National Alliance on Mental Illness
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January 31, 2003

Bush Administration Unveils $1.75 Billion Budget Proposal to Assist People With Disabilities in Transitioning From Institutions to Community Living

This past week, the Bush Administration announced its intention to develop a 5-year, $1.75 billion initiative to help states move forward on efforts to move people with severe disabilities – including children and adults with severe mental illness – from institutional care to the community. The program is part of the President’s "New Freedom Initiative" for people with disabilities and will include a proposal for $417 million in new funds as part of the Bush Administration’s FY 2004 budget proposal.

The largest share of the $417 million request for FY 2004 is $350 million for state Medicaid demonstration programs that would allow Medicaid dollars to follow an individual from institutional care (including long-term hospitals and nursing homes) into the community. These Medicaid demonstration programs would be 100% federal funds for the first year (unlike traditional Medicaid funding which is based on a joint state-federal match). However, after the first year of a demonstration program, a state would be required to assume the cost of community services at its regular federal matching rate.

NAMI is currently seeking clarification from the Bush Administration as to how such a demonstration program would apply to non-elderly adults with mental illnesses residing in Institutions for Mental Diseases (IMDs) that are not eligible for federal matching funds under Medicaid. Having the federal government immediately assume 100% of the cost of community-based care for individuals transitioning from IMDs would be an enormous step forward in addressing the many inequities in the IMD exclusion. However, there is concern about the willingness of states to include IMDs in such demonstration waivers if they are forced to assume 100% of the costs under Medicaid after the first year.

Other key provisions in the Administration’s new proposal are a new demonstration program for community-based care alternatives for children residing in psychiatric residential treatment centers and renewal of a previous proposal for respite care services for caregivers of both children and adults with severe disabilities. The Bush Administration also plans to seek authority from Congress for a $95 million, 5-year program to extend Medicaid eligibility for spouses of people with disabilities who return to work (current often discourages spouses from working because the household’s extra income makes them ineligible for Medicaid).

Finally, the Bush Administration plans to develop a proposal for Medicaid presumptive eligibility for individuals being discharged from institutional settings directly into the community. NAMI will be seeking clarification as to whether non-elderly individuals with severe mental illness residing in IMDs will be able to participate in this automatic, immediate Medicaid eligibility.

This $1.75 billion initiative is part of an even broader proposal still under development within the Bush Administration to achieve long-term systemic reform of the Medicaid program. The proposal, which will be highlighted in the President’s FY 2004 budget plan, would distribute funds to the states in separate annual allotments for long-term and acute care – rather than on the basis of a federal match as the Medicaid program currently operates. Early indications are that the proposal would require states to continue to provide "comprehensive" benefits for all mandatory Medicaid populations, including children and adults with severe mental illness receiving Supplemental Security Income (SSI). States would then be given enhanced flexibility for services to "non-mandatory" Medicaid populations. NAMI will be closely monitoring development of the Bush Administration’s Medicaid reform proposals as they are submitted to Congress.

President’s Budget to Be Released on February 3

Next week, the Bush Administration will be releasing its budget plan for FY 2004 – including this $1.75 billion plan for community integration for people with disabilities. The budget is expected to hold overall federal spending to a 4% increase. However, because of the President’s plans to move forward on bigger increases for homeland security and other priorities that were outlined in this week’s State of the Union address, many agencies are likely to see increases far below 4%, and possibly a freeze at current levels. The release of the budget is complicated by the fact that Congress has not yet completed action on spending bills for the current fiscal year (FY 2003). NAMI will be reporting early next week on specific requests for FY 2004 for key federal agencies and programs of concern to individuals with severe mental illness and their families such as NIMH, SAMHSA, HUD and the VA.