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HHS Inspector General Medicaid Managed Mental Health Recommendations Consistent With NAMI Public Policy Objectives

For Immediate Release, 14 Mar 00
Contact: Chris Marshall

The U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG) has issued three reports on Medicaid managed mental health programs. The recommendations made by the OIG are similar to those NAMI has been making.

The OIG made three core recommendations for state Medicaid programs and the Health Care Financing Administration (HCFA). Interestingly, HCFA disagrees with the recommendations. The core recommendations are:

  1. HCFA should work with SAMHSA to develop outcome measurement systems
  2. HCFA should encourage States to develop independent, third party mental health systems for conducting beneficiary satisfaction teams
  3. States should obtain a 1115 waiver from HCFA to expand services to non-Medicaid populations

OIG Recommendations for starting managed care programs are:

  1. Separate mental health services from other health services
  2. Phase in conversion
  3. Exclude Drug Formulary from managed care
  4. Use existing public mental health system
  5. Keep contract language specific

OIG recommendations for transitioning from fee-for-service to managed care are:

  1. Provide community education early and often
  2. Involve beneficiaries in conversion process
  3. Involve beneficiaries and families in treatment planning
  4. Ensure timely payment of providers

OIG recommendations for providing access to care are:

  1. Eliminate co-payments
  2. Assign health care coordinators
  3. Allow any accredited provider to participate
  4. Encourage liberal prior authorization policies
  5. Initiate outreach programs
  6. Develop rural services
  7. Initially share financial risk to encourage development of services

OIG recommendations for children's mental health are:

  1. Specify services for children's mental health care in managed care contracts
  2. Develop interagency agreements to promote coordination

As of July 1998, 36 states had implemented mandatory Medicaid mental health managed care programs. The OIG examined seven state programs - Arizona, Colorado, Iowa, Massachusetts, North Carolina, Utah and Washington. All seven states used mental health carve-outs. Four of the seven states phased in the program in geographic regions.


Cost Savings

OIG documented that four of the seven Medicaid managed mental health programs saved from $4 million to $12 million the first year, compared with the previous year's fee-for-service expenditures. The other three states limited expenditures to the previous year's expenditures. Four of these states returned "off the top" savings to the state's general fund. The other states used the savings to expand Medicaid to non-Medicaid eligible persons or to pay for managed care administration.

Reduced Hospitalization, Some Increased Outpatient Services

OIG reported that the seven state Medicaid managed health programs had "dramatic declines" in impatient costs. One state reduced inpatient costs from 51% of mental health costs to 17% in one year. In two states there was a reduction of 40% to 50% in available psychiatric hospital beds. In one state, average length of stay dropped from 12 to 6 days while another dropped 30 to 20 days.

Four of these seven states documented increased utilization of services from 1% - 2% after conversion to a managed care system. The seven states developed new services which previously did not exist - residential services, vocational services, respite care services, in-home programs, clubhouses, day services, and personal services.

In six states, psychiatric hospital readmission rates were higher under managed care, ranging from 4%-9% increases. Only one state did not see any "noticeable increase." The OIG concluded that "lower average length of stays and increased readmission rates may indicate that persons with serious mental illnesses are being released from inpatient care too quickly."

In a separate report, the HHS OIG concluded that "reductions of inpatient care for children were greater than that for adults." One state reported that children utilizing inpatient care was down 40%, compared to a decrease of 2% by adults for the same period. Another state reported a 30% decrease in psychiatric hospital admissions for children, as compared to a decrease of about 6% by adults during the same period.

While outpatient programs expanded in all seven states, "the number of children that access services are still generally below the level of access for adults." In one state, the rate of adults accessing outpatient mental health services was 123.7 per 1,000 while the child rate was 54.8 per 1,000. In another state, while 6% of adults accessed outpatient services, only 3% of children accessed such services.

Pharmacy Remains Outside Behavioral Health Capitation

The OIG reported that none of the seven states managed mental health programs included pharmacy benefits, "primarily because states were unsure of how to accurately determine the cost for this benefit.States believed that if they did not set the capitation rate for prescription drugs at a correct level, managed care organizations would have an incentive to restrict access." This led the OIG to recommend that drug formularies be excluded from managed care.

Care Fragmented Between Systems

The OIG observed in the seven state programs that "responsibility for care is fragmented with possible cost shifting," and the OIG recommended the development of interagency agreements to promote coordination.

No Performance Data

No state had working outcomes measures in place.

The OIG concluded that "the overall effect on the health of persons with severe mental illnesses" in seven Medicaid managed mental health programs "was not quantified." Further, "none of the states included in our study had working outcomes measures in place before or after they converted to managed care. Even basic utilization data, such as length of hospital stays and number of visits, was inconsistently reported by states." The OIG recommended that HCFA and the Substance Abuse and mental Health Services Administration (SAMHSA) collaborate to develop outcome measurement systems.

Needed: Independent Consumer Satisfaction Teams

The OIG has recommended that Medicaid managed mental health programs "establish independent, third party mental health systems for conducting beneficiary satisfaction surveys."

Needed: Consumer and Family Involvement

The OIG has recommended that Medicaid managed mental health programs involve beneficiaries and families in both the conversion process from fee-to-service and in treatment planning.

The three reports are available online from the Office of Inspector General, Office of Evaluation and Inspections (OEI) What's New page at or can be accessed individually via the web addresses below.

Mandatory Managed Care: Changes in Medicaid Mental Health Services (OEI-04-97-00340; 1/00)

Mandatory Managed Care: Early Lessons Learned by Medicaid Mental Health Services (OEI-04- 97-00343; 1/00)

Mandatory Managed Care: Children's Access to Medicaid Mental Health Services (OEI-04-97- 00344; 1/00)

Attached below is NAMI's Where We Stand paper on managed care.


NAMI's Position (summarized from the NAMI Policy Platform)

NAMI supports health care for all persons with brain disorders that is affordable, nondiscriminatory, and includes coverage for effective and appropriate treatment. NAMI supports federally mandated minimum standards for health insurance coverage. NAMI supports efforts of states to gain waivers of ERISA (Employee Retirement Income Security Act) so self-insured employer health plans would comply with state-mandated minimum benefit laws. Managed care organizations must be held accountable for delivering a comprehensive array of community support services, and appeal and grievance procedures must be in place that are user-friendly and time-sensitive.

The Need to Stand and Deliver

A crisis of confidence in health plans exists throughout the nation. National mandated legislative solutions are required to restore consumer confidence in health plans.

In September 1997 NAMI published Stand and Deliver: Action Call to A Failing Industry. The report observed that managed care plans failed to deliver on the following expectations: publicly available and current practice guidelines, easy hospital admission and flexible hospital length-of-stay, PACT programs, immediate access to all effective medications, suicide attempt viewed as a medical emergency, consumer and family participation in their treatment planning and care, measurement of clinical outcomes, access to psychiatric rehabilitation, and access to secure and supportive housing.

In an October 1998 NAMI survey of consumer and family experiences with managed care, 25 percent of respondents had positive experiences with managed care in four areas: improved access to treatment, emphasis on preventing crisis, focus on consumer satisfaction, and decreased unnecessary hospitalization.

The five areas of most negative experience with managed care were: don't know how to file an appeal (55 percent); seeing the patient's doctor (41 percent); problems getting medications (34 percent); problems getting crisis services (33 percent); and problems getting admitted to a hospital (28 percent). Twenty-five percent of respondents had filed an appeal with their health plan; families were successful 54 percent of the time and consumers were successful 42 percent of the time.

Managed Care: A National Overview

According to a July 1998 SAMHSA-Lewin study, 46 states are implementing 88 different managed behavioral healthcare programs. Only Maine, Mississippi, Nevada, and Wyoming have no public-sector managed behavioral healthcare programs. Of these 88 programs, 83 have mental health and 66 have substance abuse. Sixty-one (69 percent) include both mental health and substance abuse. However, 41 of these programs had been in operation less than one year. There is a roughly 50/50 split between at-risk programs and administrative services organization (ASO) arrangements. Fifty-five percent of the programs use behavioral healthcare carve-outs, but only 17 percent use non-Medicaid funds.

Colorado, Iowa, and the city and county of Philadelphia are generally viewed as the most positive of these initiatives but even there access problems exist.

Iowa and Massachusetts seem to be more advanced in terms of the development and use of performance-based measurements. Philadelphia leads the nation in the use of consumer satisfaction teams, teams staffed by consumers and family members to ascertain enrollee dissatisfaction.

Montana and Tennessee have reputations as having the most problematic public-sector managed behavioral health care in the nation. After 23 months of operation, the Montana Legislature terminated the program. These states share common mistakes. There was no previous managed care experience in the states, yet they quickly implemented a managed care program statewide. Historic patterns of service utilization by the Medicaid population were unknown, yet the states added non-Medicaid-eligible, uninsured populations to the managed care program and even included a pharmacy benefit, even though historic patterns of utilization were not known. Both states reduced spending, anticipating budget savings from the program's financing before any actual implementation experience occurred.

NAMI's Advocacy Strategies and Goals

NAMI's Stand and Deliver report identified nine measures of success. These measures have been updated into 10 suggested action steps:

1. Authentic, early, and continuing consumer and family involvement in all stages of programming. Authentic means that the involvement was not token, but actually had an impact.

2. Standardized benefit packages based on parity for mental illness so that consumers can compare health plans based on performance.

3. Public release of comparative performance by health plans and treating providers. Performance data should be explicit, benchmarked, standardized, publicly available, and independently validated.

4. Public release of consumer satisfaction data, complied by consumer satisfaction teams, staffed by consumers and families, external to the health plan, but with the health plan's commitment to immediately respond to complaints, grievances, and dissatisfactions.

5. Consumer and family surveys, such as NAMI's Stand and Deliver.

6. Publicly available practice guidelines, which are adhered to by a health plan's treating providers.

7. Immediate access to needed care.

8. Effective and timely grievances, appeals, and decisions using third-party, independent, binding clinical review. The use of independent, third party consumer and family facility and program monitoring teams and the use of independent ombudsmen programs are helpful.

9. Suicide attempts viewed as a medical emergency.

10. Standardized premium-rate structures so that consumers can compare health plans based on performance and risk-adjustment cost reimbursement so no plan is penalized because it enrolls and serves a population with more severe illness.

Other lessons learned can be action steps in advocating accountable and responsible managed care programs. These include:

11. Precisely define in the public domain, preferably in authorizing legislation, key terminology such as the actual benefits, how benefits are actually accessed, and medical necessity.

12. Consider using the Massachusetts practice where 100% of the capitation is devoted to clinical care; where pharmacy is not included in the behavioral health benefit capitation; where a separately funded, adequately funded, and separately negotiated administrative budget (currently 9% of the total expenditures) operates; and where profit is entirely tied to the achievement of performance goals. Massachusetts also uses risk corridors where potential profits and losses are capped.

13. Use other successful state capitation rates when examining the adequacy of your state or local capitation rate.

14. Implement detailed seamless systems of care between the Medicaid and public mental health systems. Even in states with more positive managed care experiences, such as Colorado and Massachusetts, the responsibility line between Medicaid and the public mental health system is not clear and people are denied or delayed access to care.

For more information about NAMI's activities on this issue, please call Clarke Ross at 703/312-7894. All media representatives, please call NAMI's communications staff at 703/516-7963.