Medi-Cal Mental Health Policy: Consolidation and Managed Care

As the state began to move towards managed care in health services delivery to the Medi-Cal population, one of the driving forces was a system which would integrate and coordinate care. This naturally led to the plan to consolidate the two Medi-Cal funding streams for mental health services. Implementing managed care was also designed to provide a cost containment strategy that would allow a prudent purchaser of services to obtain maximum benefit for its expenditures and would allow for increased access to specialty mental health services within the same level of funding. Consolidating the two mental health funding streams would help achieve this by improving care coordination and reducing administrative costs. In addition consolidating services would help assure consistent statewide access to persons receiving specialty mental health services. Access to services was a critical concern for the Health Care Financing Administration (HCFA) in evaluating the state's plans for delivery of managed health care for the Medi-Cal population.

Since research demonstrated that a single integrated system of care is critical for successful treatment of persistent mental illness and emotional disturbance and that the needs of persons with mental illness are not always paid adequate attention to in an all inclusive health care managed care system, the decision was made to "carve out" specialty mental health services from the rest of Medi-Cal managed care. Thus a distinction was made between specialty mental health care (those services requiring the services of a specialist in mental health) and general mental health care needs (those needs which could be met by a general health care practitioner). General mental health care needs for Medi-Cal beneficiaries remain under the purview of DHS either through their physical health managed care plans or through the FFS/MC system.

The decision to provide specialty mental services in California through a single plan in each county logically followed the decision to carve out specialty mental health services and to consolidate the two mental health delivery systems. This decision necessitated a "freedom of choice" waiver from HCFA. This waiver allowed California to have a single plan model whereby beneficiaries in need of specialty mental health services have one plan available in each county as opposed to the more traditional managed care model of a choice of at least two plans in each locality from which beneficiaries may choose. Provisions to assure that access to specialty mental health care was not reduced as a result of the implementation of the single plan model and that beneficiary protection mechanisms were satisfactory in the context of a single plan model were a key part of the waiver.

The selection of county mental health departments to be the single managed care plan for consolidated specialty mental health was a natural outgrowth of the extensive experience counties have had in serving the mental health needs of communities. County mental health departments were given the "first right of refusal" in choosing to be the mental health plan (MHP) for the county. All but two counties in California chose to become the MHP for their beneficiaries although there are provisions to choose another entity to be the MHP if a county chose not to assume that role. Two counties chose to partner with another county to be the MHP.

The Medi-Cal Specialty Mental Health Services Consolidation program began in January 1995 with county mental health departments taking on responsibility for authorization and payment of all Medi-Cal covered psychiatric inpatient hospital services for beneficiaries in the county. (Three counties field tested slightly different models.) Previously, county mental health departments had managed psychiatric inpatient hospital services only at county hospitals or hospitals under contract to the county. All other psychiatric inpatient hospital services were managed by DHS through the regular Medi-Cal program. Between November 1997 and July 1998, these county mental health departments, now called mental health plans (MHPs), also assumed responsibility for inpatient hospitals and outpatient specialty mental health professional services in addition to their previous responsibility to provide rehabilitative mental health and targeted case management services. As stated previously this program operates under a federal freedom of choice waiver originally approved in May 1995 and renewed in September 1997 for an additional two years. A request to renew the program for an additional two years was submitted to the Health Care Financing Administration (HCFA) in June 1999.

Under this waiver program each MHP contracts with DMH to provide medically necessary specialty mental health services to the beneficiaries of the county and are governed by state regulations in Title 9, California Code of Regulations, Division 1, Chapter 11. MHPs select and credential their provider network, negotiate rates, authorize services and provide payment for services rendered by specialty mental health providers in accordance with statewide criteria. Medi-Cal beneficiaries must receive Medi-Cal reimbursed specialty mental health services through the MHPs.

MHP coverage of a specialty mental health service requires that several criteria be met. The beneficiary must meet the medical necessity criteria for specialty mental health services, which consists of a clearly identified set of diagnoses, functional impairments, and intervention criteria. The services must be delivered by or under the direction of a specialist in the mental health field, for example, a psychiatrist, a psychologist, a Licensed Clinical Social Worker, or Marriage, Family and Child Counselor. The service must also be a mental health service, for example, medication management of psychotropic medications, individual therapy, and psychological testing. A distinction is made between specialty mental health care (those services requiring the services of a specialist in mental health) and general mental health care needs (those needs which could be met by a general health care practitioner). General mental health care needs for Medi-Cal beneficiaries remain under the purview of DHS either through their managed care plans or through the FFS/MC system.

MHPs receive a fixed annual allocation of state general funds (SGFs) based on the historical cost of services formerly provided through the FFS/MC system. MHPs receive uncapped SGFs for services provided to Medi-Cal beneficiaries under 21 for outpatient specialty mental health services above a baseline expenditure level. The MHPs also receive realignment funds which have funded SD/MC services since 1991. These funds made up of revenues from sales tax and vehicle licensure fees are collected by the state and transferred by the state to each county. All of these funds may be used as the state Medicaid match for claiming federal matching funds that make up a little over 51 percent of the funding for mental health services.