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Coalition Suggests Reforms To Make Medicaid Work

A coalition of mental health organizations offers a lucid way of untangling the complexities of Medicaid funding.

President George W. Bush proposed more than $60 billion in federal cuts to the Medicaid program over the next decade in his Fiscal 2006 budget (see story on page 9).

The National Governors Association has decried any attempts to shift federal Medicaid costs to the states, but the organization issued a statement recognizing that the program must be reformed and reshaped.

Changes to Medicaid appear inevitable. Since the program provides more than half the resources for state and local community mental health services, those changes have the potential to bring about major improvements to or further deterioration in the mental health system.

How can advocates sort out and understand the issues that will affect people with mental illness?

Selby Jacobs, M.D., chair of APA's Committee on Public Funding for Psychiatric Services, said, "A good starting point is a paper published by the Campaign for Mental Health Reform [CMHR] last fall. It offers analysis and background that are helpful in evaluating the implications of proposed changes."

Chris Koyanagi, policy director for the Bazelon Center for Mental Health Law, was the lead author of the paper.

APA is a partner of the campaign, which was organized "[to provide] the mental health community a united voice on federal policy."

"Whither Medicaid? A Briefing Paper on Mental Health Issues in Medicaid Restructuring" opens with a description of the complexities of Medicaid eligibility.

For a state to receive federal Medicaid funds, it must cover certain groups of individuals, who commonly are called the Medicaid "mandatory" populations. Other populations, the so-called "optional" groups, may be covered if a state chooses to do so.

"[S]ignificant numbers of people with mental disorders are found in both categories," according to Koyanagi.

Individuals with mental disorders can be eligible for Medicaid if they receive federal disability benefits. Over a quarter of those receiving Supplemental Security Income (SSI) disability benefits, an estimated 1.4 million people in 2001, have psychiatric disabilities.

Generally, SSI recipients are members of Medicaid-mandatory populations. However, a second group of people with psychiatric disabilities, those who are eligible for Social Security Disability Insurance, are eligible for Medicare and eligible for Medicaid only if they have low incomes. That group is known as dual eligibles.

States vary in their definitions of "low income," but typically define it as at the federal poverty level or below. They can change their definition of "low income," thus rendering people eligible or ineligible.

Individuals can also be eligible for Medicaid if they meet criteria for the Medically Needy Program. That program offers services if a person's medical costs are excessive in relation to income.

The Medically Needy Program is an optional service and can be terminated by the state. Oregon, for example, ended its program, and Gov. Jeb Bush (R) has announced plans to end the program in Florida.

Services, as well as populations, can be optional or mandatory. Important optional services for those with mental illness are "intensive community services to prevent deterioration, maintain or restore functioning, and assist individuals with daily living; case management; clinical services; and personal assistance." Coverage for prescription drugs is optional, although no state has refused to cover them.

Although those services are labeled "optional," they are essential for the appropriate care of chronically ill psychiatric patients, Jacobs pointed out.

Some children with emotional disturbances are eligible for Medicaid only through optional categories or by virtue of their eligibility for the State Children's Health Insurance Program. In either case, a state can render them ineligible by changing eligibility standards or by ceasing to fund optional services.

Koyanagi identified policy changes that would likely be detrimental.

• Altering Medicaid's basic structure to create a block grant that gives states a capped amount of resources. A state would still be required to provide mandatory services to mandatory populations, but could provide optional populations with reduced benefits and offer different packages to different groups.
  
• Permitting waivers that allow a state flexibility in how it runs its Medicaid program, in return for an agreement that the federal contribution can be capped. As a result, optional services and populations might be dropped.
  
• Eliminating the mandate that children receive all medically necessary services. A benefit package modeled on insurance policies has been proposed. These policies, however, typically have drastic limits on covered mental health services and would be highly inappropriate for children with serious mental disorders, who are disproportionately represented in Medicaid.
  
• Cutting the federal share of costs for the program as a whole or for specific segments of it.
  

The debate about the future of the program also provides an opportunity to advocate for changes that could help low-income people with mental illness.

Koyanagi described specific policies that could improve services provided through Medicaid (see box on page 4).

Jacobs said, "The [CMHR] paper could be a valuable resource for APA's newly formed Medicaid Advisory Group. We will hold our first official meeting at the annual meeting in May."

"Whither Medicaid? A Briefing Paper on Mental Health Issues in Medicaid Restructuring" is posted at <www.mhreform.org/policy/whithermedicaid.htm>.

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