Provided by David Satcher, M.D., Ph.D.
Surgeon General of the United States of America
Chapter 3: Children and Mental Health
Service Systems and Financing
Managed Care in the Public Sector
Since 1992, managed care has begun to penetrate the public
sector (Essock & Goldman, 1995). The prime impetus for this has been an attempt
to control the costs of Medicaid, in both the general health and mental health
arenas. Since Medicaid appears, on the surface, to be similar to a private
health insurance plan, administrators of state Medicaid programs have recently
implemented managed care approaches and structures to reduce health care costs.
However, Medicaid populations tend to have a higher prevalence of children with
serious emotional disturbance than that seen in privately insured populations.
Those children generally need longer-term care (Friedman et al., 1996b;
Broskowski & Harshbarger, 1998). Managed care strategies, which developed in the
private sector, are geared toward a relatively low utilization of mental health
services by a population whose mental health needs tend to be short term and
acute in nature. As a result, the kinds of cost-cutting measures used by managed
care organizations, such as reduction of hospital days and encouragement of
short-term outpatient therapies, have not worked as well in the public sector
with seriously emotionally disturbed children as they have in the private sector
(Stroul et al., 1998).
Advocates express concern that the restrictions of public managed care on mental
health services shift costs of diagnosis and treatment to other agencies, a
process known as cost-shifting. Under public managed care, hospitalization for
mental disorders is being substantially cut, with youths being discharged from
the hospital before adequate personal and/or community safety plans can be
instituted. Child welfare and juvenile justice agencies have been compelled to
create and pay for services to support those children who are no longer kept in
hospitals. Thus, while Medicaid’s mental health costs may be decreasing in such
cases, there may be a substantial cost increase to the other agencies involved,
resulting in little if any overall cost saving (Stroul et al., 1998).
Similarly, management of only the Medicaid portion of a complex funding system
that includes Medicaid, mental health, special education, child welfare, and
juvenile justice funds not only creates the cost-shifting described above, but
also underestimates the need to manage the funds spent by all agencies.
Demonstration programs of managed care strategies for children and adolescents
with severe emotional disturbances have included the creation of an interagency
funding pool, shared by all affected agencies, to meet the full range of needs
of this population. Under the demonstration program, the funds in such a pool
are capitated to ensure that the most appropriate services are purchased,
regardless of which agency’s mandate they come under. In this way, long-term,
complex care can be offered in an efficient way that reduces costs for all of
the involved child and youth agencies.
An excellent example of an approach in a managed care setting is “Wraparound
Milwaukee,” one of the Center for Mental Health Services’ Comprehensive
Community Mental Health Services for Children and Their Families Programs (Stroul
et al., 1998; Goldman & Faw, 1998). Wraparound Milwaukee, a coordinated system
of community-based care and resources for families of children with severe
emotional, behavioral, and mental health problems, is operated by the Children
and Adolescent Services Branch of the Milwaukee County Mental Health Division.
The features of this care management model are a provider network that furnishes
an array of mental health and child welfare services; an individualized plan of
care; a care coordinator management system to ensure that services are
coordinated, monitored, and evaluated; a Mobile Urgent Treatment Team to provide
crisis intervention services; a managed care approach including preauthorization
of services and service monitoring; and a reinvestment strategy in which dollars
saved from decreased use of inpatient or residential care are invested in
increased service capacity.
Since its inception in 1994, one of the goals of the program has been to blend
funding streams. Wraparound Milwaukee operates as a behavioral health care
“carve-out” that blends funds from a monthly capitation rate from Medicaid, a
case rate from county child welfare and juvenile justice funds, and a Center for
Mental Health Services child mental health services grant. The Wraparound
Milwaukee capitated rate of approximately $4,300 covers all mental health and
substance abuse services, including inpatient hospitalization. Additional funds
from child welfare and/or juvenile justice are used for children with serious
emotional disturbances in the child welfare and juvenile justice systems in
Milwaukee County to cover residential treatment, foster care, group home and
shelter care costs, and nontraditional mental health community services (e.g.,
mentors, job coaches, after-school programs). Wraparound Milwaukee is at “full
risk” for all services costs, meaning it is responsible for charges in excess of
the capitated rate. The average monthly costs, including administrative costs,
are $3,400 per child. Medicaid-eligible children constituted 80 percent of the
population served by the program in 1998.
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