Government and Health Care

Declining revenue hampers mental health programs

Loss of funds attributed to patients migrating from Disabled, Aged and Blind plan to Healthy Michigan plan.

January 12, 2018
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The Lakeshore Regional Entity is suffering from declining revenue, forcing community mental health service programs in the region to reduce their budgets.

LRE is one of Michigan’s ten prepaid inpatient health plans, responsible for Medicaid benefits management across seven counties — Allegan, Kent, Lake, Mason, Muskegon, Oceana and Ottawa — in partnership with five community mental health services programs.

The Kent County Family and Children’s Coordinating Council (KCFCCC) held an open meeting early in January to address potential cuts to mental health programs. Scott Gilman, CEO of Network180, one of the community mental health service programs impacted by the funding shortage, presented his organization’s internal budget cuts to the council. Gilman attributed the revenue loss to a “huge shift” in Michigan residents’ Medicaid status.

During the past two years, a significant number of Medicaid patients migrated from the Disabled, Aged and Blind (DAB) plan to the Healthy Michigan plan, either voluntarily or without their knowledge.

Though benefits are similar for the two programs, Healthy Michigan is paid at a much lower rate, about 80 percent less.

“It used to be a payment for all the individuals who had DAB insurance at $270 a month. Now, a great number of them have migrated to Healthy Michigan,” Gilman said. “They have that right. It’s just made the funding formula — it needs to be updated. The state is acknowledging that, but it’s a two-year process.”

Gilman said most recipients made the switch to Healthy Michigan because it offered dental coverage or because they didn’t have a spend-down like they did with DAB. But what bothered him, he said, was the individuals who didn’t know they switched.

Other recipients switched voluntarily because of ease of access but didn’t know the full extent of Healthy Michigan’s benefits or whether it was the best choice for them.

Medicaid recipients are required to prove they are eligible by being disabled, aged or blind to qualify for DAB. Healthy Michigan requires individuals qualify only by income. Recipients who are unsure if they have been switched from DAB to Healthy Michigan are advised to contact the Kent County Department of Health and Human Services.

Network180’s approved 2017 budget for Medicaid was $104,104,425. The actual expenses for that year amounted to $104,154,010, which Gilman said was “almost perfect.”

“Usually, we’re over or under a little bit,” he said.

But the funds actually collected by the region amounted to only $94,908,307. Gilman attributed the shortage to unstable rates by Healthy Michigan.

“The Lakeshore (Regional Entity) and Network180 operated all throughout last year, and the year before, with deficits because the state had communicated to the region in good faith that they were going to adjust the rates,” Gilman explained. “It wasn’t until late in the year we found out that wasn’t going to happen.”

In total, the LRE has a budget gap of about $23 million, and Network180 is expected to reduce its own budget by about $10.7 million. An independent study by Rehmann also estimated a $97-million statewide revenue shortfall, including a loss of $7.8 million for the LRE.

To meet budget reductions, Network180 had to reduce its workforce by about 35 jobs, which included 17 full-time employees and a remainder of vacant positions that will remain on hold. A wage freeze also has been implemented for all employees. The organization will have to restructure its network to deliver programs in a more cost-efficient manner.

“We have to go through the process of, for example, if people are located at one of the programs, and they have services in their treatment program, that we can offer that program somewhere else,” Gilman said.

Kent County Commissioner Harold Mast, who also is chair of the Network180 Board of Directors, said Network180 may not have much time to restructure its budget before it runs out of funding.

“It’s going to be a long process, and we’ll likely start running out of money to operate by April or May,” Mast said. “We will still operate as much as we can.”

Other programs impacted by revenue deficits include Sheldon House, operated by Cherry Health; Nuevo Camino, which provides outreach to Hispanic individuals; and Native American Community Services, which provides “culturally specific” treatment to Native American Communities and nursing home monitoring.

These and other community mental health programs currently are under review for budget reduction, though Gilman emphasized the people who benefit from these programs still are protected.

“Our consumers are protected by due process,” Gilman said. “When there are issues, such as budget, it really cannot impact services that are deemed medically necessary. The problem that we have is … the funding that we have for doing that job better is in jeopardy.”

The Native American Community Services program, for example, still will be able to provide services, but the program’s outreach and work on stigma reduction likely will be reduced.

Currently, the county’s PA-2 liquor tax revenue is being used to fund the Medicaid deficit. Kent County’s liquor tax generates about $3 million a year. Gilman expressed concern about this strategy, arguing against the historic use of discretionary funds to cover underfunding, similar to what happened for the county’s opioid epidemic.

“My concern is using these funds to bail out this funding formula problem is really not a good way to go, but at this point, it’s the only option the board has,” he said.

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