State vs. County: Issues of Responsibility

State and county mental health agencies are reexamining their roles in response to changing trends that are affecting mental health services. Among the trends that are having a dynamic impact on public mental health services are the growth of Medicaid costs, the rise of managed care, the growing influence of consumers and their families and devolution of authority from the federal government to the states and, in turn, in some cases, to the counties.

County Responsibilities are Changing

In some states, a reordering of responsibilities has resulted in the state assuming primary accountability for setting standards and providing oversight while county mental health authorities have primary responsibility for managing and providing services. In other states, the emergence of managed behavioral health has caused county officials to demand a place at the table in the planning, development and implementation of managed care. In most cases, county mental health agencies are assuming greater financial risk, as well as increased authority and flexibility to develop and manage programs that are expected to serve more people with fewer resources.

Trends Shaping County Roles

The closing, downsizing and re-organizing of state-operated inpatient psychiatric hospitals over the last several decades has resulted in a shift in the relationship between state and county mental health agencies. Where state hospitals were once the primary providers of public mental health services, counties now play a pivotal role. Many counties directly contract with managed care organizations as service providers of community-based programs.

The movement of individuals into the community has increased pressure on county-operated community-based mental health systems to provide a comprehensive range of services to a growing consumer population. This, in turn, has led to questions concerning reinvestment of funds saved through state operated hospital closings, downsizing and reorganization; the ability of funds to follow patients from the hospitals to the community; and county contracting for the use of state hospital beds.

Impact of Managed Care on State-County Relationships

To date, 37 states have requested 1115 and 1915(b) "waivers" of the Social Security Act to implement managed care in state Medicaid programs and to control public health and mental health costs.1 Each of these states is experimenting with a different strategy in developing managed care arrangements to bring private be-havioral health care companies into the mix, complicating lines of responsibility and accountability further. In the process, state-county relationships are being tested. The shift to managed care has prompted state and county mental health agencies to reexamine their relationships and responsibilities, including the assignment of legal and financial accountability and authority. A look at three states in particular, Pennsylvania, Utah and Oregon, highlight these issues.

• Accountability

With a completely publicly run system, consumers bring their concerns directly to the state and county governments. Also, state and county governments can be held legally accountable for systemic deficiencies.

Since private managed care firms are now providing services in public mental health, this puts a new wrinkle in the question of accountability. Managed care contracts do not always clarify the entity or the level of government that bears ultimate responsibility for ensuring quality of services. Although state and county mental health authorities can delegate the management of mental health services to private managed care organizations, it is essential that ultimate responsibility for governance and protection of the public welfare remain with state and county mental health authorities. With for-profit organizations, profits and shareholders become the primary concern rather than the patients’ or public’s interests.

• Financial Risk

Counties that directly enter the Medicaid managed care market are expected by the state to assume greater financial risk for providing services, similar to that assumed by private managed care organizations. For example, in Oregon, Pennsylvania and Utah, the states expect that both county mental health agencies and private managed care organizations which assume the primary role of managing Medicaid public health services will assume the financial risks that accompany this role.

The risk-bearing arrangements by counties can take several forms. Oregon has initiated discussions between county mental health agencies and private managed care firms to explore various risk-sharing options. There is a concern that over time, reimbursement rates will diminish and patterns of utilization will change. Counties may want to explore a public/private partnership with private organizations that have more resources at their disposal.

Counties taking part in Pennsylvania’s managed care project have established risk-sharing partnerships with private managed care organizations. However, county mental health agencies have ultimate responsibility for the financial risk of the managed care program just as they have ultimate responsibility for the quality of services. Even if a county chooses to delegate a portion of the financial risk through a partnership or subcontract with a private managed care organization, the state will still hold the county responsible for the financial viability of the county mental health system.

In Utah, county-operated community mental health centers assume financial risk as would any private managed care organization.

• Reinvestment

State mental health agencies in Utah, Pennsylvania and Oregon expect and, in some cases, require county mental health agencies or private managed care organizations to reinvest savings generated by implementation of managed care and the closing, downsizing or reorganizing of state inpatient psychiatric hospitals into community mental health services. The managed care contract between the Commonwealth and counties in Pennsylvania requires reinvestment of managed care savings to improve mental health service system capacity at the county level. The contract also requires counties to submit an annual county-level "reinvestment plan" for approval by the state mental health agency.

Neither Oregon nor Utah have contractual requirements regarding reinvestment. However, officials from both states say they have developed mechanisms for promoting reinvestment. In Oregon, county mental health agencies and private managed care organizations operating in the public sector must provide the state with comprehensive financial data and plans for investing unspent funds. In Utah, where private, not-for-profit mental health organizations have replaced county mental health agencies in providing services, savings that are generated by managed care have been used to expand the range of support services available to consumers.

Reducing Reliance on State Hospitals

Pennsylvania plans to reduce utili-zation of its 14 state inpatient psychiatric hospitals. In the beginning of its managed care initiative, the State will bear full inpatient costs. Over the next several years, however, the State plans to incorporate hospital expenditures into the capitated rate provided to county mental health agencies and managed care organizations. They will be responsible for contracting for the number of inpatient hospital beds to be used in the coming year.

Oregon expects to reduce use of its two remaining state-operated psychiatric hospitals by requiring managed care organizations to assume financial responsibility for the first 30 days of hospitalization.

Utah’s pre-paid, capitated mental health plan for Medicaid enrollees was largely driven by rising inpatient costs. After implementing managed care in the State, inpatient utilization has been dramatically reduced.

AFSCME Public Policy Department
August 1998

Notes

1. NTAC Networks; State-County Alliances Face New Challenges in the Evolving Public Mental Health Environment; 1997.