State of confusion: Michigan's mental health system has many layers for those in need to navigate

Michigan's $3 billion public system for treating individuals with severe mental illnesses, intellectual disabilities and addictions is heralded by advocates as being free of the financial pressures the commercial marketplace faces to squeeze out a profit.

Those same advocates also acknowledge the system is sometimes inefficient, bulky and unable to meet a growing need for behavioral health care amid escalating financial pressures for the state's overall Medicaid insurance program for low-income residents.

The layers of oversight and administration of each dollar spent on mental health are daunting: Taxpayer funding starts in Washington and flows to Lansing through the Michigan Department of Health and Human Services, which contracts with 10 state-created prepaid inpatient health plans or PIHPs to manage care for fewer than 300,000 of Michigan's 10 million residents.

The regional PIHPs in turn contract with one of Michigan's 46 community mental health authorities, an arm of county government. Those agencies then contract with behavioral health care providers, clinics and hospitals for services.

"It's not an easy system to navigate," said Marianne Huff, president and CEO of the Mental Health Association of Michigan.

But CMHs only serve individuals with severe behavioral and mental health disorders. Medicaid recipients who have mild-to-moderate mental health disorders stay in the system run by commercial health insurers, causing some individuals to bounce between two different insurers, depending on their physical and behavioral health needs.

"There definitely are a lot of layers to get down to the service level," Kyle Williams, director of litigation at Disability Rights Michigan, a Lansing-based federally funded nonprofit that advocates for adults and children with disabilities.

Removing a layer from this system of health care for the mind has proved to be a daunting challenge, in part because there's control of $3 billion in Medicaid spending at stake.

An effort by former Gov. Rick Snyder's administration to turn over management of the public mental health system to the Medicaid health plans in what's referred to as "behavioral health integration" fizzled before the COVID-19 pandemic began consuming Gov. Gretchen Whitmer's administration last year.

"Both sides of the issues have not accepted the fact that you're not going to get everything you want and you shouldn't go for everything you want," said former state Rep. Joe Haveman, director of government relations at HOPE Network, a mental health services provider. "I think we saw that Lansing hates big changes."

The global public health crisis has laid bare long-simmering problems with access to care in Michigan, reviving calls to change the way mental health services are delivered in a bureaucracy that requires a diagram to understand.

At MDHHS, the pandemic has paused all activity on making wholesale changes to the community mental health system.

"We're going to continue the hiatus because COVID is our main focus," said Allen Jansen, senior deputy director of MDHHS' behavioral health and developmental disabilities administration.

Before COVID, state and local health officials, the health insurers and behavioral health advocates spent three years debating changes to the system under what is known as Section 298, the boilerplate language that called for privatization that Snyder first proposed in the $25 billion MDHHS budget in 2017.

"Nobody wanted to lose power," said state Rep. Mary Whiteford, an Allegan County Republican who chairs the House Appropriations subcommittee for the MDHHS budget. "I would love to see them just go back to providing care. But it's big money."

Much like Michigan's no-fault auto insurance system, the community mental health system is seen by some as a model to the country that focuses on keeping people in their homes and communities — and out of psychiatric hospitals.

And like Michigan's once-mandatory unlimited medical benefit for injured drivers, a comprehensive mental health system also is costly — and those pressures have gotten worse in recent years.

In some corners of the state, the publicly run behavioral health system was awash in red ink before the pandemic.

In 2019, MDHHS yanked a contract for the Lakeshore Regional Entity that oversees the flow of behavioral health Medicaid funding to seven counties in West Michigan because the PIHP had run up a $16 million structural deficit.

During that same time period, the four-county PIHP that distributes $163 million annually in Medicaid dollars to behavioral health providers in Lenawee, Livingston, Monroe and Washtenaw counties said it racked up nearly $42 million in deficit spending in fiscal years 2017, 2018 and 2019, according to court records.

To get by, the Washtenaw County Community Mental Health Agency covered a $10 million shortfall in 2019 with "local funds meant for other purposes ... putting other county obligations at risk," according to a lawsuit filed against MDHHS last year seeking a state bailout.

At the end of 2018, Macomb County Community Mental Health had less than $200,000 in its risk reserve fund — a dangerously low amount of cash on hand for a health care organization with a $250 million annual budget.

All told, nine of Michigan's 10 PIHPs had structural deficits of nearly $93 million in 2018, according to financial data compiled by the Michigan Association of Health Plans, the trade organization for private health insurers in the Medicaid managed-care business.

For critics of the public health system, including the private insurance companies vying for a slice of Michigan's $20 billion Medicaid pie, the chronic deficits point to a system of care where each tax dollar travels through multiple layers of government.

Having Medicaid patients in need of treatment for psychosis or a controlled substance addiction leads to a "finger pointing over who's responsible for paying" for behavioral and physical health problems that often intersect, said Dominick Pallone, executive director of the Michigan Association of Health Plans.

"At the end of the day, we're trying to make the Medicaid benefit look and feel a lot more like a commercial benefit," said Pallone, whose organization represents 12 major health plans.

Michigan's 10 regional PIHPs are an animal of the state, unlicensed public insurance and managed care entities created by statute in 2011.

They receive a set amount of dollars from the Michigan Department of Health and Human Services to contract with 46 community mental health authorities that encompass single counties in populous southern Michigan and multiple counties Up North.

The bureaucracy of Michigan's public mental health system comes with a contract that's some 700 pages long.

"When the money comes to us, it also comes with a lot of requirements — and a lot of those requirements just cost money," said Dave Pankotai, CEO of Macomb County Community Mental Health.

MAHP has argued for years that integrating care will not just lead to cost savings, it will create better outcomes. The association representing Health Alliance Plan, McLaren Health Plan, Molina Health Plan and other insurers contend they can better manage a person's care than having them move into the public system when they require hospitalization or intensive outpatient therapy.

Advocates for the public mental health system are skeptical the health plans understand the intricacies of case management for individuals whose needs go beyond clinical treatment.

"We don't look for cost savings in terms of denying care," said Dana Lasenby, CEO of the Oakland County Community Health Network. "I don't think (the health plans) truly have an idea of all the things that we do. I think they're looking at bottom lines and our budget ... (and) thinking they can do it cheaper and have cost savings. It's not an apples-to-apples system that you can just take over."

Community mental health agencies are involved in placing individuals in housing and ensuring they're stabilized to remain there — cost-intensive case management work, said Huff.

"That's something I don't think the health plans and the traditional insurance companies have a knowledge and understanding of," said Huff, who ran the Allegan County Community Mental Health agency from 2010 to 2017.

Huff contends what ails the multitiered community mental health system is a policy change in 2014 that shifted money out of Medicaid mental health and into the expanded Medicaid physical health insurance benefit for low-income adults.

Allegan County alone sustained a 65 percent reduction in funding that year. "The carnage that caused is still happening today," Huff said.

MDHHS has just three full-time workers whose sole job is to enforce contracts with the 10 PIHPs and 46 community mental health authorities.

"A lot of the problems legislators and others hear about in community mental health would go away if people could be held accountable in the contracts," Huff said.

Whiteford acknowledged the 14,000-employee state health department is "very shorthanded" in this area. "There's probably 10 times more staff overseeing the Medicaid contracts than the CMH contracts," she said.

Allen, the MDHHS official, said he needs eight employees to oversee the contracts and that hiring for those positions is a priority.

Whiteford said she wants to see the 10 PIHPs consolidated into one entity.

But such a move wouldn't obliterate an entire bureaucracy, Huff said.

"That would still mean administrative costs because you'd have to have the ability to hold 46 CMHs accountable," she said.

Kevin Fischer, executive director of Michigan's chapter of the National Alliance on Mental Illness, said the public mental health system "isn't perfect" and needs to become more efficient.

But Fischer is not convinced privatizing the public mental health system will help matters.

"Those cost savings can be achieved without turning it over to the health plans," Fischer said. "The health plans don't see or truly appreciate all of the social supports that the public system provides for the person."

There have been incremental changes in recent years to integrate care without turning the payment model on its head. Some hospitals have established specialized crisis units to keep people with mental health crises out of emergency rooms.

The federal government is now funding the establishment of Certified Community Behavioral Health Clinics that are designed to integrate primary care with mental health. There are 18 such clinics across the state, though none has been established in the northern Lower Peninsula and Upper Peninsula, according to the Center for Health and Research Transformation in Ann Arbor.

"I think we're all trying to figure out what that integration is going to look like," said Dr. Amy McKenzie, associate chief medical officer for Blue Cross Blue Shield of Michigan.

In recent years, the Detroit Wayne Integrated Health Network axed a vendor contract for inbound phone calls from Wayne County residents seeking mental health services and eliminated an entire layer of its bureaucracy that created sub-networks of providers within the county. Both of those functions were brought in-house, DWIHN Deputy CEO Eric Doeh said.

"Now we get to control our front door making those critical decisions about who gets in, where they receive services," Doeh said.

Since the statewide behavioral health integration project failed to get off the ground, DWIHN has been working on developing a smaller-scale project integrating physical and behavioral health.

DWIHN has partnered with two health plans that serve 14,000 common Medicaid clients to coordinate care and get medical doctors talking with behavioral health clinicians to work together on each patient's needs, DWIHN Deputy CEO Eric Doeh said.

Doeh said he could not disclose the names of the two Medicaid health plans working on the behavioral health integration project with DWIHN.

The three entities are working on a plan to demonstrate to MDHHS how they will produce savings for both the private insurers and the public mental health entities, Doeh said.

"We want to be able to duplicate this across Eight Mile, Up North, all over the state of Michigan," he said.

Mindful of the political pressures to produce savings within the overall Medicaid budget, DWIHN is trying to be proactive about behavioral health integration before lawmakers make another run at privatizing the system, Doeh said.

"And believe me, we don't want legislators deciding this issue for us," Doeh told Crain's. "Legislators, as much as they have great knowledge, when it comes to this piece right here, the folks who are knowledgeable are the folks who experience it every day."

This story first appeared in our sister publication, Crain's Detroit Business