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California Mental Health Funding Evolution and Policy Implications Pre- and Post- MHSA

CMHDA Mission. to provide leadership, advocacy, expertise and support to California's county and city mental health programs (and their system partners) that will assist them in serving persons with serious mental illness and serious emotional disturbance." to assist in building a public mental health system that ensures the accessibility of quality, cost-effective mental health care that is consumer- and family-driven, resiliency-based and culturally competent." .

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California Mental Health Funding Evolution and Policy Implications Pre- and Post- MHSA

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    1. California Mental Health Funding Evolution and Policy Implications Pre- and Post- MHSA

    2. CMHDA Mission “to provide leadership, advocacy, expertise and support to California's county and city mental health programs (and their system partners) that will assist them in serving persons with serious mental illness and serious emotional disturbance.” “to assist in building a public mental health system that ensures the accessibility of quality, cost-effective mental health care that is consumer- and family-driven, resiliency-based and culturally competent.”

    3. California’s Community-Based Mental Health System: A Historical Perspective The California Community Mental Health Services Act 1969 was a national model of mental health legislation that “deinstitutionalized” mental health services, serving people with mental disabilities in the community rather than in state hospitals.

    4. Origins of the CA Community Mental Health System The Short-Doyle Act was the funding mechanism intended to build the community mental health system. Legislative intent language called for funding to shift from state hospitals to community programs. However, the state failed to distribute the full savings achieved through the closures of state hospitals to the community mental health system.

    5. No Entitlement for Mental Health Services Unlike services to persons with developmental disabilities, the mental health system was never conceived as an “entitlement.” Mental health services were to be provided “to the extent resources are available.”

    6. No Entitlement for Mental Health Services This essential difference built rationing of services into the framework of mental health service delivery…

    7. Major Sources of Mental Health Funding Today Realignment Revenues Medi-Cal Specialty Mental Health Managed Care SGF Allocation State Mandate Reimbursement (AB 3632) Medi-Cal EPSDT SGF Federal Funding (SAMHSA, Medi-Cal FFP) Mental Health Services Act (Prop. 63)

    8. Community Mental Health System in Crisis Beginning with an inadequate funding base, state allocations to counties were severely diminished due to inflation throughout the 1970s and 80s. In 1990, California faced a $15 billion state budget shortfall which would certainly have resulted in even more drastic cuts to mental health.

    9. Transition to Realignment Community mental health programs were already near collapse and overwhelmed with unmet need. This crisis propelled the enactment of “Realignment.”

    10. Realignment “Realignment” was enacted in 1991 with passage of the Bronzan-McCorquodale Act. It represented a major shift of authority from state to counties for mental health programs.

    11. What is “Realignment?” “Realignment” created a new dedicated revenue source. Instead of community mental health being funded by the State General Fund (and thus subject to the annual state budget process), new “Realigned” revenues would flow directly to counties.

    12. Realignment Assigned Two Dedicated Funding Streams Realignment was given two dedicated funding streams: ½ Cent Increase in State Sales Tax State Vehicle License Fee

    13. Mental Health Programs That Were Realigned from the State to Counties All community-based mental health services State hospital services for civil commitments Mental health services for those in “Institutions for Mental Disease,” which provide long-term psychiatric nursing facility care

    14. Realignment Expanded to Public Health and Social Services Although it was begun as an effort to reform mental health financing, expansion of public health programs and some social services (such as In-Home Supportive Services and Foster Care) were added to the Realignment mix. Because the Social Services programs were entitlement programs, they were given priority for growth funding.

    15. Realignment Structure Over time, this structure contributed to many of the shortcomings of Realignment to keep pace with mental health needs.

    16. Benefits of Realignment Realignment has generally provided counties with many advantages, including: A stable funding source for programs, which made a long-term investment in mental health infrastructure financially practical. The ability to use funds to reduce high-cost restrictive placements, and to serve clients appropriately in the community.

    17. Benefits of Realignment Cont’d Greater fiscal flexibility, discretion and control, including the ability to “roll-over” funds from one year to the next, enabling long-term planning and multi-year funding of projects. Emphasis on a clear mission and defined target populations.

    18. Realignment Funds Distributed by Formula** Annually, Realignment revenues are distributed to counties on a monthly basis until each county receives funds equal to the previous year’s total. Funds received above that amount are placed into growth accounts – Sales Tax and VLF. **Current and historical Realignment revenue data can be found by going to the State Controller’s Office website: http://www.sco.ca.gov/ard_payments_realign.html

    19. Realignment Funds Distributed by Formula Cont’d Realignment “growth” funds are distributed annually, and the first claim on the Sales Tax Growth Account goes to caseload-driven social services entitlement programs (IHSS and child welfare). Any remaining growth from the Sales Tax Account and all VLF growth are then distributed according to a formula developed in statute.

    20. Realignment Formula Flawed – Insufficient Growth for Mental Health Mental health has received no Sales Tax growth since FY 2005/06 In Fiscal Years 2007-08, 2008-09 and 2009-10 mental health did not even make the prior year’s base. FY 2009/10 Mental health Sales Tax revenues are expected to approximate the original baseline amounts from FY 1991/92, with no anticipated increases in the foreseeable future. VLF revenues are approximately the same as FY 2003/04 amounts.

    21. Realignment Formula Flawed – Insufficient Growth for Mental Health Meanwhile, costs of services and other demands steadily rise…

    22. Realignment Funds Declining Mental Health sales tax revenues declined 13% in FY 2008-09 and are anticipated to decline approximately 7% in FY 2009-10. Mental Health vehicle license fee receipts declined 8% in FY 2008-09 and are anticipated to decline another 7% in FY 2009-10. Estimate overall decline in FY 2009-10 total Mental Health Realignment of approximately 7%. Estimate future overall growth in total Mental Health Realignment of 1-2% for at least next 3-5 years.

    23. Realignment Growth for MH: Fiscal Year 2000/01 to 2008/09

    24. Medi-Cal Mental Health Services Federal Medicaid dollars (FFP) currently constitute the largest revenue source for county mental health programs.

    25. Medi-Cal Mental Health Services Understanding the changes in California’s Mental Health Medi-Cal program since Realignment, and the interaction of Medi-Cal revenues with Realignment, is critical to analyzing the current structure and status of public mental health services in California.

    26. Medi-Cal Mental Health Services History in California The Medi-Cal program originally consisted of physical health care benefits, with mental health treatment making up only a small part of the program. Mental health services were limited to treatment provided by physicians (psychiatrists), psychologists, hospitals, and nursing facilities, and were reimbursed through the Fee-For-Service Medi-Cal system (FFS/MC).

    27. Medi-Cal Mental Health Services There was no federal funding of the county Short-Doyle mental health program until the early 1970s, when it was recognized that these programs were treating many Medi-Cal beneficiaries.

    28. Medi-Cal Mental Health Services Short-Doyle/Medi-Cal (SD/MC) started as a pilot project in 1971, and counties were able to obtain FFP to match their own funding to provide certain mental health services to Medi-Cal eligible individuals. The SD/MC program offered a broader range of mental health services than those provided by the original Medi-Cal program.

    29. Medi-Cal Rehabilitation Option A Medicaid State Plan Amendment in 1993 added more services under the federal Medicaid “Rehab Option” to the scope of benefits, including: Community based (non-clinic) services Expanded service provider types Permitted additional service types Expanded acute care model to include long term community care model

    30. The Medicaid “Rehab Option” In short, the Rehab Option allows services that reduce institutionalization and help persons with mental disabilities live in the community.

    31. Medi-Cal Specialty Mental Health Consolidation From 1995 through 1998, the state consolidated Fee for Service and Short-Doyle programs into one “carved out” specialty mental health managed care program. Counties are given the “first right of refusal” for taking on this new responsibility of managing specialty mental health care. Under this system, all Medi-Cal beneficiaries must receive their specialty mental health services through the county Mental Health Plan.

    32. Medi-Cal Consolidation Cont’d General mental health care needs for Medi-Cal beneficiaries remain under the responsibility of the Department of Health Care Services, rather than DMH. DHCS FFS is also responsible for all pharmaceutical costs for carve-out beneficiaries. These costs total over $1 billion per year for the state.

    33. Medi-Cal Consolidation Cont’d Upon consolidation, the state DHCS transferred the funds it had been spending under the FFS system for inpatient psychiatric and outpatient physician and psychologist services to county Mental Health Plans (MHPs). It was assumed (by counties) that MHPs would receive additional funds yearly beyond the base allocation for increases in Medi-Cal beneficiary caseloads, and for COLAs.

    34. Medi-Cal, Consolidation and Realignment Any costs beyond that allocation were to come from county Realignment revenues. In other words, the risk for this entitlement program shifted from the state to the counties…

    35. Impact of Medi-Cal on Realignment Funds Since Medi-Cal Consolidation, administrative requirements by DMH have grown dramatically. Counties have not received COLAs for the Medi-Cal program since 2000. Cumulatively, since FY 2000/01, counties have lost an estimated $225 million in buying power due to the lack of a COLA (assuming a 5% annual COLA).

    36. Impact of Medi-Cal on Realignment Funds Cont’d Even more importantly, Counties have lost in real dollars over $145 million SGF ($375 million including lost FFP) in the Medi-Cal allocation.

    37. State Funding Impacts on Medi-Cal County MHPs must incur 100% of a Certified Public Expenditure (CPE) prior to submitting a claim for FFP reimbursement. Decreases in Realignment and State Medi-Cal funding limit the ability for County MHPs to incur CPEs and draw down FFP.

    38. AB 3632 Under federal law (Individuals with Disabilities Education Act [IDEA]), public school students are entitled to a “free and appropriate public education (FAPE). The state Department of Education and Local Education Agencies are responsible for complying with this entitlement program.

    39. AB 3632 In 1984, the CA legislature enacted AB 3632 (W. Brown) that mandated counties to provide IDEA-related mental health services to students. Santa Clara County mental health subsequently filed a “test claim” with the Commission on State Mandates, and its decision established this program as a reimbursable mandate for counties.

    40. AB 3632 However, the state has not complied with its obligation to fully reimburse counties for their costs. In 2004, CA voters passed Proposition 1A, which requires the state to either suspend or fully reimburse counties annually for unreimbursed costs associated with a mandate. Since 1A, for this mandate only, the state has failed to comply, in clear violation of the State Constitution.

    41. AB 3632 According to the State Controller’s Office, the state owed counties $449 million through FY 2008-09. It is unknown at this time how much the state owes counties for SB 90 claims in FY 2009-10, pursuant to Prop. 1A.

    42. AB 3632 In FY 2010/11, the Legislature chose to “fully fund” counties for past mandate costs, rather than “suspend the mandate. It included $133 million to pay counties for past claims; but the Governor vetoed the funding and “suspended the mandate” on counties, effective Oct. 8, 2010.

    43. AB 3632 There is currently no funding for this program in FY 2010-11; however, schools and advocates have sued to challenge the Governor’s ability to “suspend” a mandate, and to compel counties to continue to provide services…

    44. AB 3632 Counties have also sued the state, and have asked the Courts to relieve them of the mandate, since there is no funding for the program. All three suits are still pending as of 1-26-11.

    45. Bottom Line: Realignment, which never fully funded mental health needs, was intended to grow over time. That growth has not occurred as expected. Counties must use an increasing amount of Realignment funding as Medi-Cal match, leaving little, if any, for indigent services. Failure of the state to fully reimburse counties for AB 3632 costs also diverts Realignment funds away from target populations.

    46. Proposition 63 The Mental Health Services Act (MHSA) Proposition 63 – a California voters’ ballot initiative Passed by majority vote on November 2, 2004 Became effective as statute -- the Mental Health Services Act (MHSA) -- on January 1, 2005

    47. MHSA: What Is It? 1% tax on personal income in excess of $1M Purpose is to reduce the long-term adverse impact of untreated mental illness Intent is to expand mental health services Recovery/wellness Stakeholder involvement Focus on un-served and underserved Focus on effective services and cost-effective expenditures

    48. MHSA is Community-Driven “The most important change that the MHSA brought forward is to bring the voice of the person receiving services and the families – across ethnicity – to the center of the conversation rather than at the margins of the conversation.” (Dr. Marvin J. Southard, Los Angeles County Mental Health Director) PAT PAT

    49. What Can’t the MHSA Fund? The Act requires maintaining current spending levels, protecting existing entitlements so that MHSA funds cannot be used to supplant existing services. (see Section 3410 of the MHSA regulations) The Act requires the state to continue to provide financial support for mental health programs with “not less than the same entitlements, amount of allocations from the General Fund and formula distributions of dedicated funds as provided in the last fiscal year ended prior to the effective date of the Act.”

    50. MHSA Issues In the FY 2007-08 state budget, the Governor line-item vetoed all $55 million of funding for the AB 2034 (Integrated Services for Homeless Adults) Program -- the highly successful program on which Prop. 63 was based. The remaining $20 million of funding for the Children’s System of Care was also completely eliminated. A lawsuit was filed against the state due to the AB 2034 funding reduction. The state prevailed, and a new state “maintenance of effort” was established (approximately $577 million). That decision was recently upheld in appellate court.

    51. State Budget Crisis and Threats to MHSA Facing a $20+ billion deficit in FY 2009-10, the Legislature approved a ballot initiative that would divert $460 million over two years from MHSA to pay for SGF-funded obligations for EPSDT (Prop. 1E). Voters rejected Prop. 1E.

    52. State Budget Crisis and Threats to MHSA In the Governor’s proposed FY 2010-11 budget, another ballot initiative was proposed that would divert $452 million a year for two years from MHSA to SGF-funded programs (EPSDT and Medi-Cal managed care). Additionally, he proposed (also through the initiative) taking $847 million from MHSA if the state does not achieve its goal of receiving an additional $6.9 billion in federal funds by July 15th.

    53. State Budget Crisis Cont’d Even with no further budget cuts, it is inevitable that many counties will continue to reduce non-MHSA funded or eligible services. We also know that MHSA cash allocations will significantly decline over the next few years. If additional MHSA funds are diverted, what then?

    54. State Budget Outcomes 2010-11 The Good News … MHSA redirection of $452.3 million never made it the ballot and SGF was used. Threats to realignments funds – including a diversion of $602 million for county mental health programs was avoided.

    55. State Budget Outcomes 2010-11 The Bad News … The Governor line-item vetoed all $132.9 million in funding to reimburse counties for unpaid AB 3632 costs from FY 2004-05 through 2008-09 The Governor declared that the mandate for counties was suspended for FY 2010-11 The veto also included $70 million reduction for reimbursements for AB 3632 residential services However, it did include $76 million in federal IDEA funds to reimburse Counties.

    56. State Budget Crisis Even Larger in 2011-12 $25.4 Billion Budget Problem $8.2 Billion deficit for FY 2010-11 $17.2 Billion deficit for FY 2011-12 Why the continued deficit? Various one-time budget solutions used in previous years Not enough federal funding obtained as hoped Continued weak economy Program cuts have not created enough savings

    57. New Realignment to Local Government is Central to Proposal Governor proposes significant changes in government functions Proposals would return power to cities, counties, special districts and school boards “allowing decisions to be made by those who have the direct knowledge and interest to ensure that local needs are met in the most sensible way.” “allowing decisions to be made by those who have the direct knowledge and interest to ensure that local needs are met in the most sensible way.”

    58. Phase I Realignment 2011-12 through 2014-15 New realignment of “public safety” programs and supportive services (this includes mental health and substance use treatment services). Counties would have the responsibility of administering three mental health entitlement programs – the Early and Periodic Screening, Diagnosis and Treatment (EPSDT) program and Medi-Cal mental health managed care. Counties would also be responsible for services mandated by AB 3632 (special education mental health services), which is a federal education entitlement program. Add some commentary from discussions with DoF and LAO – In a nutshell – does realigning these programs make good policy sense? Add some commentary from discussions with DoF and LAO – In a nutshell – does realigning these programs make good policy sense?

    59. Phase I Realignment 2011-12 through 2014-15 In FY 2011-12 (only) state would save $861 million in general fund by using Mental Health Services Act (MHSA) funds to pay for these three entitlement programs. In FY 2012-13 the 3 programs, plus the existing community mental health services funded with current realignment funds, would be funded through a proposed revenue source, if approved by voters in June. Note – this means that there would be a one-time “redirection” of MHSA funds in the amount of $861 million Note – this means that there would be a one-time “redirection” of MHSA funds in the amount of $861 million

    60. Proposed Realigned Mental Health Programs EPSDT $579 million Managed Care $183.6 million AB 3632 $104 million Existing community mental health services $1.077 billion

    61. What about MHSA Funded Programs? The MHSA does not “go away” There is a one-time loss of $861 million in MHSA funds Administration contends that a 2/3 vote of the Legislature is sufficient to support the one-time supplantation of MHSA funds and suspension of MHSA maintenance of effort requirements The rationale is that this is allowable due to the realignment proposal and that amendments would be consistent with and further the intent of the MHSA. Discuss and provide some insight. There is a lot of discussion out there about the legality of the 2/3 vote – that they would have to suspend the Maintenance of Effort, Non-Supplant and possibly other provisions. What is the message if we do not support this going back on the ballot to ask the voters what they want to do even if we do support creating greater efficiencies in the MHSA’s implementation. Discuss and provide some insight. There is a lot of discussion out there about the legality of the 2/3 vote – that they would have to suspend the Maintenance of Effort, Non-Supplant and possibly other provisions. What is the message if we do not support this going back on the ballot to ask the voters what they want to do even if we do support creating greater efficiencies in the MHSA’s implementation.

    62. Other Services Realigned in Phase I Substance use treatment services (including integrated services for co-occurring) Foster Care and Child Welfare Services Adult Protective Services All services for juvenile offenders, which includes closing CA Division of Juvenile Justice, and all JJ crime prevention programs Probation services for adult parolees Jail and probation services for offenders without serious violent or sex convictions Fire and Emergency Response Activities Court Security

    63. Funding the Realignment Phase I Proposal Voter approved extensions to existing Vehicle License Fee (VLF) rates and 1% sales tax rate – generating $5.6 billion per year. One-time supplantation of $861 million in MHSA funds for state general fund obligations for EPSDT, Managed Care and AB 3632.

    64. Phase II Realignment: Implementation of National Health Reform in 2014 Current low-income individuals who are now served in county indigent health systems will become eligible for “reformed Medi-Cal” in 2014. The Governor states this shift requires examining the existing “Local Revenue Fund Indigent Health Care Account”.

    65. Considering Realignment in 1991-92 What are areas to research? Will competition be created for the new revenues, creating compliance problems for the programs proposed to be realigned? Will there be competition for the limited revenues between: The three federal entitlement programs proposed to be realigned (AB 3632, EPSDT, Medi-Cal Managed Care)? The two federal entitlement programs that serve children (AB 3632, EPSDT) and the one that serves adults (Medi-Cal Managed Care)? The full dozen or so programs and services proposed to be realigned in phase one?

    66. County Mental Health Policy/Fiscal Challenges Even with no further budget cuts, it is inevitable that many counties will continue to reduce non-MHSA funded or eligible services. We also know that MHSA cash allocations will significantly decline over the next few years. If additional MHSA funds are diverted, what then? Will Realignment be to our benefit? Even with no further budget cuts, it is inevitable that many counties will continue to reduce non-MHSA funded or eligible services. We also know that MHSA cash allocations will significantly decline over the next few years. If additional MHSA funds are diverted, what then? Even with no further budget cuts, it is inevitable that many counties will continue to reduce non-MHSA funded or eligible services. We also know that MHSA cash allocations will significantly decline over the next few years. If additional MHSA funds are diverted, what then?

    67. Mental Health Funding Sources FY 2010-11

    69. Our Future: What’s Next? Realignment Phase I and Phase II Federal Health Care Reform Federal Mental Health Parity Community Corrections – shift from state to counties Continued shift of responsibility from state to counties in every area

    70. What is Your Role? We are at another mental health public policy crossroads that necessitates leadership. How do we communicate to the public (including the legislature) that there is a human and financial benefit to what we do? Where do we want to go, how do we get there, what are our leadership needs? How can each of you help us get there?

    71. Questions and Discussion Good Budget Information Resources: Disability Rights California www.disabilityrightsca.org California Budget Project www.cbp.org Legislative Analyst’s Office www.lao.ca.gov CMHDA www.cmhda.org

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