State Medicaid Agencies have the chance to revise their Coordination of Benefits Agreements (COBAs) with CMS. The COBAs are contracts between CMS and other health insurance organizations that define the criteria for transmitting certain eligibility and claim data. This will allow them to use COBA claims data for two purposes:

1. To use the claims data for quality improvement activities under paragraphs 1 and 2 of the HIPAA and/or
2. To re-release the COBA claims data. If the State decides to sign the revised COBA, they must still seek written permission from CMS to use the claims data. This data may provide states with greater insight that could help improve the processing of claims and provide physicians with crucial data around treatment.

The Centers for Medicare and Medicaid (CMS) Office of the Actuary reported recently that Medicaid costs are expected to rise annually by 7.9 percent from a projected $339 billion in 2008 to $674 billion in 2017. Enrollment is expected to grow at a slower rate, reaching 50 million people in 2008 (up 1.8 percent); increasing at an annual average rate of 1.2 percent to 55.1 million people in 2017. The report also noted that “Medicaid is the largest source of general revenue spending on health care for both the Federal government and the States.” In 2007, Medicaid costs comprised 7 percent of the federal budget in 2007, and are expected to reach 8.4 percent in 2013 according to the study.

The report can be found at: http://www.cms.hhs.gov/ActuarialStudies/03_MedicaidReport.asp

For many individuals and organizations, uncertainty has been the prevalent feeling as the effects of the recent economic downturn are felt across the country. These effects will certainly be discussed for many months (and years) to come; including how the recession will affect mental health and substance use (M/SU) financing. Although it’s difficult to tell for certain, the impacts will likely resonate through the M/SU and healthcare communities for years to come through increased case loads, reduced funding, and difficult state and local fiscal conditions.

With increased economic anxiety about jobs, portfolios, and mortgages comes increased stress on individuals and their families. There is evidence that concerns related to employment have a negative impact on mental and physical health. [1] Based on the downturns in the 1990s and early 2000s,  health and human services agencies and organizations in many states are likely to experience an increased case load, resulting in higher Medicaid and other human service program expenditures.

Unfortunately, while there may be an increased need for behavioral health services, there may not be enough funding to support the increase, which may spur eligibility changes or programming reductions. In Fall 2008, the National Association of State Budget Officers (NASBO) reported that state spending was projected to decrease by 0.1 percent in Fiscal Year 2009 compared with the historical average growth rate of 6.7 percent per year. [2] In the time since the State Budget Officers’ report, states have dramatically altered their projections.  It is anticipated that spending for FY09 will be lower than NASBO originally reported and state budgets will likely contract.  According to recent figures published by the National Governors Association, at least 30 states are currently facing budget shortfalls for FY09, totaling $30 billion. [3]

While the last economic turndown lasted just eight months, ending in November 2001, its effects on state budgets were felt well into fiscal 2004 [4]. During that time, states were able to mitigate the effects of the downturn by drawing on tobacco settlements funds, raising tobacco excise and fuel taxes, and drawing down accumulated reserves. In 2002, NASBO reported that it typically took 12 to 18 months following a recession for states to experience revenue growth. Today it is anticipated that the current economic downturn will be longer and deeper than the 2001 recession and states will have a more difficult time accommodating declines in tax revenues that fund M/SU programs. 25 states are already reporting shortfalls in FY10 of $60 billion. [5]

Non-governmental M/SU funding is also at risk. Many foundations and non-governmental organizations rely on investment income from trusts or endowments to fund projects and services. While some have committed to maintaining funding for programs and services, many others are likely to trim back programs to adjust to current financial conditions. [6]

The good news is that economic downturns are not permanent and this downturn will ultimately come to an end. States are currently lobbying for a stimulus package to ease Medicaid funding through an increase in the “federal match,” fund social programs to prevent budget cuts, and increase infrastructure funding to create new jobs. However, given the long budget cycle in most states and the federal government we should not overlook the need to also deal with longer term planning since renewed funding appropriations will become available after the downturn has subsided and caseloads are back to normal levels.

Although the outlook is not yet known, this downturn may present the M/SU community with an opportunity to discover new and diverse financing approaches for M/SU services, create new partnerships, and consider new possibilities for its mission. Now, more than ever, we will have to collaborate and share ideas across organizations as the fallout from the current economic situation is sorted out.

 

[1] M W Linn, R Sandifer and S Stein, American Journal of Public Health, Vol. 75, Issue 5 502-6

[2] “The Fiscal Survey of States: Spring 2003,” National Governors Association and National Association of State Budget Officers

[3] “State Economic Review, December 2008,” National Governors Association

[4] “The Fiscal Survey of States: Spring 2003,” National Governors Association and National Association of State Budget Officers

[5] “State Economic Review, December 2008,” National Governors Association

[6] Statement from A Message from Risa Lavizzo-Mourey on the Effects of the Global Financial Crisis on the Robert Wood Johnson Foundation, Oct 31, 2008

by Keith Cherry 

The election of Barack Obama and the current financial crisis are reshaping the financial-business landscape of the country and are poised to create new institutions and institutional arrangements between the public and private sectors and the citizenry. As the economy declines, publicly funded mental health and substance use treatment services stand to be severely affected, and the complex web of community based service providers delivering these services may begin to unravel.  

Many have been promoting a new kind of philanthropy known as “social investing” which applies commercial financing principles to the pursuit of social goals such as behavioral health services.  Policy makers might consider how social investing could be included in recapitalization efforts offered to U.S. banks and other financial service companies as one way to mitigate the current strain to our nation’s already fragile behavioral health infrastructure.

Social banks, whose main goal is to finance projects of high social and environmental value, are the cornerstone of social investing.  They operate in a manner similar to commercial banks, using investors’ capital to make loans that will hopefully provide desired returns to the bank and the bank’s shareholders. The central difference is that social banks seek to provide financing to people and organizations that traditionally are unable to access, qualify for, or afford typical commercial bank loans, and the loans focus on borrowers who want to use the money to provide social services or improve the economic prospects of disadvantaged people.  However, social banks do not hand out free money and they require borrowers to provide appropriate documentation, like business plans that outline the social impact of their organizations and reasonable strategy for the repayment of loans.

The financial crisis provides a unique opportunity to rewrite the rules of banking, and either requiring or encouraging banks that tap federal recapitalization to create social banking programs or establishing stand alone social banks underwritten by recapitalization dollars are worth contemplating. 

Social investing can be particularly important for public behavioral health services that are traditionally funded in a variety of ways and highly sensitive to fluctuations in state revenue. Of particular concern is substance use treatment, largely supported by state discretionary spending.  As it stands, most states expect severe revenue shortfalls in the coming years (see page 5). Staff cuts, state hospital closings and program consolidations and cancellations are likely fallouts of these shortfalls. And while Congress is considering increasing the federal Medicaid match (FMAP) to help states during this time of crisis, many will continue to have difficulty accessing credit markets, particularly for short-term borrowing. Although federal recapitalization program may re-open credit markets, states rely on mechanisms such as Revenue Anticipation Notes (RANs) and Tax Anticipation Notes (TANs) to collateralize their borrowing. As state tax and revenue collection declines, so does borrowing power. Thus, short-term loans that are generally used to cover payroll and other immediate expenses are put at risk.

Beyond states, social banking could be a real alternative for the many small non-profit and for-profit organizations that provide behavioral health services across our country. As important facets of the overall system, many of these organizations could easily struggle as they have little or no access to short or long-term financing. Many rely on state or federal grants to solely fund outreach positions, for example, and have no other way to cover the payroll costs should this revenue be interrupted. On a positive note, social banking could assist community providers in establishing new or innovative programs that in times of state financial distress may not be funded. Finally, assuming that an agency has reliable revenue streams to support it, long-term social borrowing can underwrite the costs of new treatment facilities and other behavioral health infrastructure projects that are always in heavy demand and in short supply.

Social banking is not an alternative to the current mix of federal, state, and local funding that supports our country’s public behavioral health system. However, the recession we are experiencing highlights the fragility of this system and points to the need for innovative solutions that can work in both the short and long term to supplement traditional revenue mechanisms.  Providing additional capital markets that behavioral health providers can access to sustain and expand their important work is one such solution.

This report synthesizes the experiences of seven large employers that offer generous mental health benefits to their employees. Representatives of these employers shared their views and experiences in a one-day focus group meeting.

These employers use a variety of innovative practices to ensure that employees have access to mental health services and use them. The experiences of these employers may prove useful for other companies seeking to improve mental health coverage.

Participants' observations are summarized in five areas: rationale, contextual factors, benefit design, benefit management, and next steps for action. Key lessons learned from their experiences include the following:

• Investing in comprehensive mental health benefits is a sound business strategy. These employers believe that generous mental health benefits can decrease health care costs, increase productivity, reduce absenteeism, and create a comparative advantage in the labor market.
• While specific benefits may vary, approaches should provide early intervention, offer services across a continuum of care, and cover a wide range of mental health problems for employees and family members.
• Approximately 5 to 7 percent of total health care expenditures are needed in order to provide a comprehensive mental health benefit. These levels demonstrate employers' commitment to adequate funding of mental health services, which the employers believe will reduce general health care and other indirect costs.
• These companies promote an environment that reduces the stigma of mental illness and offer multiple points of entry to mental health care to facilitate access to care.
• All these employers take an active role in managing the mental health benefit. They use an extensive review process during procurement and monitor vendors throughout the contract period.
• To increase the number of employers offering comprehensive mental health benefits, meeting participants suggested that the Federal government support research to quantify the value of mental health benefits for employers.

Full report: http://mentalhealth.samhsa.gov/publications/allpubs/SMA01-3474/SMA01-3474ch1.asp

The Substance Abuse and Mental Health Services Administration has made a series of issue briefs available for employers on the financial benefits of treating workers with a substance use disorder. "Surveys have shown that 76 percent of people with drug or alcohol problems are employed and that their problems can have an enormous impact on productivity," said SAMHSA Acting Administrator Eric Broderick. The 14 briefs are available for download at http://csat.samhsa.gov/IDBSE/employee/index.aspx.