Mental Health Services Funding in Question

Vital mental health care for tens of thousands of children across the country may be reduced substantially if certain Medicaid policies continue to be unaddressed at the federal level. For the organizations that provide these services, it could mean significant funding cuts or program closures.

Taken together, it’s a recipe for poorer health outcomes for children, damaging effects on community safety, and increased violence in schools.

While the detrimental impact of these policies has been recognized both by the U.S. Congress and the President Barack Obama administration, implementation has continued in some states—even after Obama issued a reversal earlier this year.

The Medicaid policies in question, which were instituted during the George W. Bush administration, limit funding for mental health services for foster children with serious emotional disturbances. These services, including therapeutic foster care (TFC), traditionally rely heavily on Medicaid funding.

In September 2009 the joint public policy office of the Alliance for Children and Families and United Neighborhood Centers of America (UNCA) released a report documenting this ongoing and inadequately reported challenge in the child welfare community.

The report, Despite Obama Regulatory Rollback, States Continue Bush-era Medicaid Policies on Children’s Mental Health, finds that without clear reversals by the Centers for Medicare and Medicaid Services (CMS), some states continue to implement these detrimental Medicaid policies.

The Bush administration began restricting TFC and rehabilitative services in some states in 2003 and continued the restrictions throughout the decade, even after Congress blocked their implementation. 

When Obama entered office, his administration rolled back the regulations limiting these Medicaid services. However, implementation has continued in some states due to a combination of state momentum and incomplete reversals of the policies by CMS. Because Obama has not yet appointed a new CMS director, the agency has been described by some lawmakers and policy experts as “running on autopilot” rather than taking an active role in responding to the new administration’s policy changes.

Serious Harm to Child Welfare Systems

Nonprofit child welfare providers report that the continuation of the restrictions has resulted in serious harm to foster children and to state child welfare systems.

From 2003 to the present, 12 of the 19 states studied in the policy office’s new report had implemented the policies or had begun doing so. This is true even after Congress passed a law in 2007 blocking the restrictions from taking effect.

States report that without a clear reversal of policy from CMS, they feel compelled to continue with the changes or risk being out of compliance with federal Medicaid law. Many states are proceeding by “unbundling” TFC and targeted case management services, which refers to the separation of Medicaid treatment services from the comprehensive package of therapeutic programs. In the process, the treatment services are either billed separately or entirely eliminated from the program. 

The result has been widespread funding cuts to therapeutic services in many states.

Raising the Flag

Since the public policy office released its report in early September, it has contributed to the momentum building around addressing these issues, and it has been an important component of the Alliance and UNCA’s lobbying efforts. Along with several partner organizations in Washington, the public policy office is lobbying Congress for changes to federal Medicaid law that would protect TFC.

In June 2009, Sens. Debbie Stabenow (D-MI), Mark Begich (D-AK), Blanche Lincoln (D-AR), and Ron Wyden (D-OR) introduced the Medicaid Services Restoration Act (S. 1217). This act creates a new category of medical assistance through Medicaid for TFC; clarifies the definition of “rehabilitation” to include care for the restoration, attainment, and maintenance of functioning; and specifically allows states to use “bundled” payments for TFC.

The policy office also is working to secure TFC’s inclusion in nationwide health care reform. As of this writing, both the House Energy and Commerce Committee and the Senate Finance Committee had amended their health care reform legislation to specify that nothing in federal Medicaid law prevents Medicaid from being used to finance TFC. 

Several versions of health care reform legislation must now be merged into comprehensive bills that will be considered by each chamber of Congress. House and Senate sources say they expect the debate over health care reform to continue throughout the fall, with Congress likely extending its schedule or to complete work on the legislation. 

Rebecca Farley is a health policy analyst for the National Council for Community Behavioral Health. Formerly, she worked as a health policy analyst for the Alliance and UNCA. During her tenure, she authored the report Despite Obama Regulatory Rollback, States Continue Bush-era Medicaid Policies on Children’s Mental Health. She received a bachelor’s degree in political science from Carleton College in Northfield, Minn. She has an extensive background in policy analysis and health services work for low-income communities.

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