How Medicaid Agencies Administer Mental Health Services: Results From a 50-State Survey

State Medicaid agencies are playing an increasing role in funding, managing, and monitoring public mental health services in states, reflecting the steady growth over the past three decades in the share of these services funded by Medicaid. Yet relatively little is known on a state-by-state basis about how Medicaid agencies are exercising their responsibilities for mental health services. The federal Substance Abuse and Mental Health Services Administration (SAMHSA) funded the telephone survey discussed in this brief report (and reported fully elsewhere) to fill that gap ( 1 ). It is the first systematic in-depth survey from the perspective of Medicaid agencies of how Medicaid agencies administer Medicaid-funded mental health services. Previous surveys have covered a number of these issues from the perspective of state mental health agencies ( 2 ).

Medicaid is the dominant payer for state mental health services. Medicaid now funds more than half of all mental health services administered by states and could account for two-thirds of such spending by 2017 ( 3 ). Ten percent of all Medicaid dollars were spent on mental health services in 2003 ( 4 ). The trend toward greater Medicaid funding of mental health services began soon after the Medicaid program was enacted in 1965, as mental health care shifted from institutional settings, where Medicaid funding is limited, to community settings, where it is more readily available, and as Medicaid began taking over more of the financing role previously held by state or county mental health authorities ( 5 , 6 ). More recently, Medicaid funding of mental health services has also grown because of efforts by states to obtain federal Medicaid funding for services previously funded entirely with state or local dollars.

Increased Medicaid funding of mental health services has substantially changed the state mental health policy landscape. Federal Medicaid requirements have reduced the flexibility states previously had to shape mental health services and their delivery, and pressures to use state mental health dollars to obtain additional Medicaid funding have sometimes limited the ability of mental health agencies to provide services for those not eligible for Medicaid ( 7 ).

Although federal law requires that the Medicaid agency retain ultimate authority over all aspects of the Medicaid program, states may delegate responsibility to mental health agencies and other entities for a variety of Medicaid administrative activities. Consequently, administrative arrangements vary considerably across states. State and county mental health agencies generally have more experience than Medicaid agencies in designing and administering programs for the population with mental illness, so it is important to understand how Medicaid agencies work with mental health agencies to utilize their expertise and what organizational and funding factors facilitate or impede such collaboration.

This brief report focuses on two key aspects of this relationship between Medicaid and mental health agencies: whether the two agencies are part of the same umbrella agency or are separate, which may facilitate or impede collaboration, and whether state or county mental health agencies contribute to the funding of Medicaid mental health services, which may give those agencies a greater voice in how Medicaid funds are spent.

Methods

We conducted the survey between July 2005 and February 2006. It included both closed- and open-ended questions and was designed to be completed within one hour. We sent letters to the Medicaid director of each state and the District of Columbia, explaining the purpose of the survey and offering to send a full set of interview questions in advance of the interview. We followed up with e-mails and telephone calls to schedule the interviews. We assured interviewees at the outset of each interview that their responses to open-ended questions would not be quoted in ways that would permit them to be identified. Once the survey was completed, we gave states the opportunity to review their own responses for accuracy, but we generally did not check the responses against other sources.

The response rate was 100%. In 22 states the respondents were the heads of the Medicaid agency, in seven states the respondents reported directly to the Medicaid directors, and in 15 states there were one or more levels between the respondents and the Medicaid directors. In six states the Medicaid directors designated respondents in the state mental health agency. (The District of Columbia is counted as a state throughout this brief report.)

Results

Organizationally, state Medicaid and mental health agencies were located within the same umbrella agency in 28 states, and they were in separate agencies in 23 states. In some umbrella agencies Medicaid and mental health were parallel or sister agencies, and in a few states the umbrella agency itself was the Medicaid agency and the mental health agency was located within it.

States that include both Medicaid and state mental health agencies within the same umbrella agency were more likely to report frequent collaboration, have directors who meet regularly, and have meetings between agencies at least monthly. Medicaid agency authority was also more likely to be shared when the agencies were part of the same umbrella agency. In contrast, Medicaid agency authority over mental health funding, provider certification, rate setting, and data appeared to be relatively greater when Medicaid and mental health agencies operate separately.

Mental health agencies that were in an agency separate from Medicaid were somewhat more likely to contribute to the funding of Medicaid mental health services than those that were in the same umbrella agency. Some funding for Medicaid mental health services came at least partially from the state mental health agency in 32 states, with 17 of 23 separate-agency states (74%) reporting such funding, compared with 15 of 28 (54%) umbrella-agency states. In the 22 states in which some Medicaid mental health funding came from counties or other local sources, such funding occurred as frequently when Medicaid and mental health were separate at the state level (ten of 23 states) as when they were in the same agency (12 of 28 states).

To examine these patterns of collaboration and allocation of authority more closely, we categorized all states as having higher, moderate, and lower levels of collaboration and of delegation of Medicaid authority to the mental health agency, based on responses to a number of questions on these issues contained in the survey. The states on either end of these collaboration and authority spectrums illustrate some of the characteristics of different approaches to Medicaid administration and funding of mental health services.

The eight states we identified as having especially high levels of Medicaid and mental health agency collaboration (Louisiana, Massachusetts, Nevada, New Mexico, North Carolina, Oklahoma, Pennsylvania, and Wisconsin) were more likely to have both agencies in the same umbrella agency (six of the eight states) than the eight states where collaboration appeared to be relatively low (Colorado, Delaware, the District of Columbia, Hawaii, Mississippi, Montana, South Dakota, and Utah), where only two states had such umbrella-agency structures. There did not appear to be any relationship between collaboration and sources of funding. The mental health agency provided some funding for the state share of Medicaid in three of the eight high-collaboration states and four of the eight low-collaboration states, whereas counties provided some Medicaid mental health funding in four of the eight high-collaboration states and three of the eight low-collaboration states.

There were four states where the Medicaid agency appeared to have a relatively high level of authority over Medicaid mental health services, and the mental health agency a correspondingly lower level (Arkansas, North Dakota, Oklahoma, and South Dakota), and five states where the Medicaid agency appeared to have delegated a substantial level of authority over Medicaid mental health services to the mental health agency (California, Michigan, Ohio, Oregon, and Washington). In the four states with high Medicaid agency authority, Medicaid and mental health were in the same umbrella agency in only two of the states, there were fewer meetings and other indicators of collaboration, and the populations were smaller. The mental health agency provided some Medicaid funding in only one of the states, and counties provided funding in none of them. In the five states in which Medicaid delegated relatively high levels of authority to the mental health agency, by contrast, Medicaid and mental health were in the same umbrella agency in four of the states, meetings of directors and staff were frequent, and the populations were larger. The mental health agency provided funding for some Medicaid services in four of the states, and counties provided funding in all of them.

Discussion

Collaboration between Medicaid and mental health agencies is important because of the steadily increasing role that Medicaid is playing in the financing of mental health services in states. Medicaid agencies may not have the same level of clinical expertise and trust from mental health providers and beneficiaries as mental health agencies, and mental health agencies may not have a full understanding or appreciation of the regulatory and fiscal constraints under which Medicaid agencies must operate. Consistently incorporating both of these perspectives in state decision making and program management could make Medicaid financing of mental health services more reliable, sustainable over time, and reflective of clinical priorities. Although collaboration and communication provide no assurance that conflicting interests, priorities, and requirements will always be appropriately balanced, it improves the odds.

The survey indicated that having both Medicaid and mental health agencies under the same umbrella agency was generally associated with greater collaboration. Respondents noted, however, that day-to-day operational factors such as meetings between agency directors and staff, common problems to work on, the priorities of agency leadership, and personal relationships among agency leaders and staff may be just as important as agency structure and can facilitate or impede collaboration whether the agencies themselves are in a common umbrella agency or are separate. As one respondent commented, "It's all about personalities, and [agency leadership] is playing really well together right now, so it's good."

The allocation of authority over Medicaid-funded mental health services also appeared to be related to agency structure. Four of the five states in which the Medicaid agency delegated substantial authority to mental health agencies have both agencies within a common umbrella agency, and the two agencies were separate in two of the four states with minimal delegation of Medicaid agency authority.

Although county funding of mental health services did not appear to be related to collaboration between state Medicaid and mental health agencies, it was associated with shared authority. Counties provided some Medicaid funding in all five of the states in which Medicaid delegated substantial authority to the mental health agency, but there was no county funding in the four states in which the Medicaid agency retained most authority. This finding suggests that county funding may give the state mental health agency some additional leverage in obtaining authority from Medicaid by, for example, enabling the mental health agency to draw on influence that county officials may have in state executive or legislative deliberations. The mental health agency itself contributed to Medicaid funding in four of the five states with relatively high mental health agency authority, but this happened in only one of the four states with low mental health agency authority, suggesting again that such funding may give the mental health agency some greater leverage over executive or legislative allocations of Medicaid authority.

The increased use of Medicaid as a funding source for mental health services has led to greater federal scrutiny of state Medicaid funding arrangements and to efforts by the federal Centers for Medicare and Medicaid Services (CMS) to limit some of these arrangements. In 2007, for example, CMS proposed regulations to limit Medicaid funding of rehabilitation services and targeted case management ( 8 , 9 , 10 ). These federal efforts to limit Medicaid financing of mental health services have put some added stress on the relationships between Medicaid and mental health agencies.

The resulting tension is reflected in a recent article in Psychiatric Services reporting on discussions with state Medicaid directors, which notes that they "overwhelmingly expressed concern about a growing disconnect between what the mental health system views as `best practice' and what the Medicaid program is able to cover" ( 11 ). This was a common theme in our interviews as well. State mental health agency directors expressed similar concerns in another recent survey ( 12 ).

Although organizational and administrative arrangements at the state level cannot resolve the tensions between Medicaid and mental health agencies that arise from these federal financing and regulatory requirements, greater communication and shared responsibility can facilitate problem-solving within these constraints.

Our survey indicated that, with few exceptions, reorganizations of state government have not been driven primarily by concerns about relationships between Medicaid and mental health agencies. As a result, respondents told us, reorganizations in some states have exacerbated communications problems between Medicaid and mental health agencies and disrupted established relationships that had facilitated work on common problems. In other states, reorganizations have sought to better align policy and budget responsibilities by giving the mental health agency more authority over Medicaid funds, accompanied by enhanced accountability for the use of those funds. Respondents reported easier transitions and better outcomes with this approach.

Although the survey was thorough and the response rate was high, the study had limitations. The results represent a snapshot at a point in time. The ways in which Medicaid agencies exercised their responsibilities for mental health services in the last half of calendar year 2005, when most of the interviews were conducted, were often different in prior years and will change in the future in many states as a result of gubernatorial elections, new agency leadership, reorganizations, and new state priorities.

Respondents varied in their ability to answer all of the questions in the survey and in the extent to which they consulted with others in the Medicaid and mental health agencies to obtain the information they needed to respond. In the 29 states in which we interviewed either the Medicaid director or a person reporting directly to the Medicaid director, the respondents were more likely to have a broad view of the political, organizational, and other pressures that affect Medicaid agencies and their relationships with mental health agencies and to reflect that perspective in their responses. Staff at lower levels tended to confine their responses to the direct factual questions in the survey, without offering opinions about broader issues.

Conclusions

In light of Medicaid's large and growing role in financing and administering state mental health services, the high needs and vulnerability of those who depend on those services, and the complexity and potential controversy entailed in administering Medicaid-funded programs, greater state and federal efforts are warranted to ensure that both Medicaid and mental health agency perspectives are appropriately reflected in state decision making on these issues. Promising approaches include well-structured umbrella agencies and better alignment of responsibility and accountability for mental health funding and policy making. Payers and pipers should have reciprocal responsibilities.

Acknowledgments and disclosures

The report on which this brief report is based was prepared for the Substance Abuse and Mental Health Services Administration of the U.S. Department of Health and Human Services under Contract No. 280-03-1501. Sarah Davis, M.P.A., made major contributions to that report. Judith L. Teich, M.S.W., served as the government project officer, and Jeffrey A. Buck, Ph.D., served as adviser.

The authors report no competing interests.