The 130th Annual Meeting of APHA

Abstract #46708

Dominic Hodgkin, PhD, Donald S. Shepard, PhD, Gail Strickler, MS, and Yvonne Anthony, PhD. Schneider Institute for Health Policy, Heller Graduate School, Brandeis University, MS 35,415 South St, Waltham, MA 02454, (781) 736-8551, hodgkin@brandeis.edu

This paper reports on recent reforms to the financing and management of substance abuse treatment in Michigan's Medicaid program. Michigan is one of many states to carve out its Medicaid mental health and substance abuse benefit from the general medical plans, transferring responsibility for managing care to specialized entities. Generally, proponents of carving out believe that specialized management will allow greater focus on behavioral health issues, leading to better access and utilization patterns. Others fear that carving out will hinder coordination between behavioral health and general medical care, and possibly increase incentives to undertreat substance abuse problems. Policymakers also debate whether carving out has different impacts when the specialized managers are in the public sector, rather than privately owned. Michigan’s Medicaid carve-out began in 1998 when the responsibility for managing care and paying providers was transferred to 15 “coordinating agencies” (CAs), local public or quasi-public entities. The CAs are paid capitated rates per enrollee for their defined catchment area, and therefore bear financial risk for any increase in utilization or provider payment rates. Administrative data indicate that after the carve-out the number of Medicaid recipients in treatment decreased, but spending per user increased. Both findings differ from experience in most other Medicaid carve-out programs. One key issue may be that Michigan Medicaid did not originally cover inpatient or residential care, a common source of savings in other carve-outs. Carving out to small local public entities poses different design issues than the better-known statewide contracts with for-profit firms.

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