Underfunding of Michigan Mental Health System Shifts Financial Burden to Counties

County governments are being forced to loan millions to cover state shortfalls

A lack of adequate mental health funding from the state is putting an increased financial strain on already cash-strapped county governments, including Muskegon County.

HealthWest, a department of Muskegon County, is the local Community Mental Health Service Program (CMHSP) and is responsible for providing government-mandated services to those on Medicaid with a serious mental illness, developmental disability, serious emotional disturbance, and/or co-occurring substance use disorder.

About 84 percent of HealthWest’s $69 million annual budget comes from Medicaid payments distributed by the State of Michigan through local Prepaid Inpatient Health Plans (PIHPs).  Muskegon County’s general fund is responsible for roughly 1 percent of HealthWest’s annual budget. The remaining budget is funded through grants, substance use block grants and Public Act 2, the state general fund, reimbursements, and third-party funding sources.

However, delays in payments from the state and inadequate funding of the PIHPs have forced county governments across the state, including Muskegon County, to loan millions of dollars to their Community Mental Health Service Programs to cover expenses for programs the CMHSPs are required by law to provide.

Of the 10 PIHPs across the state, 9 are projecting a funding deficit for FY2019 and 4 PIHPs have no reserve funds to cover the anticipated shortfalls, including the Lakeshore Regional Entity. Lakeshore serves as the PIHP for Muskegon, Allegan, Kent, Lake, Mason, Oceana, and Ottawa counties.

These shortfalls have forced Muskegon County to loan more than $9 million from the county to cover payments owed to HealthWest, some of which date back as far as FY2017. Those funds have been used to pay for Medicaid-eligible services, which HealthWest is legally required to provide to any eligible Muskegon County resident.

“It is unfair that Muskegon County taxpayers are asked to foot the bill for services the State of Michigan is legally required to pay for,” said HealthWest Executive Director Julia Rupp. “We are working hard to ensure Muskegon County residents are receiving quality mental health services in the most cost-efficient manner possible, while also working with legislators to find real solutions to the state’s shortfall in mental health funding.”

HealthWest workers are carrying larger than ever caseloads and serving more people with less. In addition, administrative costs have been cut in response to the state’s funding issues, making it very challenging to respond to the rapidly changing mental health care scene. Since FY2015, HealthWest has become increasingly efficient in its service delivery, reducing delivery cost per person by more than 20 percent.

HealthWest has also joined the Section 298 Pilot, which will improve the coordination of publicly-funded physical and behavioral health services in Michigan and overhaul how they are funded. “The pilot gives us the chance to use savings resulting from improved care coordination to expand the services we provide to more people, and to better manage care for the whole person,” Rupp adds. Research shows that integrated care leads to overall community savings and better outcomes for the individuals served.

The cost of providing services continues to increase along with demand for services. Since FY2015, HealthWest has experienced a 41 percent increase in the number of people it serves annually. However, funding from the state has not kept pace as Medicaid payments have increased only 12 percent over the same period.

A study released earlier this year by the Community Mental Health Association of Michigan revealed a $150 million gap between the cost of health care and the funding provided to Michigan’s public mental health system.

Properly addressing the state’s mental healthcare needs not only helps those struggling with mental health issues, but it also saves county taxpayers money by reducing the strain on other more-costly services, such as the criminal justice and emergency medical systems.

“The state’s payment formulas have not kept up with the increasing demand for mental health services,” said Rupp. “This puts our local governments, taxpayers, and individuals receiving services at risk.”

For more information on Michigan’s mental health system underfunding, visit https://cmham.org/systemic-underfunding-of-michigans-public-mental-health-system/. To learn more about HealthWest, visit www.healthwest.net.