The Bazelon Center for Mental Health Law

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Statement to President's New Freedom Commission on Mental Health
On Administration's Medicaid Proposal

Bazelon Center for Mental Health Law
Children and Adults with Attention Deficit/Hyperactivity Disorder
Federation of Families for Children's Mental Health
International Association of Psychosocial Rehabilitation Services
National Alliance for the Mentally Ill
National Association of County Behavioral Health Directors
National Council for Community Behavioral Healthcare
National Mental Health Association

March 5, 2003

As this Commission moves toward issuance of a final report, committees of the Congress are just beginning to review the outlines of an Administration proposal to restructure the Medicaid program. The sharp debate provoked by that plan--even among the nation's governors-- suggests that Congress and the Administration may need guidance in the months ahead in considering future directions for the Medicaid program. We believe this commission should be among the voices offering that guidance.

As you know, the Medicaid program is a vital safety net for people with mental illness, funding approximately 50 percent of state and local spending on mental health services. Many of the services and benefits that Medicaid covers enable individuals to remain in their homes and communities, and avoid costly institutionalization.

As advocates for mental health consumers, family members, providers, and professionals, our organizations are deeply concerned about the future of Medicaid, and its capacity to meet the needs of people with mental disorders.

Given the program's critical role in providing needed access to mental health care for low-income populations and the unresolved, troubling questions surrounding any major restructuring, we urge the Commission to address Medicaid reform in your final report. We have previously offered you a set of recommendations for improving the Medicaid program. Today, we ask that you consider those recommendations in the broad context of the debate over restructuring Medicaid.

State governments across the country face alarming budget deficits and accompanying Medicaid funding shortfalls. These shortfalls have already led states to adopt troubling cutbacks: limiting Medicaid coverage, reducing benefits, increasing cost-sharing burdens on low-income beneficiaries, and restricting access to medications through prior authorization requirements and preferred drug lists. We are deeply concerned by these actions and by the prospect for further reductions in Medicaid coverage as state budget crises deepen . These actions place people with mental illnesses at increased risk for homelessness, involvement with criminal justice systems, and even suicide.

Congress has been urged to adopt a plan that would pressure states into accepting a capped allotment for segments of the Medicaid population in exchange for a ten-year loan. The allotments would not reflect the actual medical needs of the covered populations, inevitably resulting in reduced coverage that would likely worsen over time as increased health care costs overtake block-grant funding levels.

This block-grant approach would eliminate consumer rights and protections currently provided "optional groups" under Medicaid. This coverage is certainly not "optional" for these low-income individuals , many of whom have serious mental or emotional disorders and receive their services through the public mental health system. "Optional" populations include people with disabilities, children, parents, pregnant women, and senior citizens whose incomes are very low, even though they are not quite low enough to qualify as a mandatory group and whose very lives often depend on the services they now receive through Medicaid. These "optional" beneficiaries include, for example, individuals with disabilities, including serious mental illness, whose incomes are above the limit for Supplemental Security Income (SSI), a limit set at 77 percent of poverty, or less than $7,000 a year. In place of comprehensive benefits, these individuals would likely be offered a private insurance plan under the Administration's proposal. The gap between private health insurance and Medicaid mental health benefits is wide-- a limited array of services and a very limited amount of service is all that is likely to be offered.

Clearly, states need temporary fiscal relief, including a temporary increase in federal matching funds tied to states freezing further Medicaid cuts. Likewise, we welcome efforts to bring needed reforms to Medicaid mental health care - such as those we have proposed earlier to this commission.

Fiscal relief and reform must be achieved, but not by potentially shredding the Medicaid safety net. The Commission must reject reform efforts that will inevitably bring cuts in benefits to those in need of mental health care.