Cass County’s mental health agency says it’s running out of money, because the state health department's funding formula does not reflect the rising cost of treatment.
Woodlands Behavioral Healthcare Network pays for mental health services for around a thousand people in Cass County. But CEO John Ruddell said Woodlands won’t be able to compensate providers past September.
“Either that provider is going to be okay with not receiving payment for six to eight months, or they're going to stop providing services, and that vulnerable portion is going to be out on the road, out on the street.”
Provider compensation isn't the only thing at risk. Woodlands also operates a 24/7 response team for mental health emergencies.
"Sometimes we are better-equipped to help that individual come up with a safety plan for themselves, right? To help them, talk them, work them through a crisis that they're facing."
In an email, Michigan Department of Health and Human Services spokesperson Lynn Sutfin suggested that the state's funding rates were both appropriate and carefully calculated. But not everyone agrees.
Rising costs
MDHHS funds agencies like Woodlands. Ruddell said the Department considers many factors when calculating the amount. But, he said, the formula does not reflect the rising cost of mental healthcare.
“The past two or three years, MDHHS has underfunded not only us, but the entire county mental health, community mental health system to the tune of, for our region, approximately $25 million per year," he said.
Ruddell said MDHHS' underfunding has put Woodlands in a tough situation, since it is required under the state constitution and the Michigan Mental Health Code to provide services.
"If we're required and mandated to provide the services, the state should be required and mandated to pay for it," Ruddell said.
Brad Casemore agrees. He’s the CEO of Southwest Michigan Behavioral Health, which manages financial resources for Woodlands and seven other agencies in the region. These regional agencies are known as Prepaid Inpatient Health Plans, or PIHPs.
Casemore said his regional agency is also at risk.
“I'm able to say here with the absolute fact that in fiscal year '23, our 2023 service costs were 107% of what we were paying. And the '24 rates really did not in any way acknowledge that.”
Casemore said there are multiple flaws in MDHHS’ calculations, including unrealistically low cost estimates. He explained just one of the many costs he said have increased since 2020.
“In a community inpatient psychiatric hospital, the rates have increased from roughly, on average, $850 a day to closer to $1,100 a day statewide.”
Casemore added that increased demand for mental health care and waning COVID-era support are also fueling the crisis. He said that his region isn't the only one at risk.
"Statewide, fiscal year '24, five of the PIHPs ended the year with negative margins, as in more Medicaid expenses than Medicaid revenue, approximately of $112 million," Casemore said.
"Projections, which, of course, are still projections and subject to hopefully some mid-year adjustments, then reveal for this current fiscal year seven prepaid inpatient health plans with negative margins totaling $80 million."
State funding
Casemore said he and Woodlands have alerted MDHHS to this problem, and have held several meetings with it and Milliman, the state's actuary, which helps determine rates.
"We've had, I think, six meetings now with the department and with Milliman, without remedy and without any commitments of any remedies either for us or for the system."
In response to these concerns, MDHHS spokesperson Lynn Sutfin said in an email that rates are federally vetted by the Centers for Medicare & Medicaid Services, and that MDHHS is open to making adjustments.
"This effort includes collaborating with all our PIHPs, including Southwest Michigan Behavioral Health, and their Community Mental Health Service Providers to better understand their financial situations, cost pressures and utilization patterns in the region," she wrote.
But Casemore says only state-level rates are federally vetted, not regional or county rates.
"Milliman expressly states in writing that capitation rates are not certified as actuarially sound at the PIHP level, let alone the county/CMH level," Casemore stated in an email.
Capitation rates are payments rates based on the number of enrollees.
"It is largely these regional factor approaches and calculations that SWMBH and the system dispute and find flawed as well as the lapse of federal Medicaid funds over several years when so many PIHPs are in dire straits over multiple years."
Casemore summed up the situation like this: "Either seven PIHPs are incompetent spendthrifts or the overall and regional Medicaid capitation rates are insufficient."
Sutfin did not respond to a request for clarification.
On Thursday, Casemore stated in an email that MDHHS has informed his organization that it would release adjusted Medicaid rates in May, but Casemore wrote that he was "not at all confident new rates will adequately cover statewide need."
Michael Symonds reports for WMUK through the Report for America national service program.
