Performance Improvement 2007. How Do States Pay for Services for Children and Youth with Serious Emotional Disorders and Why Do They Choose These Methods?



The mechanisms states use to pay for intensive home and community services for children and youth with serious emotional disorders were studied. The study asked several questions. How do states choose among--and what are the benefits and challenges of--the different financial strategies? Do demonstration projects influence selection of particular financing mechanisms? What are ways to promote coordination among agencies? What is the role of residential treatment centers? There are four major funding mechanisms states use to pay for these services to children and youth. Section 1915(c) of the Social Security Act permits states to waive certain spending restrictions and offer community services to persons who otherwise would qualify for services in a hospital, nursing home, or intermediate care facility for the mentally retarded. Section 1905(a)(13) of the Act allows optional Medicaid coverage of rehabilitative services and related administrative costs. The third funding mechanism is known as "case rates." The final mechanism (the "Katie Beckett" Act) comes from the Tax Equity and Fiscal Responsibility Act of 1982 and provides for special exception to the requirement of institutionalization by allowing payment for care of children in their homes. Officials in each of three sets of states were interviewed.

One group of states had conducted comprehensive statewide reforms of their mental health systems including their financing strategies. A second had made reforms incrementally. The third were contemplating future reform. The strengths and weaknesses of four major financing mechanisms were identified. The study focused especially on the Medicaid home and community-based service waiver (the "1915(c) waiver"). States with such waivers have greater flexibility to provide an expanded set of services under Medicaid to children at serious mental health risk. States may control costs by limiting who can be enrolled in the program.

The study found that state officials typically seek to combine a variety of mechanisms and funding sources because no one mechanism provides the flexibility and breadth needed to coordinate and pay for a comprehensive set of intensive home and community services. A state's legislative and political history of seeking to deal with high-risk youth influences what approaches are likely to succeed. States that carefully manage access to residential treatment services and psychiatric hospitals tend to have more resources for intensive home and community services. Administrative and budgetary procedures can support cost-sharing of services among agencies that serve children. Allowing emotionally disturbed near-poor child in families with limited insurance coverage for mental health care to access intensive services (even if not Medicaid eligible) is critically important. There are three major implications of the study. Sustained improvements in financing intensive home and community services for emotionally disturbed youth depends on the development of effective partnerships between key agencies at the state and local levels. Demonstration projects play an important role in laying the groundwork for carrying out further collaborative systems and financing for intensive services for youth. States should save both federal and state Medicaid money by replacing residential care with more effective home and community services.

Report Title: Public Financing of Home and Community Services for Children and Youth with Serious Emotional Disturbances: Selected State Strategies
Agency Sponsor: ASPE, Office of the Assistant Secretary for Planning and Evaluation
Federal Contact: Kennedy, Cille, 202-690-6443
Performer: Mathematica Policy Research, Inc.; Princeton, NJ
PIC ID: 8342

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"PerformanceImprovement2007.pdf" (pdf, 717.63Kb)

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