Using Medicaid to Support Working Age Adults with Serious Mental Illnesses in the Community: A Handbook. Funding the Constellation of Community Services


Supporting low-income working-age adults with serious mental illnesses in the community involves not only furnishing them with effective mental health services but also addressing other important needs, including housing, jobs, other primary health care, and income assistance. Funding the constellation of services that comprise a comprehensive array of community support is challenging because it requires tapping a variety of federal, state, and frequently, local resources, as illustrated in Figure 1-2.

Resources for community support flow through many federal and federal-state programs and funding streams.18 State and, often, local tax dollars also underwrite the full spectrum of services and supports. States and localities (in some states) match federal Medicaid and other federal funds (e.g., for vocational rehabilitation). There are a wide variety of federal housing assistance programs; here too, states and localities often provide significant funding. With respect to income support, working-age adults with serious mental illnesses frequently receive federal benefits such as Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). Some states supplement these benefits.

The federal Medicare program pays for some mental health services (discussed in Chapter 4) and, in the case of individuals who are eligible for both Medicare and Medicaid (discussed in Chapter 3), also underwrites other primary care. The joint federal-state Medicaid program is a critical source of funding for both basic primary health services and for mental health services for low-income working-age adults with serious mental illnesses. Through the federal Community Mental Health Services Block Grant program, states receive flexible formula-based grants to fund community mental health services. The Mental Health Block Grant program is the “single largest federal contribution dedicated toward improving mental health service systems across the country.”19 Block grants have played an important role in capacity building by enabling states to target dollars to special populations and underwrite the development of new services. Annual block grant funding accounts for less than two percent of total public mental health services outlays nationwide.

Numerous challenges inhibit the development of effective strategies for combining federal, state, and local funding for community mental health services to support individuals. As observed in a report to the President’s New Freedom Commission on Mental Health:

“A coordinated system that addresses the needs of people with mental illnesses must include a comprehensive range of mental health services including ancillary supports such as housing, vocational rehabilitation, education, substance abuse treatment, income support, and other basic services. While federal funds are potentially available to individuals, states, localities, or public and private providers, most of the federal programs that contribute funding to the current mental health system are designed to address broadly defined human needs rather than serving the specific needs of adults with serious mental illnesses or children with serious emotional disturbances.”20

A major challenge in marshaling resources to meet the varied needs of working-age adults with serious mental illnesses is that federal and state programs are often structured as “funding silos” with their own unique rules and requirements, which makes coordination difficult at both the system and service delivery levels.21 The President’s New Freedom Commission on Mental Health identified funding fragmentation as a major barrier to effectively supporting individuals with mental illnesses. To address this barrier, the Commission recommended that states develop and implement comprehensive mental health plans to promote a unified approach to system planning and management at the state level.22

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