Publication Date

Feb 15, 2006

U.S. Department of Health and Human Services

Public Financing of Home and Community Services for Children and Youth with Serious Emotional Disturbances: Selected State Strategies

Henry T. Ireys, Sheila Pires and Meridith Lee

Mathematica Policy Research, Inc.

June 2006

This report was prepared under contract #HHS-100-03-0024 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and Mathematica Policy Research, Inc.. For additional information about the study, you may visit the DALTCP home page at http://aspe.hhs.gov/_/office_specific/daltcp.cfm or contact the ASPE Project Officer, Cille Kennedy, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. Her e-mail address is: Cille.Kennedy@hhs.gov.

The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.

ACKNOWLEDGMENTS

EXECUTIVE SUMMARY

I. INTRODUCTION: A. Research Questions and Methods; B. Overview of Report

II. MECHANISMS FOR FINANCING SERVICES FOR YOUTH WITH SED AND THEIR FAMILIES: CRITICAL BACKGROUND ISSUES: A. Number of Youth with SED in Residential Care and Costs Associated with Their Care; B. Sources of Federal Funding for Child Mental Health Services; C. Financing Mechanisms; D. Financial Incentives for State Agencies; E. The Role of Residential Treatment Facilities

III. STATE APPROACHES TO FINANCING HOME AND COMMUNITY-BASED SERVICES FOR YOUTH WITH SED AND THEIR FAMILIES: A. Comprehensive Statewide Reforms; B. Incremental Reforms; C. Contemplating Future Reforms; D. Summary

IV. STRENGTHS AND WEAKNESSES OF SELECTED FINANCING MECHANISMS: A. HCBS Waivers; B. Medicaid Rehabilitation Option; C. Case-Rates Used by Designated Care Management Entities for High-Risk Populations; D. The TEFRA Provision

V. SYNTHESIS AND IMPLICATIONS

REFERENCES

GLOSSARY

NOTES

APPENDICES: APPENDIX A: States with Comprehensive Statewide Reforms; APPENDIX B: States with Home and Community-Based Service Waivers; APPENDIX C: States with a CMS Grant for a Feasibility Study and Development Project for Community-Based Treatment Alternatives for Children with SED; APPENDIX D: Values and Principles Supporting the Systems of Care Approach; APPENDIX E: Cost of Services Provided Through HCBS Waivers

LIST OF TABLES: TABLE ES.1: Advantages and Disadvantages of Four Financing Mechanisms for Supporting Intensive Home and Community Services for Youth with SED; TABLE II.1: Estimates of Expenditures for Home and Community Services and Hospital Level Care for Youth with SED; TABLE II.2: Mechanisms for Financing Intensive Home and Community Services for Youth with SED; TABLE II.3: Use of Selected Mechanisms for Financing Intensive Home and Community Services; TABLE IV.1: Advantages and Disadvantages of Four Financing Mechanisms for Supporting Intensive Home and Community Services for Youth with SED; TABLE IV.2: Intensive Home and Community Services Provided Through HCBS Waivers in Five States

ACKNOWLEDGMENTS

We asked two panels of experts to assist in the development of the project and final report. The first, convened in May 2004, included Robert Friedman, Gary Harbison, Russell Frank, Darcy Gruttadaro, Bruce Kamradt, Carol Lichtenwalter, Lucy Keating, Sybil Goldman, Karen Spoelman, Randy Myers, and Andrea Fiero. These individuals helped develop an appropriate focus for the project in its early stages. The second panel, convened in March 2006, included Gary Blau, Sybil Goldman, Ron Hendler, Chris Koyanagi, Ken Martinez, Martha Moorehouse, Judith Teich, Constance Thomas, and James Wotring. This group read an early draft of the report and provided many helpful comments and suggestions. We are grateful to everyone who participated in these panels, and absolve them all from any inaccuracies or misinterpretations that remain in the report.

Cille Kennedy, our project officer in the Office of the Assistant Secretary for Planning and Evaluation, provided the initial impetus for this project as well as continued encouragement, support, and good ideas. We thank her very much for her considerable help and leadership. Lindsay Harris, a former analyst on our staff, helped enormously in the early stages of the project, participated in many of the discussions with state officials, and drafted several of the summaries found in the appendices. We send her many thanks. Sharon Clark managed the production of early drafts and the final report with her usual efficiency and good humor. Bob Whitaker read an early draft and made numerous suggestions that improved the report considerably.

Many thanks also are owed to the state officials with whom we talked. They answered our many questions with diligence and care, and we are especially grateful for their willingness to review early drafts of the summaries of our discussions. These summaries were finalized between April and November of 2005 (see the front pages of Appendix A, Appendix B, and Appendix C for specific months of completion). We assume full responsibility for the accuracy of the summaries as of their completion date and for the conclusions drawn in the lessons learned sections. The summaries are not and should not be viewed as officially sanctioned policy statements or program descriptions.

EXECUTIVE SUMMARY

Numerous reports have underscored the contradictions and deficiencies in the nations mental health service system for children with serious emotional disturbances (SED), including a heavy reliance on residential care and out-of-home placements (e.g., Campaign for Mental Health Reform 2005; New Freedom Commission on Mental Health 2003). Recent studies have also reinforced long-standing concerns that some parents have had to relinquish custody of their children solely to obtain treatment for their childrens behavioral or emotional problems (Government Accounting Office 2003). Overall, these reports have motivated federal and state legislators to consider new strategies for improving child mental health services and, in particular, enhancing access to effective home and community services.

Youth with SED include children and adolescents with chronic depression, major conduct disorders, substance abuse problems, and other behaviors that are challenging for families and communities. Many youth with SED are first identified in the schools, child welfare or juvenile justice systems, and they often claim a great deal of public attention because of the wide gap between their need for intensive treatment and the availability of appropriate services, including home-based counseling, respite care, family-to-family support, treatment foster care, and school-based mental health care. More and more studies indicate that these services are effective not only in improving mental health outcomes for youth with SED, but also in reducing or preventing stays in residential care and other out-of-home settings (Hawaii Department of Health 2004; Knitzer and Cooper 2006; Sheidow et al. 2004). Given these signs of progress, policymakers have expressed greater interest in making these services more widely available (Waxman 2006). For example, the 2005 Deficit Reduction Act (Public Law 109-171) authorizes demonstration projects for up to ten states to assess the effectiveness of home and community-based alternatives to psychiatric residential treatment facilities (PRTFs).

States and counties currently are pursuing numerous approaches to support home and community services and, more broadly, to initiate and sustain a fundamental transformation of their child mental health service systems. These approaches include enhancing access to Medicaid coverage of these services, re-directing funds from residential services to community care, integrating funds from the numerous agencies that serve children, designating care management entities to oversee services for high-risk populations, and implementing demonstration projects to develop specific financing models.

The purpose of this report is to present the results of a study of selected public financing mechanisms that states have used to pay for intensive home and community services for children and youth with SED.¹ Although the study covers several key public strategies for funding home and community services for children with SED, it focuses particularly on the Medicaid home and community-based service (HCBS) waiver as a result of recent federal and state interest in this particular financing approach. Policymakers have focused on the HCBS waiver partly because this financing mechanism allows states to provide an expanded set of Medicaid services to a limited number of children. With an HCBS waiver, states have considerable flexibility in addressing the needs of high-risk children by paying for services not included in their standard Medicaid state plans; at the same time, they can maintain some control over costs by sharply limiting the number of children enrolled in the waiver program.

However, the HCBS waiver is only one of several methods for supporting intensive home and community services for youth with SED. States that already have such a waiver also use other financing mechanisms to support comprehensive mental health care for these children and their families. Previous studies have described the financing of model community-based programs (e.g., Bazelon Center 2003; Pires 2002), but there remains a need to examine in greater detail the mechanisms used by states to finance intensive home and community services and the reasons behind states decisions for choosing some mechanisms over others. Better information on strategies for selecting the best set of financing mechanisms may help states design and implement new initiatives for broadening home and community-based alternatives to psychiatric residential treatment and other out-of-home care.

To develop this information, the Office of the Assistant Secretary for Planning and Evaluation in the Department of Health and Human Services contracted with Mathematica Policy Research, Inc. to examine how states and communities have financed, or could finance, these services for youth with SED and their families.

Specific policy questions examined in the study include:

What are the benefits and disadvantages of HCBS waivers and other financing approaches for building home and community services as alternatives to residential care?
Why do states feel they need waivers and what are the arguments for or against amending the current 1915(c) waiver program to include PRTFs under the rubric of an institution?
How have different financing approaches been combined to support community alternatives to residential care or out-of-home placements?
What financing strategies are likely to contribute to the sustainability of improvements in mental health services for youth with SED?

Methods

This report is based on discussions with officials in three groups of states, and a review of federal and state reports on financing services for youth with SED and their families. The three groups of states include those that:

Are implementing broad, statewide reforms in their child mental health service systems (New Jersey and New Mexico);
Deliver services to youth with SED through HCBS waivers (Indiana, Kansas, New York, Vermont, and Wisconsin);² and
Received awards in 2003 from CMS to assess the feasibility of developing an HCBS waiver as an alternative to psychiatric residential treatment facilities (Illinois, Maryland, Mississippi, Missouri, and Texas).

As a group, these states are using many different strategies to configure and support mental health services for youth with SED, are at varying stages in the development of statewide systems, and have encountered a diverse set of obstacles and opportunities for improving home and community services. Consequently, discussions with officials in these states covered a wide range of topics, including the legislative and policy background related to services for youth with SED, the reasons for selecting a given financing strategy or strategies, the benefits and challenges associated with HCBS waivers, the extent to which demonstration projects influenced a states selection of particular financing mechanisms, tactics for promoting coordination among key agencies, the role of residential treatment centers, and general lessons learned from recent state efforts to strengthen the financing of these services.

Findings

Discussions with state officials underscore the challenges of paying for the mix of intensive mental health services that are appropriate to each child and family by combining the resources of different agencies or expanding the type of services covered (or both). Many factors influence the way in which states address these challenges, including:

The proportion of children living in rural areas;
The set of services covered under the existing Medicaid plan and the status of the Medicaid budget;
Prior experience with demonstration projects involving home and community services for children with SED;
Leadership on this issue from the governors office and the extent of support from the state legislature;
The willingness of residential provider organizations to engage in discussions of new service models;
The strength of family advocacy and support for change; and
The history of collaboration among departments of child mental health, child welfare, juvenile justice, and special education.

Because of the many factors involved, state officials have to balance a variety of issues as they decide what financing strategies are most suitable given a states resources and constraints. Five findings from this study provide insights into this decision-making process.

First, 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. The mechanisms examined closely in this study include:

The 1915(c) HCBS waiver.
The Medicaid rehabilitation option.
The development of case rates for designated care management entities serving high-risk populations (whereby states pay a monthly fee for each child, allowing the child access to a flexible, individualized array of services and supports).
A provision in the Tax Equity and Fiscal Responsibility Act (TEFRA) known as the Katie Beckett provision.

Determining what combination of these funding mechanisms is appropriate for a particular state means balancing their advantages and disadvantages in light of the states fiscal, legislative, and agency resources (see Table ES.1). In addition to these resources, officials at the state or county level can blend or braid funds from multiple child-serving systems, which allows states to pay for a broader range of services than any one agency could cover. This approach is often used in conjunction with a case rate approach. Many states also have implemented Medicaid managed care (1915(b)) and research and demonstration (1115) waivers that allow for flexibility in types of covered services by implementing managed behavioral health systems. A few states and counties have designated sales, property, or income taxes to generate new revenue to enhance public mental health services, including services for youth with SED.

TABLE ES.1: Advantages and Disadvantages of Four Financing Mechanisms for Supporting Intensive Home and Community Services for Youth with SED
Funding Mechanism	Advantages	Disadvantages
HCBS waiver	Allows states to provide intensive services not covered in state plan Waives parental deeming requirements Waives statewideness requirements Promotes increase in number of providers offering intensive home and community based services Gives states experience in pricing intensive services and individual care plans	Does not support preventive or step-down services Substantial administrative effort for a relatively small number of youth Application development and waiver implementation can be challenging Does little to re-align funding across agencies and may introduce disincentives for sharing costs for community services Does little to reduce geographic disparities within states
Expanding Medicaid rehabilitation option	Offers states opportunities to include certain types of intensive home and community-based mental health services into state plan coverage Services available to all Medicaid beneficiaries, not just subgroups	Risks increasing state Medicaid expenditures if rehabilitative services are used heavily and poorly managed
Case rates used by designated care management entities for high risk populations	Allows state and local agencies to negotiate payment rates for specific high risk populations Provides a mechanism for states to combine funding from different agencies to cover integrated, individualized plans of care Permits monitoring of plan performance and quality of care	Requires experience in managed care technologies and financing models Requires a sufficient case load to support a feasible economy of scale and risk management
TEFRA (Katie Beckett) provision	Waives rules requiring application of parental income to determination of Medicaid eligibility for children who meet SSAs disability definition, meet certain clinical criteria, and need an institutional level of care	A sharply limited number of children with SED qualify for this provision Expands Medicaid eligibility, thus posing potential cost issues Does not expand types of home and community services covered

A second finding involves the importance of legislative and budgetary action at the state level. In several of the states in this study, the passage of state legislation directly focused on services for children has been an important impetus for interagency collaboration around the financing of services for youth with SED. Although state legislation alone is neither necessary nor sufficient for garnering financial support for intensive home and community services for youth with SED, it can move a state in the right direction by establishing expectations and goals, removing barriers to collaboration, and, in some cases, providing new dollars to build the infrastructure necessary to sustain these services. Discussions with state officials suggest that decisions about how to finance intensive community services have to account for a states history of legislative and political efforts to improve the child mental health service system.

Third, states and counties that carefully manage access to residential treatment services and psychiatric hospitals tend to have more resources for intensive home and community services. In the process of building financial support for intensive home and community services for children with SED, many states began by re-directing expenditures away from psychiatric hospitals and residential treatment services and toward community alternatives. This process, coupled with careful management of access to beds in both residential treatment facilities and in-patient psychiatric hospitals, is important because it has allowed states to conserve dollars and invest their resources in developing the provider capacity and infrastructure necessary for a community-based service system. Careful management of access to residential care is critical not only because such care is expensive but also because there is little evidence of its long-term effectiveness in solving problems to which it is usually applied.

Fourth, within states, certain administrative and budgetary procedures can support the cost-sharing of services among all or most of the agencies that serve children. Problems with interagency coordination and the associated duplication and gaps in services have long been recognized as a serious barrier to comprehensive child mental health care. In addition to instituting strategies for improving interagency coordination at a policy level, states also have established mechanisms for ensuring that funds from different agencies are integrated at the local level to ensure that the child and family can obtain needed services. In some states, for example, individualized plans of care specify which state agency (mental health, child welfare, juvenile justice, or special education) will pay for which services. In other states, dollars are blended to allow for integrated service delivery across child-serving systems. According to some state officials, case rates are an especially useful financing mechanism because: (1) several agencies can contribute dollars to the case rate for an individual child; and (2) agencies have a predictable amount of dollars to pay for a wide range of home and community services tailored to help children with SED achieve specific outcomes.

Fifth, because of the urgent needs of near-poor children with SED who have little or no insurance coverage for mental health care, and for families of these children who exhaust their coverage, financing mechanisms that allow these children to access intensive services (even if their families are not Medicaid eligible) are critically important. One of the principal advantages of the HCBS waivers is that they allow states to disregard Medicaids rules for using parental income in determining a childs eligibility for Medicaid. Several state officials emphasized the importance of this particular component of the waiver because it provides states with a means for: (1) covering high-risk and uninsured or inadequately insured children who would not otherwise have access to mental health services; and (2) ensuring that families do not have to relinquish custody of a child with SED solely to obtain intensive mental health services.

Implications

The findings from this study have three major implications for policymakers concerned with improving mental health services to youth with SED and their families. First, sustained improvements in financing intensive home and community services for youth with SED depends on the development of effective partnerships between key agencies at the state and local levels. No simple recipe can create this partnership. In some cases, the key partnership was forged between the state mental health department and the Medicaid agency. Medicaid programs in every state now pay for a considerable portion of mental health services for youth with SED, while mental health agencies have the experience necessary to manage clinical care, certify providers, and assess service quality. The resources of both agencies can be used to support initiatives that provide appropriate and cost-effective services. Child welfare, juvenile justice and education agencies also are key because they often control considerable behavioral health dollars, and they serve the majority of children who need mental health services and supports.

In states that are actively pursuing ways to expand the availability of home and community-based services, agencies that serve children have developed new partnerships with one another. Discussions with state officials provided many examples of initiatives--often mandated by state legislation or budgetary processes--that bring different agencies together on behalf of youth with SED (e.g., mental health, Medicaid, child welfare, juvenile justice and education agencies). From a state perspective, the challenge is to ensure that the process of collaboration does not threaten the budget of any single agency, but instead leads to an equitable distribution of financial responsibility across the agencies. From a federal perspective, the challenge is to ensure that legislation directly affecting one system or one funding source (for example, Medicaid) does not unintentionally create barriers to interagency agreements at the state level.

The second implication involves the impact of prior demonstration projects funded under the original federal Child and Adolescent Service System Program, the current federal Comprehensive Community Mental Health Services for Children and Their Families Program, or other foundation-sponsored initiatives. These efforts spawned community level demonstration projects in virtually every state, and many officials with whom we spoke noted that the roots of current initiatives often lay in the experience gained during the implementation and operation of these projects. This finding underscores the strong potential for positive long-term outcomes of the demonstration projects authorized under the Deficit Reduction Act of 2005.

Finally, the study findings indicate that state officials value HCBS waivers because they can provide states with an additional mechanism for financing home and community services and support other efforts to manage access to residential treatment. Moreover, states would be interested in applying for an HCBS waiver for youth with SED if the criteria for documenting budget neutrality could be linked to psychiatric residential treatment facilities rather than to psychiatric hospitalization alone. In most states, very few children now enter psychiatric hospitals, and even fewer stay for long periods of time. Because most states are spending comparatively little on psychiatric hospitalization for children, they will not save many dollars, if any, by substituting intensive home or community services for treatment in these hospitals. However, as inpatient utilization has decreased, use of residential treatment has increased; this trend has placed corresponding demands on Medicaid dollars because Medicaid covers psychiatric residential care for children in most states. By replacing this residential care with more effective home and community services, states should be saving both federal and state Medicaid dollars, which could be available to enhance home and community services for youth with SED.

Notes

States and communities can support child mental health services in many different ways. This report addresses several major public mechanisms available to all states, but it is not designed as a comprehensive review of all possible public and private strategies to finance services for youth with SED.
Kansas and New York began operating their wavier programs in the mid 1990s and had 2,020 and 1,700 children enrolled in their waivers, respectively, as of 2005; Vermont began its waiver program in 1982 and had 140 children enrolled as of 2004. Indiana and Wisconsin began their waiver programs in 2005 and had 20 and 190 children enrolled, respectively, at the end of that year. Michigan obtained approval for an HCBS waiver for youth with SED in October 2005--too late to be included in this study.

I. INTRODUCTION

Numerous reports have underscored major deficiencies in the response of the nations mental health, juvenile justice, and child welfare systems to children with serious emotional disturbances (SED) and their families, including a heavy reliance on residential care and out-of-home placements (Campaign for Mental Health Reform 2005; New Freedom Commission on Mental Health 2003; U.S. Department of Health and Human Services 1999). In addition, recent studies (for example, General Accounting Office 2003) have reinforced long-standing concerns that some parents have had to relinquish custody of their children solely to obtain treatment for their childrens behavioral or emotional problems. Prompted by these findings, many federal and state legislators and program administrators have begun to consider new mechanisms for improving child mental health services.

Youth with SED include children and adolescents with chronic depression, major conduct disorders, substance abuse problems, and other behaviors that are challenging for families and communities. These children and adolescents have claimed a great deal of attention because of the gap between their need for intensive treatment and the availability of appropriate home and community services, which include a range of nontraditional treatments from home-based family counseling, respite care, and family-to-family support to independent skills training, crisis intervention, and treatment foster care. More and more studies indicate that these services are effective not only in improving mental health outcomes for youth with SED, but also in reducing or preventing stays in residential care and other out-of-home settings (Burns 2002; Hawaii Department of Health 2004; Knitzer and Cooper 2006; Sheidow et al. 2004). Given these signs of progress, policymakers have begun to express greater interest in making these services more widely available (Waxman 2006).

The purpose of this report is to present the results of a study of the mechanisms that states use to pay for intensive home and community services for children and youth with SED and their parents. Although the study covers the major public strategies for funding home and community services for children with SED, it focuses on the Medicaid home and community-based service (HCBS) waiver, also known as the 1915(c) waivers, because of the substantial legislative interest in this particular financing approach. It is not intended to be a review of all possible public and private mechanisms for funding mental health services for this group of children.

At the beginning of the study, five states were operating HCBS waivers for youth with SED: Indiana, Kansas, New York, Vermont and Wisconsin.¹ However, the 2005 Deficit Reduction Act (Public Law 109-171) authorizes demonstration projects for up to ten states to assess the effectiveness of home and community-based alternatives to psychiatric residential treatment. As states pursue these demonstration projects and more generally seek to improve their mental health service system for children, they will need information on how different public financing mechanisms can be applied. This report is designed to provide background information to policymakers and program administrators in federal and state departments of mental health, child welfare, juvenile justice, and education who are working to improve care for children and youth with SED.

HCBS waivers allow states to provide an expanded set of Medicaid services to a limited number of children identified as having SED through various clinical criteria. These waivers enable states to provide high-risk children with a set of intensive services not included in the standard Medicaid plan while maintaining some control over costs. However, the HCBS waiver is only one of several methods for supporting intensive home and community services for youth with SED. States and counties are combining many approaches to finance these services and, more broadly, to initiate and sustain a fundamental transformation of their child mental health service systems. These approaches include the various Medicaid coverage options, integrated funds from the numerous agencies that serve children, designated care management entities (CMEs) for high-risk populations, time-limited demonstration projects funded by the Substance Abuse and Mental Health Services Administration (SAMHSA), and other Medicaid waivers (such as the 1115 waivers).

Although case studies have been used in previous studies to describe the financing of model community-based programs (e.g., Bazelon Center 2003; Pires 2002; Stroul 2003), there remains a need to examine in greater detail the mechanisms used by states to finance intensive home and community services, and the reasons behind the states decisions for choosing one mechanism over another. To explore these questions, the Office of the Assistant Secretary for Planning and Evaluation in the Department of Health and Human Services contracted with Mathematica Policy Research, Inc. to examine how states and communities have financed, or could finance, these services for youth with SED and their families. In particular, the study examines states use of HCBS waivers and other financing approaches in order to provide a context for understanding what can be accomplished with and without waivers.

A. Research Questions and Methods

The study addressed the following research questions:

What are the benefits and disadvantages of HCBS waivers, as well as other financing methods for building home and community alternatives to residential care?
Why do states feel they need HCBS waivers, and what are the arguments for or against amending this waiver program to allow for alternatives to psychiatric residential treatment facilities (PRTFs), as well as to hospital level care?
How and why have different financing approaches been combined to support alternatives to residential care or out-of-home placements?
What financing strategies are likely to contribute to the sustainability of improvements in mental health services for youth with SED?
What role do different financing mechanisms play in promoting collaboration among mental health, child welfare, juvenile justice, and special education agencies?
To what extent have demonstration projects provided the experience that states can use to develop effective financing strategies for home and community services?
What financial arrangements should be avoided because they work against long-term improvements in the overall system-of-care?

To collect the data required to address these questions, officials in three groups of states were contacted:

States that are implementing comprehensive statewide reforms in their child mental health service systems, but are not using HCBS waivers as part of this effort: New Jersey and New Mexico.
States that have HCBS waivers for youth with SED: Indiana, Kansas, New York, Vermont, and Wisconsin.
States that received grants from the Centers for Medicare and Medicaid Services (CMS) in 2003 to assess the feasibility of developing an application for an HCBS waiver: Illinois, Maryland, Mississippi, Missouri, and Texas.²

Discussions with officials in these states covered a wide range of topics, including the legislative and policy background related to services for youth with SED, the reasons for selecting a given financing strategy or strategies, the benefits and challenges associated with HCBS waivers, the extent to which demonstration projects influenced a states selection of particular financing mechanisms, tactics for promoting coordination among key agencies, the role of residential treatment centers (RTCs), and general lessons learned from recent state efforts to strengthen the financing of these services. Discussions were held during visits to two states (Kansas and New York) and through telephone conference calls with officials in the other states.

These discussions and a review of relevant state and federal reports were used to develop a summary of each states experience in supporting intensive home and community services for youth with SED. Each summary covered the policy context that shaped the services provided to youth with SED; key features of the HCBS waiver, the feasibility study, or the statewide reform plan (depending on which strategy a state had followed); the role of RTCs in each states mental health service system for children; and the lessons we might learn from each states experience. Officials from each state reviewed the summary for their state, and their comments were incorporated to the extent possible.³ The summaries are included in Appendix A, Appendix B, and Appendix C.

B. Overview of Report

Strengthening the financing of intensive home and community services for youth with SED involves a complex set of policy issues, regulatory constraints, and payment mechanisms. Chapter II presents critical background information on these topics. It describes important system-of-care principles that have shaped the services for youth with SED, the role of the various agencies that serve these children, and the financing mechanisms used by many states.

Chapter III and Chapter IV present the study findings. The former identifies the general financing themes that emerged in our discussions with officials in each of the three groups of states. The latter covers the strengths and weaknesses of four major financing mechanisms: HCBS waivers, the Medicaid rehabilitation option, case-rates for high-risk populations, and provisions in the Tax Equity and Fiscal Responsibility Act (TEFRA), also known as the Katie Beckett provision. The final chapter presents a synthesis of findings with respect to the research questions, and discusses what the findings may imply for current legislative and policy efforts to strengthen the financing of intensive home and community services for youth with SED and their families.

II. MECHANISMS FOR FINANCING SERVICES FOR YOUTH WITH SED AND THEIR FAMILIES: CRITICAL BACKGROUND ISSUES

At least 10 percent of the children in the United States--more than six million young people--have an SED, defined as any diagnosable mental disorder that severely disrupts social, academic, and emotional functioning (U.S. Department of Health and Human Services 1999). An estimated 70-80 percent of these children do not get the treatment they need (Campaign for Mental Health Reform 2005; Koppelman 2004). As a result, many become involved with juvenile justice systems, drop out of high school, and are poorly prepared for adult life (Duchnowski et al. 2002).

Most children and youth with SED are first identified not in mental health clinics but in child welfare agencies, detention centers, juvenile courts, schools, primary care practices, and childcare programs. These agencies and institutions play a critical role in providing services for these children, albeit only for a short time or for certain problems (New Freedom Commission on Mental Health 2003). To complicate the issue, the various agencies that serve youth with SED and their families differ in terms of their legislative mandates, treatment philosophies, funding sources, and reporting requirements. In many states, these differences make for a rigid, poorly coordinated delivery system with financing silos that are difficult to integrate. For example, if a child with SED comes to the attention of one agency, he or she may have access to community services; if he or she comes to the attention of another agency, residential treatment may be the only option available.

Problems with interagency coordination and the associated duplication and gaps in services have long been recognized as a serious barrier to comprehensive child mental health care. In 1986, for example, the National Institute of Mental Health developed the Child and Adolescent Service System Program (CASSP) as a means to strengthen mental health services for children by improving interagency coordination and developing a cohesive system-of-care, defined by Stroul and Friedman (1986) as a comprehensive spectrum of mental health and other necessary services which are organized into a coordinated network to meet the multiple and changing needs of children and adolescents with severe emotional disturbances and their families. Ideally, such systems of care should also be community-based and culturally competent (see Appendix D for the ideal attributes of a system-of-care for youth with SED, as defined by Stroul and Friedman 1986).

CASSP provided both an important conceptual framework and financial support for states that wanted to strengthen their systems of care for children with SED and their families by promoting more flexible funding and interagency approaches (Potter and Mulkern 2004). CASSP funding ended in the early 1990s, but Congress passed a new program to support efforts in local communities: the Comprehensive Community Mental Health Services for Children and Their Families Program. This program, administered by the Center for Mental Health Services (CMHS), provides six-year grants to selected communities, states, or tribal organizations for the purpose of creating, through a demonstration program, sustainable changes in infrastructure and service delivery systems for children with emotional and behavioral problems who require services from several agencies. Grantees are required to match federal dollars with local, state, or other funds in the early years of their programs and must assume an increasingly larger share of program expenses over time. In October 2005, SAMHSA announced 25 new grantees, totaling $184.5 million over the next six years (Mental Help Net 2005), bringing to over 120 the total number of grantee sites funded to date. As of March 2006, programs were operating in 56 sites.

In addition to federal funds for demonstration projects, several private foundations have sponsored local initiatives to enhance access to community services for youth with SED (see, for example, Saxe and Cross (1998) for an overview of the Mental Health Services Program for Youth (MHSPY), funded by the Robert Wood Johnson Foundation).

Despite more than two decades of experience in the application of system-of-care principles and flexible funding through demonstration programs (see Potter and Mulkern 2004 for a partial review), few states have adopted a comprehensive approach to re-engineering their interagency agreements in support of a statewide financing system for child mental health services (Knitzer and Cooper 2006). Instead, most states have taken an incremental approach to reform, making circumscribed policy changes or implementing demonstration programs under one agency or another. Although these changes have improved access to intensive home and community services for certain populations of at-risk children, the policy and procedural differences still remaining between the various child-serving agencies continue to stifle the emergence in most states of a coordinated, statewide system of financing services for youth with SED (Institute of Medicine 2005).

Nonetheless, many states persist in the search for a better way to pay for services for children with SED and their families (see Armstrong et al. 2006 for a state planning guide). They do so because home and community services offer an opportunity to provide services that are less expensive and more effective than residential care. In fact, a growing number of methodologically sophisticated studies, many based on a randomized design, have demonstrated the positive impact of home and community services such as multisystemic therapy, multidimensional treatment foster care, functional family therapy, various cognitive behavioral therapies, and wraparound interventions, among others (see, for example, Burns 2002; Glied and Cuellar 2003; Sheidow et al. 2004). Based on this evidence, states are beginning to recognize the value of these services as essential to any comprehensive child mental health service system (see, for example, Hawaii Department of Health 2004). In contrast to the growing empirical support for these services, there is marked absence of evidence for the long-term effectiveness of traditional residential care (Frensch and Cameron 2002; Joshi and Rosenberg 1997; Weiner et al. 2001).

This chapter provides the foundation for our analysis of strategies that states have used or could use to pay for intensive home or community services as part of a broader system for financing effective treatment for youth with SED. Specifically, we:

Present estimates of the number of youth with SED in residential care and the costs associated with care in these facilities;
Describe the incentives that shape the financing decisions made by different agencies;
Outline mechanisms for financing home and community services; and
Discuss financial incentives that shape the policy decisions of state agencies.

A limited number of states and counties (for example, Proposition 63 in California, Spokane County in Washington State and Jackson County in Kansas) have designated sales, property, or income taxes to enhance public mental health services, including services for youth with SED. Because so few localities have designated tax revenues specifically for mental health services, the report does not address this issue further. However, tax initiatives are an important potential source of new revenue for child mental health services and are attracting interest from an increasing number of states and localities.

A. Number of Youth with SED in Residential Care and Costs Associated with Their Care

When intensive home or community services are unavailable or ineffective, parents and other authorities typically turn to psychiatric in-patient units, residential settings, or other out-of-home placements to treat children with SED. Residential settings include psychiatric residential treatment facilities (PRTFs), residential treatment centers (RTCs), therapeutic group homes, and therapeutic foster care residences. These facilities are owned by a wide variety of public and private entities and are operated under the jurisdiction of various state agencies, including departments of mental health, child welfare, and juvenile justice (Ireys et al. 2006; Goldstrom et al. 2001; Pottick et al. 2004). According to analyses of data from SAMHSAs 1997 Client/Patient Sample Survey, social service agencies, including child welfare units, were responsible for referring about 37 percent of all youth in residential care in 1997, and juvenile justice agencies were responsible for referring another 28 percent.

The number of children in residential settings has increased during the past two decades partly in response to the closing of long-term psychiatric hospitals and in-patient institutions (Manderscheid et al. 2004). As states have focused on closing hospital beds and Medicaid managed care has worked to reduce in-patient admissions and lengths of stay, the number of children placed in residential treatment has increased.

Overall, the number of residential beds in a state is shaped by several factors, including:

Coverage of residential care for youth with mental illness in the states Medicaid plan.
The extent to which juvenile justice, child welfare, special education, and mental health agencies place children in residential care without considering other alternatives.
Financial incentives that favor placement in residential treatment over provision of home and community care (such as a Medicaid state plan that includes coverage for residential treatment but not in-home counseling).
The availability of home and community services that could prevent or shorten placement in residential care (a particular problem in the rural areas of many states).
State agency, juvenile court, provider and family awareness of and willingness to use intensive home and community services as an alternative to residential settings.
Reluctance on the part of many communities to care for children who are perceived to be very dangerous or uncontrollable.

The total number of beds in RTCs or other out-of-home settings operated or funded by all state agencies combined is an important element in a financing analysis because care in these facilities is expensive. For example, analyses of Medicaid administrative and claims data from New Jersey indicate that annual costs in 1999 for all Medicaid services averaged $25,759 for a child with an emotional or behavioral disorder who spent 30 days or less in an institution for mental diseases (IMD) and $73,884 for children who spent more than 30 days in an IMD (Ireys and Cherlow 2004). In 2002, the Colorado state auditor estimated that the average annual cost in fiscal year 2001 for a child in a PRTF was $56,064 for children committed by the state Department of Youth Corrections (DYC), and $52,990 for children placed by their county child welfare or mental health agency (Colorado Office of the State Auditor 2002). The cost of care in PRTFs with on-grounds schools was higher, averaging $68,313 annually for children placed by DYC, and $65,901 for children placed by a county agency.

In contrast, costs for children who receive home and community services through an HCBS waiver range between $12,813 and $28,058 per child per year (excluding Kansas), depending on the particular state and year of waiver operation (see Table II.1). These figures are substantially lower than the estimates of the institutional level of care costs that would have been incurred had these children not been enrolled in the waiver, ranging from $22,736 to $113,572 per child per year, again depending on the particular state and year of waiver operation (Table II.1). Given that total treatment dollars for youth with SED are limited, the more that states spend on residential and other out-of-home care, the less they have for intensive home and community services. Faced with this dilemma, policymakers in many states see their ability to enhance community services for youth with SED as depending, at least in part, on their ability to reduce the number of residential beds and average lengths of stay in residential settings. The monies saved by diverting children from residential care into community treatment are often referred to as diversion dollars or re-investment funds, and some states allocate all or a portion of these funds to child-serving agencies with the specific goal of enhancing intensive home and community services.

TABLE II.1: Estimates of Expenditures for Home and Community Services and Hospital Level Care for Youth with SED
State	Year	Estimated Annual Average Per Capita Medicaid Cost For
State	Year	Home and Community Services	Hospital, Nursing Facility or ICF/MR Services^a
Indiana	2004	$12,813	$54,513
Kansas	2005	$607^b	$28,918
New York	2004	$18,028	$113,572
Vermont	2003-4	$28,058	$40,365
Wisconsin	2003	$16,129	$22,736
SOURCE: Applications for an HCBS waiver submitted by states to CMS. These are estimated Medicaid costs that would be incurred for individuals served in the waiver were the waiver not granted. Kansas per capita cost is substantially less than the other states because of the states lower reimbursement rates for specific services (see Appendix E), and its larger number of unduplicated recipients (relative to other states with an HCBS waiver).

B. Sources of Federal Funding for Child Mental Health Services

In addition to the demonstration projects funded by SAMHSA under the Comprehensive Community Mental Health Services for Children and Their Families Program, states draw from several federal sources to pay for mental health services for children, including Medicaid, Title IV-E and Title IV-B of the Social Security Act, special education, and community mental health block grants, among others. They also draw considerably on state and local general funds.

Medicaid is todays largest payer of mental health services in the nation (New Freedom Commission on Mental Health 2003). Consequently, the program plays a significant role in financing mental health services for youth with SED. About 20 percent of all children with mental illness are publicly insured, mostly through Medicaid, which in 1998 covered 24 percent of all childrens mental health expenditures (Koppleman 2005).

States use Medicaid to finance a wide range of mental health services including, in most states, treatment in psychiatric in-patient and residential facilities. Various waivers (such as the HCBS waiver), if approved by CMS, allow states to waive compliance with certain portions of the Medicaid statute, such as the amount, duration, and scope of Medicaid services they provide. As a result, a state may pay for specialized services not otherwise covered under its Medicaid plan in lieu of placing children in hospital in-patient settings but not, currently, in lieu of placing children in PRTFs.

For children involved in the child welfare system, Title IV-E provides states with matching federal funds to pay for the cost of room and board for eligible children in residential settings, including foster homes and other types of out-of-home care under a court order or voluntary placement. Title IV-E does not pay for mental health services provided outside of residential facilities, although it does cover certain types of administrative services, such as case management. (Medicaid typically pays for mental health services for Medicaid eligible children in foster care.)

Under the Individuals with Disabilities Education Improvement Act (IDEA), children who require special education services because of a disability, including SED, are entitled to receive such services, which will enable them to make progress in school and prepare for employment and independent living. IDEA requires public schools to evaluate children who are referred for special education services and, if it is determined that services are required, these schools must develop an individualized education program (IEP) that documents the type and intensity of services that will be provided (General Accounting Office 2003). Public schools are obligated to ensure that services specified in IEPs are provided, including paying for services if necessary, including mental health services and tuition at private schools designed for children with particular types of problems. Many school systems are reluctant to include intensive home or community services in IEPs because of their cost, although many school systems are paying for the cost of services in residential facilities.

The Community Mental Health Services Block Grant program supports the delivery of a broad range of community-based systems of care for individuals with serious mental illnesses, including children with SED, as an alternative to hospitalization. All states and territories are eligible for the grant program, which is administered by CMHS within SAMHSA. The grants are based on a states demographic and economic factors. They offer flexible funding that states can use not only to support mental health services not covered by other sources but also to pay for mental health treatment for uninsured individuals. Overall, these funds are quite limited, representing about 3 percent of all mental health costs in most states.

Changes in Medicaid payment strategies to support states use of intensive home and community services are essential. However, significant improvement in treating youth with SED depends on aligning the incentives and funding priorities of all key agencies, not just those that rely on Medicaid funding.

C. Financing Mechanisms

Broadly speaking, there are two policy options through which states can reform the way they finance intensive home and community services for youth with SED:

They can make comprehensive statewide reforms intended to address the entire service delivery and financing system through procedural changes in all participating agencies at the same time over a period of several years; or
They can make incremental reforms intended to address pieces of the service delivery and financing system through procedural changes in one agency or one department at a time or in a limited number of counties at a time.

As a practical matter, the latter option is typically more feasible than the former, but the large variety of mechanisms that states can actually use to effect change is the same under either approach. This report focuses on the following four mechanisms (see Table II.2):

Medicaid 1915(c) HCBS;
The Medicaid rehabilitation option;
TEFRA provisions; and
Case-rates used by designated CMEs for high-risk populations, using blended or braided funding.

Each is briefly described below, together with other mechanisms that can be important components in developing a comprehensive financing system for childrens mental health services.

1. Medicaid 1915(c) Home and Community-Based Services Waivers

Through HCBS waivers, states can expand coverage of mental health services to intensive HCBS for a designated number of children with SED as an alternative to institutional care (defined as hospital level not residential treatment) that would otherwise be covered by Medicaid. States also can use HCBS waivers to expand coverage to populations not otherwise eligible for Medicaid, creating access, for example, to uninsured families and those who exhaust their private insurance because they have a child with SED. These are the families who otherwise may have to relinquish custody of their children to access services.

The waivers are attractive because they allow states to provide selected services to a limited number of children, thereby reducing their risks for a rapid escalation in expenditures. Children are determined to be eligible based on specific clinical criteria and, in some states, on whether the waiver is operational in their county. The expanded package can include a wide range of intensive services that many children with SED and their families need, and that can be combined into individualized plans of care tailored to the needs of the child and family.

TABLE II.2: Mechanisms for Financing Intensive Home and Community Services for Youth with SED
Mechanism	Description
1915(c) HCBS Waivers	Eligible children must require care in a psychiatric hospital (RTCs in most states do not qualify as psychiatric hospitals) HCBS waivers allow states to waive: Limits on the amount, duration and scope of Medicaid services, thereby enabling the state to offer specialized intensive HCBS not available through mandatory or optional Medicaid services or through other state or county programs Parental deeming requirements, thereby providing access to intensive mental health services for youth who might not otherwise be financially eligible for Medicaid Statewideness requirements, allowing the state to implement the waiver in particular geographic areas
Rehabilitation option	A rehabilitation service is defined as any medical or remedial services (provided in a facility, a home or other setting) recommended by a physician or other licensed practitionerfor the maximum reduction of physical or mental disability and restoration of an individual to the best possible functional level (42 CFR 440.130(d)) Range of specific covered rehabilitation services defined differently by different states
TEFRA (also known as the Katie Beckett provision)	Gives states the option to waive the deeming of parental income and resources for children with disabilities under 18 years old who are living at home but would otherwise be eligible for Medicaid-funded institutional care Qualifying children eligible to receive all services provided under the states Medicaid plan Requires states to determine that: The child has a disability as defined by the Social Security Administration (SSA) disability definition The child requires the level of care provided in an institution Providing care inside of the home is appropriate The cost of care at home is no more than the cost of institutional care
Case-rates for designated CMEs serving high-risk populations	Fee for each child received per month in return for providing a flexible, individualized array of services and supports designed to achieve specific outcomes Different state and local agencies may contribute to case-rates through mechanisms that blend or braid funds Separate case-rates negotiated for different groups

2. The Medicaid Rehabilitation Option

The Medicaid rehabilitation option can include a wide range of psychiatric rehabilitation services, which are defined as medical or remedial services for maximum reduction of mental disabilities and restoration of maximum functioning (Table II.2). Such services include: (1) restoration and maintenance of daily living skills (grooming, personal hygiene, cooking, nutrition, health and mental health education, medication management, money management, and maintenance of the living environment); (2) training in the social skills appropriate to the use of community services; (3) development of appropriate personal support networks; (4) recreational services that are therapeutic in nature; and (5) telephone counseling services (Bazelon Center for Mental Health Law 2001; Smith et al. 2000, p. 84). States vary widely in the rehabilitation services they offer depending on the various political and administrative factors that influenced the states decision to include this option. Some provide psychological assessment; crisis intervention; individual, group, and family therapy; and day treatment. Others offer home-based services, behavioral management skills training, therapeutic foster care, family preservation services, care coordination, or help in medication compliance (Smith et al. 2000, pp. 75-76). Once a state has adopted the rehabilitation option as part of the state plan, it must make the covered services available to all Medicaid beneficiaries.

3. Tax Equity and Fiscal Responsibility Act of 1982

TEFRA added the Katie Beckett provision to the Medicaid program as a state option. This provision allows states to waive the requirement for considering parental income in the process of determining Medicaid eligibility for children with disabilities under 18 years old who are living at home but would otherwise be eligible for Medicaid-funded institutional care. As of 2002, 20 states include this provision in their Medicaid plan, but in only ten do children with mental and emotional disorders qualify (Bazelon Center for Mental Health Law 2002). Children who qualify under the provision are eligible only for the services provided under the states Medicaid plan. That is, TEFRA did not authorize a specialized package of intensive services for children covered under this provision. (TEFRA included many other provisions not related to children.)

4. Case-Rates for High-Risk Populations

More and more states and counties are contracting with designated CMEs to provide a flexible, individualized array of services and supports for defined populations of youth and pay these CMEs on a case-rate basis in return for meeting specified outcomes. For example, in Oneida County, New York, the Department of Social Services pays a nonprofit CME (Kids Oneida) $2,550 per month for each youth with SED to provide an individualized plan of care (IPC), including such services and supports as care coordination, family support, crisis response, skill building, intensive in-home counseling services, and respite care (see Appendix B for additional details).

In some other states, several state and local agencies that serve children contribute to the case-rate amount. Wraparound Milwaukee, for example, uses pooled dollars from child welfare, juvenile justice, Medicaid, and mental health (see Appendix B for additional details). This program accepts full risk for enrolled children but is able to purchase a broad, flexible array of services and supports. When necessary, the program pays RTCs for care (generally very short-term) on the basis of negotiated fee-for-service arrangements, as it does for all other types of services and supports.

Overall, CMEs such as Kids Oneida or Wraparound Milwaukee can provide a wider range of services tailored to the needs of the individual child and family than would be possible for any single agency. Moreover, because the state contracts with these entities, the state can include provisions specifically designed to enhance quality of care, such as specifying that evidence-based mental health treatments will be used to the extent possible.

5. Other Important Medicaid Financing Mechanisms

a. Early and Periodic Screening, Diagnosis, and Treatment Program

States use other Medicaid provisions to pay for mental health services for children, including the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program, the optional clinic benefit, 1915(b) waivers, and 1115 waivers. Under EPSDT, all Medicaid-eligible children under the age of 21 are entitled to be screened regularly for physical and mental health conditions. States are required to provide screened children with any medically necessary, federally authorized Medicaid service regardless of whether the service is included in the states Medicaid plan. Ideally, states would use EPSDT to enhance access to mental health treatment services for children with SED by ensuring that: (1) primary care physicians and clinics use standard screening tools to identify children with or at high risk for SED; (2) identified children are referred for further evaluation and treatment; and (3) identified children have access to a broad range of treatments, including intensive home and community services.

Most states, however, have neither fully put the EPSDT program into practice nor implemented the standard screening tools statewide that can reliably identify children and adolescents at risk for mental health problems (Bazelon Center for Mental Health Law 1999; Koppelman 2004). Consequently, lawsuits have been filed in numerous states alleging shortcomings in the provision of EPSDT services. Some of these lawsuits have focused on a states failure to provide intensive community-based mental health services to youth with SED and their families that would enable the youth to reside at home or in the community (GAO 2001; Perkins and Strickland 2004). For example, in June 1999, as a result of a class action lawsuit (Emily Q v. Bontá), Medi-Cal, the California Medicaid Program, was required to: (1) offer therapeutic behavioral services (TBS) so that children with SED could receive treatment in their communities instead of being institutionalized; (2) assess children in institutions to determine if they qualify for TBS; (3) develop and distribute a request and referral form for providers to request TBS services; (4) revise the EPSDT brochure to inform beneficiaries and applicants about TBS and other developmental services; and (5) provide compensatory benefits to class members wrongfully denied TBS services (Perkins and Strickland 2004). The most recent decision in a class action suit (Rosie D. v. Romney) occurred on January 26, 2006 when a judge ruled that Massachusetts violated EPSDT by failing to provide various intensive community-based mental health services, including comprehensive assessments, case management and clinical oversight, and in-home behavioral health services necessary to maintain a child at home or in the community. (Rosie D. v. Romney, No. 01-30199-MAP, January 26, 2006).

b. Clinic Option

Through the Medicaid clinic option, states can provide nonhospital-based community services, but only in community clinics and by or under the direction of a physician. Mental health services supported under this option typically include traditional counseling, psychotherapy, and medication management. The intensive home and community services required by youth with SED and their families are not generally covered under the clinic option.

c. Managed Care Waivers and Demonstrations

Through 1915(b) waivers, states can implement managed care delivery systems or "carve out" delivery systems for specialty care (e.g., behavioral health) that limit an individuals choice of provider under Medicaid. These waivers must be budget neutral but do not have to be operated statewide. Although the 1915(b) waiver can be used only for individuals who are already Medicaid eligible, the managed care system can utilize funding streams beyond Medicaid, thereby providing a vehicle for using diverse funding sources to implement a coordinated service delivery system for both Medicaid and nonMedicaid eligible children. CMS approves 1915(b) waivers for two years and states have the option to renew for successive two-year periods.

Medicaid 1115 waivers permit states to conduct demonstration projects that are likely to promote the objectives of the Medicaid program. For example, some states use 1115 waivers to expand eligibility to individuals not otherwise eligible under the Medicaid program, to provide services to Medicaid beneficiaries that are not typically covered, or to test innovative service delivery systems. States must show that the demonstrations will be budget neutral. CMS approves 1115 waivers for five years, after which states can submit renewal applications.

Because they offer states substantial flexibility in developing service packages and extending coverage to particular subgroups of beneficiaries, both 1915(b) and 1115 waivers can be important vehicles for funding intensive home and community services for youth with SED.

6. Financing Mechanisms in the Study States

The states in the study are at different points in the process of transforming their mental health services for youth with SED, and have used or are using different combinations of financing mechanisms to do so (Table II.3). The HCBS waiver states tend to use a greater number of mechanisms compared with the states that are exploring the feasibility of an HCBS waiver application. New Jersey and New Mexico have taken yet a different approach in their effort to implement comprehensive statewide reforms.

TABLE II.3: Use of Selected Mechanisms for Financing Intensive Home and Community Services
State	Medicaid Program			Other Sources of Funds
State	HCBS Waivers for Youth with SED	Rehabilitation Option^a	Katie Beckett Provision	Case-Rates for High-Risk Populations^b	SAMHSA Grants^c	Other Funds^d
Comprehensive Statewide Reform
New Jersey		X			X	X
New Mexico		X		X	X
HCBS Waiver States
Indiana	X	X		X	X
Kansas	X	X			X	X
New York	X			X	X	X
Wisconsin	X	X	X	X	X	X
Vermont	X	X	X		X
CMS Feasibility Study States
Illinois		X			X
Maryland		X		X^e	X	X
Mississippi			X		X
Missouri		X			X
Texas		X			X
Only states that use the Medicaid rehabilitation services option to pay for intensive HCBS for youth with SED and their families are indicated by a X. Mississippi has elected the Medicaid rehabilitation services option, but does not use it to pay for intensive home and community services for youth with SED. New York has elected the Medicaid rehabilitation option for some mental health services for children, but the state has not used it to support intensive community services for children with SED. Includes states where CMEs have negotiated case-rates with state or local child-serving agencies to provide flexible, individualized services and supports for defined populations of youth and to meet specified outcomes. Service packages typically include a broad array of home and community services and may also include residential care. The entire case-rate may be paid by a single agency (e.g., Medicaid) or by multiple agencies (e.g., Medicaid, mental health, and child welfare). Additional details are provided in Chapter III. Includes states that have been awarded grants under the SAMHSA-administered Comprehensive Community Mental Health Services for Children and Their Families Program since its authorization in 1992. Under the previous CASSP program, all 50 states had received support by 1989 (Potter and Mulkern 2004). Includes diversion funds, re-investment dollars, and monies from tobacco settlements specifically earmarked for home and community services for youth with SED. In development.

D. Financial Incentives for State Agencies

Although state departments of mental health, child welfare, juvenile justice, and special education all provide treatment services to youth with SED, the services may vary according to differences in the agencies financial and programmatic incentives.

Child welfare agencies focus on ensuring that children are safe from harm and living under appropriate custody arrangements; the primary sources of federal funding include Title IV-E (for foster care services, including room and board in residential facilities) and Title IV-B (for child welfare services, including family preservation services) of the Social Security Act. Title IV-E dollars are entitlement dollars (i.e., essentially uncapped) that are designated primarily for the maintenance costs associated with out-of-home placements, including foster care and residential services, but Title IV-B dollars, which can be used to pay for intensive community or home mental health services, are capped. As a result, most youth with SED involved in the child welfare system who need intensive treatment are steered toward some type of residential care.⁴
With funding from state and federal special education appropriations, special education departments focus on providing services that will promote a childs ability to learn. In most cases, special education officials do not view home or community services as related to education, and hence tend not to include them in a childs IEP. School-based mental health counseling may be included, but usually for strictly defined time periods. It is difficult for parents to argue successfully that intensive mental health services of any kind should be included in the childs IEP; when they are included, they typically entail out-of-school day or residential placements.
Departments of mental health focus on providing preventive, diagnostic, and treatment services for children who have or are at high risk for mental illness or substance abuse, and receive much of their funding for these services through Medicaid, mental health block grants, and general state and local revenues. Treatment dollars typically move through state and county mental health agencies to local community mental health centers (CMHCs) and hence state and county policies (as well as the state Medicaid plan) shape the incentives for CMHCs to provide home and community services. In a number of states, CMHCs function as quasi-independent agencies under contract with the state and accept risk for mental health services provided to children in their area; as a result, they have strong incentives to replace expensive services (i.e., residential care) with less expensive and more effective alternatives (i.e., intensive home or community treatment.) In most states, however, CMHCs do not bear this risk and are limited to providing services for which Medicaid or the state will reimburse them.

E. The Role of Residential Treatment Facilities

In addition to state agencies, PRTFs and RTCs also play pivotal roles in treating youth with SED and, like state agencies, their decisions are shaped by financial incentives. These facilities or centers are owned and operated by various entities, including private nonprofit firms, for profit companies, and to a lesser extent state agencies, and are operated or funded under the auspices of various state agencies, including departments of mental health, child welfare, and social services (Ireys et al. 2006). In 2000, state mental health agencies alone operated 474 RTCs for emotionally disturbed children with SED with a total of 33,421 beds (Manderscheid et al. 2004). This figure does not include beds operated or purchased by other child-serving systems, and hence is a substantial undercount of the total number of beds for children in residential treatment settings (see Ireys et al. 2006).

In some states, the leadership of RTCs is well organized and may actively resist the development and implementation of financing reforms for children with SED because such reforms typically shift dollars away from residential settings. On the other hand, a limited number of residential centers have begun to re-engineer their services by re-training staff to provide intensive home and community services. They also are taking a broader view of their mission, focusing not only on providing residential treatment but also on a continuum of services that vary in intensity and delivery site. For instance, some centers are beginning to explore methods for providing crisis intervention, stabilization, and treatment services in the home, school, detention centers, or other community settings (Kamradt and Connolly 2003).

III. STATE APPROACHES TO FINANCING HOME AND COMMUNITY-BASED SERVICES FOR YOUTH WITH SED AND THEIR FAMILIES

Developing better mechanisms for financing home and community services for youth with SED is a work-in-progress for most states, and an integral part of their ongoing efforts to improve the child mental health service system. By necessity, discussions with state officials focused on their policy and program environments at one point in time (late 2004 to mid 2005), but these environments can change quickly in response to new legislation or lessons learned from ongoing program implementation. For example, during this period, two states had recently initiated HCBS waivers and were still in the early phases of implementation. In addition, several of the states that had received CMS grants to study the feasibility of developing an HCBS waiver were moving forward to implement study recommendations.

Although the summaries are snapshots of the policies and programs in selected states at one point in time, they illustrate the large constellation of mechanisms available to all states interested in financing intensive home and community services for youth with SED and their families. In particular, they show how the states are combining different financing methods to support these services and why the states made the choices they did. This chapter: (1) describes findings from two states (New Jersey and New Mexico) that have implemented broad statewide financing reforms; (2) presents findings on incremental reforms implemented by the states with HCBS waivers; and (3) discusses the key issues that emerged as states conducted their CMS-supported feasibility studies.

A. Comprehensive Statewide Reforms

In light of funding constraints and the many other policy issues competing for legislative attention, few states are likely to have the combination of sustained political leadership, financial resources, and technical capacity required to reform their entire public mental health system for children over a period of several years. Nonetheless, two states in this study--New Jersey and New Mexico--have pursued this goal. (See the New Jersey exhibit and New Mexico exhibit and the states summaries in Appendix A for more details.)

In 2004, New Jersey began using a statewide administrative service organization (ASO) to manage the financing and monitoring of child mental health services across several child-serving systems. The ASO uses a standard tool to assess children and refers those at risk for out-of-home placement to local care management organizations (CMOs). The CMOs develop individualized service plans (ISPs), provide care management, and contract with family support organizations (FSOs) for family-to-family services. To help pay for these intensive home and community services, New Jersey implemented the rehabilitation services option under Medicaid and expanded coverage to include such services as mobile response and stabilization, in-home services, and intensive care management.

NEW JERSEY

Policy Context and Program Characteristics

Development of fundamental structural and financing reform of the states system of mental health care for children began in 1999 and led to the Childrens Initiative, a community-based system-of-care that brought together once disparate child welfare, juvenile justice, mental health and Medicaid agencies.
The state implemented the Medicaid rehabilitation option and expanded service coverage and contracted with ValueOptions to provide a single point of entry and standard assessments of children.
This organization refers children who are at risk of out-of-home placement to CMOs, which are local, private, nonprofit entities developed specifically under the new program to serve children with complex, multisystem needs; operating in all of the states 15 service areas, CMOs serve over 3,000 children.
Each CMO receives about $500,000 per year to support individualized service planning, provide intensive care management services, and must contract with FSOs, which are new, locally-based family-run organizations funded by the state and play a key role in the reform.

Financing Issues

In the first year of reform, New Jersey financed its share of Medicaid costs by combining $167 million in existing state dollars for children with SED from the child welfare and mental health divisions (including $117 million previously spent by the department of child welfare on residential care) with $39 million in new funds authorized for children with SED in the governors 2001 budget.
To build infrastructure for intensive home and community services, the state used dollars saved by drawing down federal Medicaid dollars for services covered under its expanded rehabilitation option and by claiming federal matching dollars for services that it had previously supported solely with state funds.
Partly because more children are receiving community services than in earlier years, growth in spending for community care has outpaced growth in spending for residential care, which now constitutes a smaller fraction (60 percent instead of 90 percent) of the overall budget for childrens mental health than it did before system reform, and the goal is to reduce this ratio further.

Lessons Learned

Support from the New Jersey legislature, the governor, and commissioner of key agencies was essential to implement major structural reforms in the states child mental health system.
By pooling state and federal dollars, New Jersey has been able to provide more appropriate and timely services (including intensive and nontraditional community-based services in addition to residential treatment) in more settings to more children and their families, regardless of illness severity or insurance status.
New Jersey opted to reform its childrens mental health system using the Medicaid rehabilitation option because it allowed the state to develop a continuum of services that would be commensurate with a range of mental health needs statewide; the HCBS waiver was perceived as being too administratively burdensome and inconsistent with the goal of serving all children in need, in all areas of the state.

New Mexico also is using an ASO-like statewide agency to administer mental health and substance abuse programs for both adults and children. Funds from several agencies are being pooled to support intensive home and rehabilitation services, including out-patient services, case management, respite care, in-home treatment services, and wraparound services. The state is in the early stages of implementing its reforms, having officially started on July 1, 2005, after two years of intensive interagency planning and development.

NEW MEXICO

Policy Context and Program Characteristics

In response to substantial dissatisfaction with the Medicaid managed care plan, begun in the mid 1990s, that integrated financing for physical and behavioral health, Governor Richardson initiated a major reform effort in 2003, instructing key agencies to develop a behavioral health carve out to be overseen by a single purchasing collaborative.
In a report released in April 2004, the Interdepartmental Behavioral Health Purchasing Collaborative (IBHPC), a cabinet level workgroup, recommended a fundamental restructuring of the states behavioral health system by establishing a single statewide entity to administer the states mental health and substance abuse programs.
In the spring of 2005 a contract was awarded to ValueOptions, and the first phase of structural reforms began in July 2005.
As part of the plan, local collaboratives are responsible for identifying unmet needs in particular areas, developing plans and programs to address these needs, and evaluating the quality of services provided through the programs.

Financing Issues

Funds for the single behavioral health service delivery system will be braided from the various state agencies that now purchase behavioral health services. First-year funds are to top out at approximately $350 million in state and federal dollars. In the second year, additional funding streams from the various agencies will be added to significantly increase the total fund.
ValueOptions will manage the entire behavioral health system on a risk basis through capitation, fee-for-service, and other strategies. The IBHPC will work with ValueOptions to make the individual funding streams as flexible as possible within federal or state constraints.
Monies from the following agencies will be braided for child services: the Human Services Department, the Department of Health, and the Children, Youth and Families Department (which includes childrens mental health, child welfare, and juvenile justice).
The behavioral health service package will include services previously covered under New Mexicos Medicaid plan (e.g., out-patient services, case management, residential treatment, and in-patient care) and the enhanced services offered under the states Medicaid managed care program (e.g., behavioral health respite, intensive out-patient services, multisystemic therapy, functional family therapy, and wraparound services).

Lessons Learned

New Mexicos statewide behavioral health care system was created by the twin forces of visionary political leadership and the widespread perception of an inadequate public mental health service system.New Mexico did not implement a HCBS for two reasons: The state did not think it could show budget neutrality, and its overall goal was to re-design the entire behavioral health system rather than to implement incremental changes that would affect a limited number of individuals.

Discussions with officials in these two states also indicated the following:

The statewide reform efforts were spurred, at least in part, by emerging crises in the mental health system in each state: New Jerseys system was heavily dependent on in-patient and residential treatment beds, with high costs and poor outcomes. In New Mexico, there was widespread dissatisfaction with, and evidence of deterioration in, the public mental health system with implication of behavioral health Medicaid managed care.
Reform efforts were initiated and then supported by top levels of government (either the governors office or the legislature or both).
Political support for system re-design, including support from family members, led directly to expanding financial resources for home and community services and the infrastructure necessary for major changes to occur.
Extensive collaboration among key agencies was necessary for the research, planning, and development efforts required to ensure that funds from key child-serving agencies could be: (1) combined or otherwise coordinated to give care managers flexibility in developing ISPs; and (2) managed in a way that would support a continuum of care in which intensive home and community services could be used to improve outcomes.
Both states planned and instituted reforms to restructure their entire mental health system for children in order to provide a continuum of care for all children with mental health needs--not just those with the most severe conditions in specific areas of the state.

B. Incremental Reforms

When comprehensive statewide reform was not politically or financially feasible, other states addressed the problem of a less-than-adequate child mental health system incrementally, implementing specific aspects of a larger program over time. Most of the states with HCBS waivers took this approach. Each has several programs that aim to support intensive home or community services for youth with SED, resulting in wide variation in the services available across different counties or different groups of children within a state. The summaries in Appendix B illustrate this pattern. This section describes the incremental approaches taken by three states: New York, Indiana, and Vermont. Appendix B includes additional information on Kansas and Wisconsin.

New York. New York (see New York exhibit and Appendix B) has had a Medicaid HCBS waiver for about ten years that now serves approximately 1,700 children with SED in 40 of the states 57 counties and the five boroughs of New York City. Even with the waiver, however, funding strategies in the state vary widely at the county level:

In some counties, for instance, the waiver is the only vehicle through which some youth with SED can become eligible for Medicaid and gain access to intensive HCBS because counties do not have the resources for providing intensive service through other sources.
In other counties, children with SED have access to intensive services either through the waiver or through other community-based programs and supports funded by: (1) state re-investment dollars; (2) resources pooled from the Office of Mental Health (OMH), Medicaid, and the local Department of Social Services; and (3) a SAMHSA grant. In these counties, the HCBS waiver supplements, rather than defines, the intensive services available to children with SED.

NEW YORK

Policy Context

County departments of mental health and social service play a key role in service delivery because counties provide half of the nonfederal Medicaid match and are required by state law to develop plans for mental health services.
In the mid-1990s, the state instituted the Coordinated Childrens Services Initiative (an interagency coordination effort that functions at the state, county, and local levels) to support localities in creating systems of care to ensure that children at risk for residential placement remain in the home and community.
The Medicaid rehabilitation and clinic options provide some out-patient mental health services but not intensive community-based services for children with SED.

Characteristics of the HCBS Waiver

A Medicaid HCBS waiver was implemented in 1996, allowing the state to: (1) finance an expanded array of intensive community-based services; (2) lift requirements for applying parental income to otherwise eligible children (known as deeming); (3) waive statewideness requirements; and (4) control exposure to rapid increases in Medicaid expenditures by limiting the number of waiver-enrolled children.
In 2003, New York spent $25.6 million on services (including medical care) for waiver-enrolled children, and in 2005 expects to serve approximately 1,700 children in 40 counties and the boroughs of New York City.
Waiver services are organized and, in some cases, provided by Individualized Care Coordination agencies, which are paid either on a fee-for-service basis or through a case-rate for bundled packages of services.

A County Level Program

Kids Oneida, a designated CME for a high-risk population of youth, serves about 200 children.
- Developed in part through a MHSPY grant from the Robert Wood Johnson Foundation, Kids Oneida offers services similar to those available through the HCBS waiver.
- Oneida County pays Kids Oneida $2,550 per child per month via a blend of state (65 percent) and local (35 percent) funds and Medicaid pays a monthly case-rate of $1,225 for each Medicaid eligible enrollee.

Lessons Learned

Given the different mechanisms used by the states counties, New York State reflects the diversity of approaches found in the nation as a whole.
Legislation promoting individualized service planning and interagency collaboration has enhanced the effectiveness of HCBS waivers and other efforts to finance intensive home and community services.
The ability to waive parental deeming and statewideness requirements was useful for New York State during the initial implementation of the HCBS waiver.
New York continues to face challenges in managing admissions to residential treatment facilities for children with SED because counties must pay some of the costs for intensive community services but none of the costs of residential care; consequently, counties have a strong financial incentive to place youth with SED in residential settings.

Still other counties have sophisticated systems of financing. For example, rather than enrolling children with SED into the HCBS wavier, Oneida County uses a managed care model that is based on case rates and depends also on fiscal collaboration among county departments of social service and mental health. Kids Oneida is a nonprofit CME that has negotiated with the county to receive a case-rate of $2,550 per child per month to provide about 200 children with a flexible, individualized set of services similar to those provided under the HCBS wavier. In addition, the state Medicaid program pays Kids Oneida a monthly case-rate of $1,225 for each Medicaid-eligible enrolled child.
Some counties have no special financing initiatives for children with SED.

New Yorks experience illustrates the challenge of aligning county and state financing in a county-structured state. For instance, when youth with SED cannot enroll in the wavier (i.e., when counties do not participate in the HCBS waiver program or when all waiver slots are filled), counties have a strong financial incentive to admit these children to residential care because the state covers the entire portion of the Medicaid match for residential services whereas the counties have to pay a portion of the Medicaid match for community services.

Indiana. Like New York, Indiana has used a variety of mechanisms to fund intensive home and community services for youth with SED (see Indiana exhibit and Appendix B). In addition to an HCBS waiver, the state uses the Medicaid rehabilitation option and state-funded awards grants of about $50,000 per year for up to two years to 32 single and multicounty sites (covering about half of its 92 counties) specifically to develop system-of-care programs. In state fiscal year 2005, these sites reported serving 993 children. The funds supporting these programs pay for an individualized, wraparound approach to service planning and provide counties with some flexible monies to support specific services. These dollars, however, are not derived from redirecting existing monies currently being spent on residential care, suggesting that the state has provided modest support for new community services but has not implemented a strategy for reducing and re-deploying dollars spent on residential care. In fact, as noted below, the number of the states residential beds is increasing.

Indianas experience provides insight into two important financing issues: legal pressures to expand the number of residential beds and the challenges of implementing innovative projects statewide. The first issue is related to a class-action lawsuit that was filed in the late 1990s on behalf of parents who had to relinquish custody of their Medicaid-enrolled children in order to obtain residential treatment services because the states Medicaid program did not cover services provided to children in PRTFs unless the children were wards of the state. In January 2004, Indiana lost the lawsuit, forcing it to cover, through Medicaid, services provided to children in PRTFs under the auspices of mental health agencies. This change contributed to an increase in the total number of PRTF beds for children in the state. As of early 2005, 11 PRTFs had a total bed capacity of 150, but state staff expect this number to rise as new PRTFs are completed. This increase will add to the existing beds in residential facilities operated under the auspices of juvenile justice and child welfare. Indianas counties pay the full amount of the state match of federal Medicaid dollars for PRTF services, and most use their child welfare dollars to do so.

INDIANA

Policy Context

The state has covered mental health services for Medicaid-enrolled children through the Medicaid rehabilitation option since 1994.
Indianas 31 private nonprofit CMHCs have authority over admissions to the states approximately 90 beds for children and adolescents in six public psychiatric hospitals, but do not manage admission to PRTFs.
Two federally funded projects were launched in 1997, the Dawn Project in Marion County and Circle Around Families in Lake County, but both projects now are sustained by state and local resources.
In 2005, the state awarded system-of-care grants (about $50,000 per year for up to two years) to 32 single and multicounty sites, covering about half of Indianas 92 counties and serving 993 children.

Characteristics of the HCBS Waiver

In its first year, Indiana expected to fill 50 slots distributed across ten counties varying in their experience with system-of-care programs, but only 20 children were enrolled in the first 15 months of operation.
According to state officials, enrollment in the waiver program has been slower than expected primarily because of administrative barriers, such as difficulties with a management information system and delays in processing waiver applications at CMHCs.

A County Level Program

The Dawn Project in Marion County (which includes Indianapolis) is a case-rate project for high-risk youth managed by a designated CME, serving more than 1,000 youth and families since its inception in 1997.
The Dawn Project contracts with Indiana Behavioral Health Choices (Choices), a nonprofit entity, to manage childrens clinical and financial processes and to monitor outcomes.
For children referred by child welfare or juvenile court who are at risk of entering or who are in residential care, the Dawn Project charges a case-rate of $4,379 per child per month to provide a wide array of services and supports and a case-rate of $1,809 for children identified by Indianapolis public schools (which does not include residential services).
For Medicaid-eligible children, the project bills Medicaid directly for services covered through Medicaid. Medicaid does not contribute directly to the case-rate.

Lessons Learned

Developing and implementing the HCBS waiver has required a substantial amount of administrative effort.
Court orders led to programmatic decisions that were inconsistent with expanding intensive community services, underscoring the need for statewide consensus on appropriate future directions for the child mental health system.
Adding dollars for additional community-based services without restructuring management of residential treatment may have limited effect in achieving overall system reform.

The historical absence of Medicaid coverage for treatment services in PRTFs also meant that Medicaid expenditures for residential care were minimal in the 1990s and early 2000s. As a result, there was no financial incentive within Medicaid to develop community services because these services would not reduce Medicaid expenditures on residential care. In short, there was no business case to be made for diverting Medicaid dollars from residential care to community services, as there is now.

The second financing issue--developing a county-based financing program and attempting to apply it statewide--is exemplified by the Dawn Project, a designated CME operating in Marion County (Indianapolis), similar in design to Kids Oneida and Wraparound Milwaukee. The project negotiated case-rates with child welfare, juvenile justice, and special education that cover intensive home and community services for children with SED and their families. Although the project has been a good learning experience for state and county level mental health authorities, several factors have limited the states ability to expand this model statewide:

Mental health services are planned and organized largely at the county level; as a result, county level factors (such as leadership, population density, and service accessibility) play important roles in shaping mental health services.
Most counties have little experience in managed behavioral health care technologies, such as utilization management and risk-based financing, and as a result do not have the experiential foundation necessary to replicate the Dawn Project.
In theory, because counties are at risk for the Medicaid match for placements in residential facilities, they should have an incentive to develop Dawn-like projects and participate in the waiver program. However, according to state officials, officials in some counties believe that the number of youth with SED in their county who are at risk for placement in residential care is not sufficient to justify the costs of establishing a Dawn-like system-of-care.
The viability of an integrated services program depends on sustained coordination among key county agencies, which can be difficult to achieve because of the agencies different missions and funding streams.

Vermont. Vermont is a third state that has taken the route of incremental reform. In Vermonts case, however, the incremental reforms have added up to a comprehensive statewide system-of-care, in part because the number of children with SED is low compared with many other states and in part because state officials have been working aggressively on reforms for almost a quarter of a century (see Vermont exhibit and Appendix B). In contrast to New Jersey and New Mexico, which have initiated comprehensive reforms statewide in a relatively short period, Vermont has achieved the same end by using a variety of financing strategies over a long period.

VERMONT

Policy Context

Vermont has built a comprehensive system-of-care for children with SED, using a variety of financing mechanisms including:
- A Medicaid HCBS waiver.
- TEFRA provisions.
- An expanded Medicaid rehabilitation option.
- State legislation mandating interagency collaboration.
- Active management of access to residential settings.
Vermont has been working actively to enhance services for youth with SED since 1982, when it received its HCBS waiver.

Characteristics of the HCBS Waiver

Approximately 140 children were enrolled in Vermonts HCBS waiver in 2004, with an average enrollment duration of 14 months.
Total Medicaid funding for services provided to waiver-enrolled children was capped at $3,212,100 in 2003.
To ensure that services are coordinated for any child with an SED, CMHCs develop IPCs in collaboration with the parent, schools, pediatricians, and other key stakeholders, as mandated under state legislation.
Each IPC specifies a budget for treatment (typically $100-$200 per day depending on the needs of the child, with an average of $156 in 2004) and identifies the fiscal responsibilities of key agencies: mental health, special education, and child welfare.
- If a child under the custody of the child welfare system is placed on the HCBS waiver, child welfare will pay for designated services, billing Medicaid for the portion of services covered under the waiver provisions.
- In recent years the Department of Education has substantially reduced its financial support for mental health services by discouraging the inclusion of mental health services in IEPs.
The state uses the dollars contributed by child welfare and other agencies as part of the state Medicaid match.

Lessons Learned

Although the state uses numerous funding mechanisms to pay for intensive home and community services, state officials view the HCBS waiver as an essential component of the overall financing system.
The IPC process, and the fact that final authority over placement decisions resides with the Department of Mental Health, ensures that access to residential and in-patient care is closely monitored.

In 1982, Vermont applied for and received a Medicaid HCBS waiver. This small, but important, component of the states mental health system for children with SED allows it to provide these children with intensive services beyond those available in the standard Medicaid benefit package. In doing so, the waiver allows Vermont to manage the costs of care for high-need children by helping it to avoid costly institutional level placements. The waiver also allows the state to serve children who would not otherwise be Medicaid eligible because parental income is usually applied to children for purposes of determining eligibility (a process known as deeming). Other key financing strategies in Vermont include the following:

By passing Act 264 in 1988--which mandated interagency collaboration and parental involvement at all levels of decision-making--Vermont enhanced support for the coordination and planning of community-based services. The goal of this effort was to ensure that families of children with SED would be provided with an IPC that was developed and coordinated by teams of mental health, special education, and child welfare staff and family members and that specified which agencies would pay for which services in the IPC.
By expanding the Medicaid rehabilitation option in the mid 1990s, the state made other services available, such as targeted case management.
By using the Katie Beckett provision in the TEFRA, the state was able to provide services for some children with SED whose families had incomes above the Medicaid criteria and who did not meet clinical criteria for the waiver.
By increasing eligibility for Medicaid to 300 percent of the federal poverty level, the state ensured that all but a very few children had health coverage.

The product of Vermonts multifaceted and aggressive use of financing alternatives is a comprehensive, flexible mental health care system for children with SED.

C. Contemplating Future Reforms

The feasibility studies conducted by Illinois, Maryland, Mississippi, Missouri, and Texas indicate that these states are seriously contemplating an HCBS waiver to finance reforms to their mental health system for children. Each of the states used its grant dollars for somewhat different purposes, but collectively, their efforts tell a great deal about how change begins and where it leads in the ever-evolving landscape of the child mental health system. For instance, discussions with officials in the five states that received grants from CMS to study the feasibility of developing an application for an HCBS waiver provide fresh insight into the key financing issues that emerge as states work to improve the financing of intensive home and community services.

In most states, assessing the feasibility of an HCBS waiver application entailed an examination of a states overall system-of-care for youth with SED. Some states saw the act of developing an application for an HCBS wavier for youth with SED not only as a contribution to their ongoing efforts to enhance the child mental health service system but also as a vehicle to encourage collaboration among child-serving agencies, thus making the somewhat disparate missions and funding streams of these agencies more congruent with one another. Many grantees used their funds to build on work already underway through interagency committees or as a result of state laws requiring them to improve their systems of care for youth with SED. In addition, most grantees used the funds to support studies of the factors that must be considered in the service expansion process, including defining provider case-rates, determining the number of children with mental health service needs, and identifying needed services.

Maryland, for example, actually applied for an HCBS waiver in the 1990s and was denied because the state used residential facility expenditures rather than expenditures for care in psychiatric hospitals in its cost-neutrality calculations. In its continuing efforts to build support for intensive home and community services, the state is using its CMS feasibility grant dollars to develop actuarially sound case-rates and build support for a pilot wraparound program that it plans to launch in two locations (see Maryland exhibit and Appendix C), which would re-direct Medicaid dollars now spent on residential treatment to local CMEs to provide individualized, intensive home and community services and supports. A committee is working on convincing child welfare and juvenile justice agencies that a wraparound program could reduce their direct costs by reducing stays in residential facilities, detention centers, and foster care. These agencies, however, have little incentive to support such a program because as long as a Medicaid-enrolled child is in a residential facility, they are not obligated to cover the cost of care, which is paid for by the state mental health department or Medicaid.

Missouri passed legislation in 2003 and 2004 to address the problem posed by a policy that forces parents to relinquish custody of their children in order to gain access to mental health treatment. The bill paved the way for the state to both increase interagency collaboration and obtain a CMS grant for a feasibility study. The study addressed the question of how to expand access to mental health services and supports so that parents would not have to turn to the child welfare system for help (see the Missouri exhibit and Appendix C). Through the study, the state found that in 2003, about 600 children were in state custody for no reason other than that was the only means through which their parents could secure mental health care for them, and that the total annual cost in 2002 for such children was about $43,000 per child. The study presented a series of five alternatives to providing these children with mental health services (see Appendix C), including a Medicaid HCBS wavier. The state has submitted an application for an HCBS waiver and is in the process of developing a new data system that should support efforts to implement a comprehensive system-of-care.

Several challenges were common to the states with feasibility studies:

Determining the unmet need for intensive community services (see the summaries for Illinois and Missouri in Appendix C).
Gathering the information needed to estimate the costs of certain services, or to calculate case-rates for a given service package or population, or both (see Appendix C, Texas and Maryland).
Strengthening the interagency support needed to better align funding and services in general and working with juvenile justice agencies and juvenile court judges in particular to increase awareness of community alternatives to residential care (Appendix C, Missouri and Mississippi).
Finding the most appropriate way to perform the cost-neutrality calculations required for an HCBS waiver application (Appendix C, Maryland and Mississippi).

MARYLAND

Policy Context

In 1997, Marylands Mental Hygiene Administration (MHA) organized an application for an HCBS waiver for youth with SED, but the application was denied because the state had used RTCs rather than psychiatric hospitals or in-patient facilities as the basis for establishing cost neutrality.
The MHA has developed a plan for implementing a wraparound model in which designated entities would be paid a standard case-rate for managing services for selected children, providing a broad range of home and community services as alternatives to residential treatment, and would assume risk for all mental health service costs.
- The plan will be piloted in Baltimore City and Montgomery County.
- The average length of enrollment is expected to range from 16 to 18 months and cost $4,500-$5,000 per child per month.
The state has submitted an amendment to its existing 1115 waiver to implement locally-based CMEs supported by a flexible case-rate and is awaiting CMS decision.

Financing Study Goals and Challenges

The state used funds from the CMS grant to:
- Subcontract with a university to conduct actuarial analyses to determine the costs of RTC placements and the number of youth in these settings to inform development of specific case-rates for the pilot program.
- Explore how wraparound concepts and case-rate strategies can be applied in two localities by consulting with the directors of other similar programs.
- Convene an expert panel to assist leaders of RTCs in gaining the technical expertise and perspectives needed to develop intensive community services as additional product lines.
The state recognizes the challenge of persuading other agencies to participate in the wraparound program and hopes that that social service and juvenile justice agencies will contribute dollars to fund the program because they are responsible for two-thirds of children with SED in residential settings.
The MHA also is beginning discussions with the state Department of Education to investigate whether improvements in community-based care will affect the use of nonpublic day school programs for youth with SED.

Lessons Learned

Finding a mechanism acceptable to state and federal Medicaid agencies to support community-based services can be time-consuming even when a detailed plan is available.
Prudent arguments for strengthening home and community services involve re-directing existing funds rather than projecting substantial cost savings.
Braided funding is an effective way to garner financial support for a wraparound program because it allows each agency to retain some control over its dollars.

Based on the results of their feasibility studies, four of the five grantees are actively exploring the next steps needed to submit an application for an HCBS waiver for youth with SED. Like the states that already have these waivers, these states view the waivers as one component in the larger service system and as a conduit to an incremental service expansion in which costs are shared with the Federal Government.

MISSOURI

Policy Context

Legislation passed in 2003 and 2004 required the child welfare agency to identify children in state custody solely because of mental health needs, and develop a plan for each child in conjunction with other appropriate agencies and the family.
The individualized plans, indicating which agencies will provide and pay for services, must be approved by a juvenile court, after which children return to their families.
Based on an interagency financing agreement, the department of mental health bills the child welfare agency for the cost of services as specified in the plan.
The legislation also:
- Waived the states standard means test for Medicaid eligibility for children in need of mental health services to avoid custody transfers; and
- Authorizes the department of mental health, in partnership with key stakeholders, to establish a management team to develop a comprehensive, coordinated childrens mental health service system.

Financing Study Goals

The studys central question was how to expand access to mental health services and supports in order to prevent parents from having to turn to the child welfare system for help.
The grant allowed the state to:
- Identify characteristics of children with SED in state custody exclusively because they need mental health services; and
- Estimate the extent and nature of current Medicaid, mental health, and child welfare expenditures for these children, and determine the cost of providing mental health services for these children in the community.

Selected Findings from Feasibility Study

In calendar year 2003, approximately 600 children were in state custody solely for the purpose of accessing mental health services; total annual costs of providing care to these children were approximately $43,000 per child in 2002.
On the basis of study findings, the contractor identified five options open to Missouri in terms of what it could do to improve its mental health system.

Lessons Learned

New state laws to prevent custody relinquishment and coordinate mental health services helped to lay the groundwork for a process of planning for service system reforms.
To finance community services for children with SED who did not qualify for Medicaid, Missouri applied for a Section 1915(c) HCBS waiver because it will allow the state to control Medicaid expenses while providing mental health services to children who, until now, have not been served adequately and whose families have had to relinquish custody to access services.

D. Summary

The findings in this chapter illustrate the diversity of mechanisms that states are using to pay for intensive home and community services for youth with SED. This variation is a function not only of the mosaic of funding sources and financing mechanisms available to them, but also of the many historical, legislative, and experiential factors that are unique to any given state. Despite this variation, four themes are common across the states.

First, legislative or budgetary action has been an important impetus for interagency collaboration around planning, financing, and program development. Although legislation alone is neither necessary nor sufficient for garnering financial support for intensive home and community services for youth with SED, it can certainly move a state in the right direction by establishing expectations and goals, removing barriers to collaboration, and, in some cases, providing new dollars to build the infrastructure necessary to sustain these services. Some of this money has come from diversion dollars, re-investment funds, or tobacco settlement monies.

Second, extremely tight budgets have made states reluctant to add services to their Medicaid plans for fear that they will substantially raise expenditures, and current federal priorities are not favorable for expanding coverage of services for youth with SED. At this point in time, few states appear to be considering seriously an expansion of the Medicaid rehabilitation option to cover intensive services for these children, although many have taken this step in the past.

Third, system-of-care demonstration projects gave states useful experience in the financing of intensive home and community services. Although many of these demonstration projects did not continue after federal funding ended, some states (e.g., Kansas, Indiana, Mississippi, Maryland, Texas, and Wisconsin) indicated that the projects were critical to developing technical experience in: (1) funding and managing community services; and (2) fostering the interagency collaboration that underpins a flexible and comprehensive set of services for youth with SED. In fact, states with these projects typically created coordinated systems-of-care in selected locations, which, in some states, helped build the administrative support for a waiver application.

Fourth, states and counties that carefully manage access to residential treatment services and psychiatric hospitals tend to have more resources for intensive home and community services. Careful management of access to residential care is important for a variety of reasons. The evidence supporting the effectiveness of residential treatment is poor (Frensch and Cameron 2002; Joshi and Rosenberg 1997; Weiner et al. 2001) and managing access to residential placements avoids both the high cost of such care, as well as the problems that occur when children return to their families without appropriate transition and family support services. In fact, much of the initial success of Wraparound Milwaukee resulted from re-directing child welfare, juvenile justice, and Medicaid funds from residential care to intensive home and community services (Kamradt and Connolly 2003).

Discussions with state officials indicated that establishing a statewide gate-keeping system for managing admissions and lengths of stay in residential treatment depends on several factors including:

The use of standard assessments that are strength-based, culturally competent, and family focused to inform service planning.
The availability of community services that provide an effective alternative to residential care.
The extent of collaboration among key agencies, which ensures service continuity and prevents a child from cycling from one agency to the next.
Financial incentives that favor HCBS over residential placement.
Recognition on the part of juvenile court judges, child welfare case workers, providers and families that intensive home and community services are effective alternatives to residential care.

IV. STRENGTHS AND WEAKNESSES OF SELECTED FINANCING MECHANISMS

In addition to documenting the financing issues specific to each state, the discussions with state officials provided general information on the states experience with the following four financing mechanisms: HCBS waivers, the Medicaid rehabilitation option, case-rates used by designated CMEs, and the Katie Becket provision of TEFRA. This chapter examines the strengths and weaknesses of each of these mechanisms (Table IV.1). As noted in Chapter II, states also have other Medicaid financing options (for example, the EPSDT program, Section 1115 waivers and Section 1915(b) waivers), but these are not covered again in this chapter.

A. HCBS Waivers

According to state officials, HCBS waivers offer five benefits. First, in allowing states to circumvent restrictions on the type, amount, duration, and scope of Medicaid services, the waivers permit states to provide selected individuals and their families with a set of specialized intensive HCBS that would not otherwise be covered by any other financing mechanism. These services include wraparound facilitation, respite care, parent support, daily living skills, and other services (see Table IV.2).

Second, HCBS waivers allow states to lift requirements for applying parental income to children, thereby providing access to medical and mental health services for youth who might not otherwise meet the Medicaid financial eligibility criteria. These services include not only the specialized intensive services covered under the waiver, but also all other services offered in the states standard Medicaid plan. This feature of the waiver is especially valuable for children in low or moderate-income families in which one or both parents work but whose employer-based insurance has very restrictive mental health benefits or none at all, as well as for parents of children with serious disorders who exhaust their private insurance coverage. Lifting these requirements also allows children with SED who enroll in an HCBS waiver to obtain services without having to be wards of the state, so parents no longer have to relinquish custody of their children to obtain services for them.⁵

Third, HCBS waivers remove the statewideness requirement for standard Medicaid services, thereby allowing states to roll out waiver services county by county as resources and experience allow. As a practical matter, most states have designated a certain number of slots that will be open under the waiver and established mechanisms for determining which counties or localities can enroll children in the waiver. For example, New York makes 610 total slots available, and has allotted a certain number of slots to 40 of its 57 counties and to all the boroughs in New York City. Overall, this translates into a total of about 1,700 children served annually because many children are enrolled in the waiver for only part of a year. Other states, such as Vermont, have capped waiver expenditures, allowing IPCs to be developed for as many children as possible, provided that total expenditures for all plans do not exceed the limit.

TABLE IV.1: Advantages and Disadvantages of Four Financing Mechanisms for Supporting Intensive Home and Community Services for Youth with SED
Funding Mechanism	Advantages	Disadvantages
HCBS waiver	Allows states to provide intensive services not covered in state plan Waives parental deeming requirements Waives statewideness requirements Promotes increase in number of providers offering intensive HCBS Gives states experience in pricing intensive services and individual care plans	Does not support preventive or step-down services Substantial administrative effort for a relatively small number of youth Application development and waiver implementation can be challenging Does little to re-align funding across agencies and may introduce disincentives for sharing costs for community services Does little to reduce geographic disparities within states
Expanding Medicaid rehabilitation option	Offers states opportunities to include certain types of intensive home and community-based mental health services into state plan coverage Are available to entire eligible Medicaid population, not just subsets	Risks increasing state Medicaid expenditures if rehabilitative services are used heavily and poorly managed
Case-rates used by designated CMEs for high risk populations	Allows state and local agencies to negotiate payment rates for specific high-risk populations Provides a mechanism for states to combine funding from different agencies to cover integrated, individualized plans of care Permits monitoring of plan performance and quality of care	Requires experience in managed care technologies and financing models Requires a sufficient case load to support a feasible economy of scale and risk management
TEFRA (Katie Beckett provision)	Waives rules requiring application of parental income to determination of Medicaid eligibility for children who meet SSAs disability definition, meet certain clinical criteria, and need an institutional level of care	A sharply limited number of children with SED qualify for this provision Expands Medicaid eligibility, thus posing potential cost issues Does not expand types of home and community services covered

TABLE IV.2: Intensive Home and Community Services Provided Through HCBS Waivers in Five States
Waiver Services	Indiana	Kansas	New York	Vermont	Wisconsin
Case management, wraparound facilitation, individualized care coordination	X	X	X		X
Respite care	X	X	X	X	X
Parent/family/home education, support and training, including financial management counseling	X	X	X	X	X
Daily living skills, independent skills training	X	X	X		X
Community and social supports and crisis intervention, response			X	X	X
Environmental modification and specialized transportation				X	X
Adaptive equipment				X	X
Therapeutic foster care				X	X
Day habilitation and supported employment services					X
Counseling and therapeutic services					X
Intensive in-home autism treatment					X
Intensive in-home services			X
SOURCE: State applications for a Medicaid 1915(c) HCBS waiver.

Fourth, in some states, the HCBS waivers have contributed to an increase in the number of organizations that provide intensive home or community services, such as respite care or family-to-family support. For these organizations, predictable access to clients and reimbursements brings economies of scale that can sustain them over time and, in turn, make intensive home and community services more available.

Finally, the states with HCBS waivers have gained considerable experience in pricing intensive home and community services. For example, several states have contracted with family organizations for the delivery of various kinds of family support programs and services. Appendix E provides examples of the cost of these and other services provided through the waivers. An examination of the actuarial implications of these costs was beyond the scope of this study, but additional study of states collective experience in developing costs estimates for specific home and community services could be a useful resource for states working to expand coverage of these services.

Although HCBS waivers help states to support intensive home and community services for selected youth with SED, they also have several disadvantages. Overall, state officials cited six disadvantages of the HCBS waivers.

First, HCBS waivers for youth with SED are focused on treatment services for high-risk or high-need children, and as a result do not allow states to support services that would prevent children from moving into a high-risk category. Nor does the basic Medicaid plan in many states cover services for these children. The result is a gap in coverage for children whose problems are not serious enough either to qualify for the waiver or to be addressed through Medicaid.

Second, building the administrative support necessary to develop and implement a waiver requires substantial administrative effort that results in coverage for a relatively small number of children. For example, Indiana (see Chapter III) found that it had to provide substantial guidance to county level personnel in the use of software that enrolls and tracks waiver enrollees. The combination of too few computers and field workers who had relatively little experience with a new software package contributed to lower enrollment rates than anticipated. During the first 15 months of operation, the waiver enrolled only 20 children.

Third, HCBS waivers alone do little to align funding practices and financial incentives in a way that would make home and community services for children with SED more widely available. For instance, although the waivers have brought state Medicaid and mental health agencies together in the effort to strengthen coverage for intensive home and community services for youth with SED who need a hospital level of care, they do not directly affect financing practices in other agencies, such as child welfare, that often cover residential services for the majority of youth with SED, nor do the waivers currently allow for alternatives to residential treatment. If child welfare and juvenile justice agencies are not financially motivated to support home or community services, then the HCBS waiver itself will be a somewhat isolated effort that affects only a small proportion of the target population. Indeed, that has been the case in all of the current waiver states. Discussions with state officials suggest that HCBS waivers have the most impact when states also have passed legislation compelling child-serving agencies to enhance collaboration and align their missions and funding streams to jointly support the financing of intensive home and community services.

Fourth, in states where counties play a major role in financing services for youth with SED, the HCBS waiver can introduce or reinforce a financial disincentive to support home or community services. For example, if counties must contribute to the state Medicaid match for waiver services but not for residential care, they are more likely to place youth with SED in residential settings than to link them with community services because it will be less expensive for the counties to do so even though it will be more expensive for the state. The same rationale holds for counties in which state child welfare agencies pay for the majority of residential care for youth with SED. For these counties, it is likely to be financially advantageous to pay for residential care through Title IV-E funds rather than to contribute a portion of the state Medicaid match for waiver services.

Fifth, the HCBS waivers may do little to reduce a states geographic disparities in access to mental health services and the fragmentation of the mental health system. For example, not all counties in New York State can enroll children with SED in the waiver even though it has been in existence for about a decade. Although the rationale for waiving statewideness may be reasonable in the early stages of waiver implementation (i.e., so states can gain experience with the waiver before expanding it more broadly), states may be slow to broaden access to all of its jurisdictions because of cost concerns.

Finally, children who improve enough to disenroll from a waiver are likely to need some continuing treatment services. Unless the state provides an effective continuum of services, most of which would not be covered under an HCBS waiver, maintaining the benefits of waiver services can be challenging. Many program administrators who have implemented an HCBS waiver underscore the importance of viewing the waiver as one part of a larger, continuing effort to strengthen the child mental health service system and improve interagency collaboration overall.

B. Medicaid Rehabilitation Option

Because federal regulations give states wide latitude in defining the type, scope, and delivery site for services covered under this option, the services covered under the Medicaid rehabilitation option vary widely from state to state (see Chapter II, Table II.2). For example, states offer services such as assessment, in-home services, school-based services, behavioral management skills training, and crisis intervention. Depending on the state, services may be covered under this option if they are provided either in the childs residence, school, or other community institution. This flexibility is very useful to states because it allows them to cover a number of intensive home and community services that are particularly important for youth with SED and their families.

Despite the flexibility offered by the rehabilitation option, several officials see the expansion of the option as financially risky. Offering the services is potentially expensive because these services are needed and sought after by families, and because they would be available to all categorically eligible beneficiaries, not just to high-need children; consequently, the rise in utilization could increase state Medicaid expenditures substantially.

C. Case-Rates Used by Designated Care Management Entities for High-Risk Populations

States, counties and other local jurisdictions in several of the study states have developed approaches that specifically serve youth with SED using managed care technologies and risk-based financing. These approaches provide a case-rate to a designated CME to provide a flexible, individualized array of services and supports and intensive care management for youth with SED and their families, giving the CME wide latitude in individualizing care in return for meeting specified outcomes. These include Wraparound Milwaukee in Wisconsin, the Dawn Project in Indiana, and Kids Oneida in New York. New Jerseys CMOs are also modeled on this approach, but they do not involve risk-based financing currently. Other states like Maryland are exploring similar alternatives. These approaches seek to achieve better cost and quality outcomes by providing an alternative to placement of youth in residential treatment. Referrals to these programs typically come from juvenile justice, child welfare, and education agencies, which contribute to the case-rate for each child. Thus, comprehensive services for children enrolled in these programs are paid for by multiple child-serving agencies and delivered in a coordinated and efficient manner by designated CMEs. Moreover, CMEs are usually under contract to report specific performance measures to the states as a means for tracking quality of care. Because of these contractual agreements, CMEs typically aim to provide only those services that have demonstrated effectiveness.

The successful application of managed care principles to services for youth with SED has several advantages, including comprehensive service coordination; careful tracking of service utilization, quality, and costs; and accurate monitoring of performance and outcomes. However, this approach also has several disadvantages. First, it requires expertise in financial management, organizational development, clinical supervision, and data systems--a set of skills that can be developed in many state and local agencies only through substantial training and technical support.

Second, even states with experience in the use of case-rates to pay for services for youth with SED in selected counties may find it difficult to expand the arrangement statewide. Again, the financial and experiential resources needed to broadly implement even a well-tested program take time to develop at a local level.

D. The TEFRA Provision

As noted in Chapter II, the Katie Beckett provision in TEFRA allows states to waive the requirement for considering parental income in the process of determining Medicaid eligibility for children with disabilities under 18 years old who are living at home but would otherwise be eligible for Medicaid-funded institutional care. The strength of this provision lies in the fact that it extends Medicaid eligibility to children who would not normally have access to Medicaid services and who are likely to have no or inadequate coverage for mental health services.

However, the provision is restrictive in that it requires states to determine that: (1) the child has a disability as defined by the SSA disability definition; (2) the child requires the level of care provided in an institution; (3) home care is appropriate; and (4) the cost of home care is no more than the cost of institutional care. For children with SED, documentation of a disability that meets SSA standards can be particularly difficult. As of 2002, 20 states had a TEFRA option, but of these, only ten included children with SED (Bazelon Center for Mental Health Law 2002).⁶ In 2001, in nine of these ten states (all except Vermont), the percentage of children with SED was less than 21 percent of all children enrolled in Medicaid through this TEFRA provision, amounting to less than 2,500 children with SED across all ten states (Bazelon Center for Mental Health Law 2002). In addition, TEFRA does not expand coverage of home and community services; rather, it expands eligibility to a states existing Medicaid benefit package.

V. SYNTHESIS AND IMPLICATIONS

Discussions with state officials indicate that policymakers in many states are committed to finding better ways to finance intensive home and community services for youth with SED and their families because the problem is urgent and legislative interest is high. Also, the evidence for the effectiveness of home and community services for this population is growing. In contrast, sustainable outcomes associated with residential treatment and other out-of-home placements have not been demonstrated and the costs of these interventions are high. The discussions also provide numerous examples of how states finance these services by combining various mechanisms--from cobbling together several Medicaid-based strategies (e.g., the HCBS waivers, the rehabilitation option, and the TEFRA provision) to broad statewide reforms of the child mental health system as a whole.

State officials decisions regarding a suitable combination of financing mechanisms vary from state to state because of many factors, including differences in demographic variables, political leadership, financial resources, and availability of technical expertise. Discussions with state officials underscore the challenging political environments in most states because financial resources are sharply limited. In addition, developing a long-term commitment to collaboration between and among key state departments, county agencies, private sector providers, family members, and other key stakeholders requires substantial administrative time and, in most instances, sustained leadership from the governors office or the legislature.

Moreover, each individual financing mechanism has particular strengths and weaknesses, and no single mechanism alone can address the scope of challenges involved in paying for intensive home and community services for youth with SED. Although comprehensive statewide reforms, like the ones being implemented in New Jersey and New Mexico, promise fundamental improvements in child mental health services over a number of years, most states are approaching the task through incremental reforms because they tend to be more politically, financially, and technically feasible.

Overall, state officials have to balance a variety of issues as they decide what financing strategies are most suitable and sustainable given a states resources and constraints. Discussions with state officials point to the following issues as critical in their decision-making process:

Finding a process for re-directing expenditures away from residential treatment services and toward community alternatives, coupled with careful management of access to beds in both RTCs and in-patient psychiatric hospitals. Programs in Wisconsin, New York, and other states illustrate the financial benefits of ensuring that community services are both available to and used by all agencies that serve children in order to avoid unnecessary out-of-home placements and payments for services that have little evidence of effectiveness. In sites such as Wraparound Milwaukee and Kids Oneida, traditional models of intervention, such as removing a child from the home, are no longer viewed by court judges or most mental health professionals as the treatment of choice for children with SED because other, evidence-based treatment options are available. The key challenge for states is to develop administrative and tracking mechanisms that shift the emphasis from paying for out-of-home placements to supporting a range of home and community services.
Devising an administrative structure that supports equitable sharing of service costs among all or most state and local level agencies that serve children, including Medicaid, mental health, child welfare, juvenile justice, and education. Cost-sharing arrangements can be implemented at several levels. For example, at the local level, a designated agency can receive funds from multiple agencies to support services provided to selected children with SED. In some states, such as Vermont, legislation supports the development of individual care plans that specify which agency (mental health, child welfare, juvenile justice, or special education) will pay for which services. In still other states, local agency staff meet regularly to ensure that needed services are covered for designated children; these local teams can be supported by state level counterparts to find ways to pay for specialized services not otherwise covered (for example, the Coordinated Childrens Services Initiative in New York).
Developing financing strategies that promote flexibility in supporting IPCs. One of the major challenges in financing home and community services for youth with SED is paying for the particular combination of services that each individual requires. Because each funding source covers some needed services but not others, state officials in most states have to find different means for combining funding sources for each child depending on his or her needs. However, discussions with officials in some states (e.g., Indiana, New York, and Wisconsin) suggest that case-rates are especially useful in promoting flexibility in service planning. Case-rates mean that dollars can be used to purchase a wide range of individual, family, and community services to help the child reach specific outcomes.
Establishing procedures that do not remove or dilute local or state responsibility for higher levels of care. Ideally, local agencies should arrange for the care of youth with SED who live in their jurisdiction. In many cases, this means that counties contribute to a share of the costs--to the state Medicaid match, for example. But policies that obligate counties to cover a portion of the costs for community or home services but not for residential care bring financial disincentives to improving access to community services. If county governments are asked to share responsibility for community services, it makes sense to ask them to share responsibility for residential care as well, but there is, understandably, often a great deal of political resistance from localities on this point.
Providing children with SED access to intensive services even if their families are not Medicaid eligible. One of the principle advantages of the HCBS waivers is that they allow states to waive Medicaids deeming rules, as does the Katie Beckett provision in the TEFRA legislation. Several state officials emphasized the importance of this particular component of the waiver because it allows states to: (1) cover high-risk and uninsured or inadequately insured children who would not otherwise have access to mental health services; and (2) ensure that families do not have to relinquish custody of a child with SED solely to obtain intensive mental health services.
Enhancing policy coordination among agencies and institutions that serve children. Discussions with state officials suggest that sustainable improvements in the financing of services for children with SED will not occur in the absence of a strong commitment to policy coordination by all key child-serving agencies and institutions. In many states, this commitment began and was sustained through legislation mandating interagency collaboration. In addition, efforts to engage the leadership of RTCs in discussions of new community-based models of care have increased at both the federal and state levels. In particular, officials in several of the states in this study have supported workshops and conferences with directors of residential settings to ensure that their perspectives are taken into account and that they are made aware of the rationale behind reform agendas as new financing strategies are developed and implemented.
Finding providers of nontraditional services in areas where such providers are in short supply. Several directors noted a serious Catch-22 in the development of comprehensive community service systems: States cannot pay for these services because there are no organizations to provide them, and the organizations do not exist because there is no money to support them. Building provider capacity appears to be one of the most difficult challenges facing state officials. Some officials indicated that, in theory, a part of the provider capacity problem could be addressed by re-training staff of RTCs and enlisting the cooperation of residential programs to diversify the type of services they offer, including home and community services. The clinical and administrative leaders of these facilities have considerable experience in treating children with SED; furthermore, in most states that are moving to home and community care, the number and bed capacity of residential facilities are likely to decrease as home and community services expand. The experienced staff who leave their positions as a result of this restructuring can act as a natural labor pool for states that can give these qualified individuals an opportunity to apply their skills in a community setting.

The findings from this study have three major implications for policymakers concerned with improving mental health services to youth with SED.

First, sustained improvements in financing intensive home and community services for youth with SED depend on the development of effective partnerships between key agencies at the state and local levels. The state descriptions in Appendix A, Appendix B, and Appendix C provide substantial evidence that the financing of these services is more effective when agencies work together in new ways.

In some cases, the key partnership was between the state mental health department and the Medicaid agency. Medicaid programs in every state now pay for a considerable portion of mental health services for children, especially for youth with SED, but mental health agencies have the experience necessary to manage clinical care, certify providers, and assess service quality. The resources of both agencies are therefore needed to support initiatives that provide appropriate and cost-effective services. Child welfare, juvenile justice and education agencies also are critical partners, because they control many behavioral health resources and serve the majority of children needing mental health services and supports.

The descriptions of the states in the appendices include numerous examples of initiatives--often mandated by state legislation--that bring these different agencies together on behalf of youth with SED. Because the same children are often served by several agencies, interagency coordination makes fiscal sense; from a state perspective, however, the challenge is to ensure that the process of collaboration does not threaten the budget of any single agency but leads instead to an equitable distribution of financial responsibility across the agencies. From a federal perspective, the challenge is to ensure that legislation that may directly affect one system or one funding source (for example, Medicaid) does not unintentionally create barriers to interagency agreements at the state level.

The second implication involves the impact of prior demonstration projects funded under the original CASSP program, the current Comprehensive Community Mental Health Services for Children and Their Families Program, or other foundation-sponsored initiatives. These efforts spawned demonstration projects in virtually every state, and officials in most of the study states noted that the roots of current initiatives often lay in the experience gained during the implementation and operation of these projects. In many cases, individuals who were involved in early projects moved into leadership roles in subsequent initiatives. This observation suggests that the demonstration projects authorized by the 2005 Deficit Reduction Act (Public Law 109-171) will provide important opportunities not only to strengthen the financing of community services for youth with SED in selected states but also to develop a new generation of leaders whose experience can have enduring effects on the field.

Finally, the study findings suggest that more states would be interested in applying for an HCBS waiver for youth with SED if the criteria for documenting budget neutrality were linked to PRTFs rather than to psychiatric hospitalization alone. In most states, very few children now enter psychiatric hospitals, and even fewer stay for long periods of time. Because most states are spending comparatively little on psychiatric hospitalization for children, they will not save many dollars, if any, by substituting intensive home or community-based services for treatment in these hospitals. Rather, the savings for state and federal Medicaid agencies will come from decreasing current use of residential treatment facilities by replacing that treatment with effective and less costly home and community care, which could be available to enhance home and community services for youth with SED.

REFERENCES

Armstrong, M.I., Pires, S.A., McCarthy, J., Stroul, B.A., Wood, G.M., & Pizzigati, K., (2006). A self-assessment and planning guide: Developing a comprehensive financing plan (RTC study 3: Financing structures and strategies to support effective systems of care, FMHI pub. # 235-01). Tampa, FL: University of South Florida, Louis de la Parte Florida Mental Health Institute (FMHI), Research and Training Center for Childrens Mental Health.

Bazelon Center for Mental Health Law. Mix and Match-Using Federal Programs to Support Interagency Systems of Care for Children with Mental Health Care Needs. Washington, DC: Bazelon Center for Mental Health Law, July 2003.

Bazelon Center for Mental Health Law. Avoiding Cruel Choices: A Guide for Policymakers and Family Organizations on Medicaids Role in Preventing Custody Relinquishment. Washington, DC: Bazelon Center for Mental Health Law, November 2002.

Bazelon Center for Mental Health Law. Recovery in the Community: Funding Mental Health Rehabilitative Approaches under Medicaid. Washington, DC: Bazelon Center for Mental Health Law, November 2001.

Bazelon Center for Mental Health Law. Where to Turn: Confusion in Medicaid Policies on Screening Children for Mental Health Needs. Washington, DC: Bazelon Center for Mental Health Law and the Federation of Families for Childrens Mental Health, September 1999.

Bazelon Center for Mental Health Law. Making Sense of Medicaid: For Children with Serious Emotional Disturbance. Washington, DC: Bazelon Center for Mental Health Law and the Federation of Families for Childrens Mental Health, September 1999.

Burns, B.J. Reasons for Hope for Children and Adolescents: A Perspective and Overview In Burns, B., & Hoagwood, K. (eds), Community Treatment for Youth: Evidence-Based Interventions for Severe Emotional and Behavioral Disorders. New York, NY: Oxford University Press, 2002.

Campaign for Mental Health Reform. Emergency Response: A Roadmap for Federal Action on Americas Mental Health Crisis. Washington, DC: 2005.

Childrens Bureau. Synthesis of Findings: Title IV-E Flexible Funding Child Welfare Waiver Demonstrations. Washington, DC: U.S. Department of Health and Human Services, Administration for Children Youth and Families, September 2005.

Colorado Office of the State Auditor. Residential Treatment Center Rate Setting and Monitoring. Denver, CO: Office of State Auditor, January 2002.

Duchnowski, A.J., Kutash, K., & Friedman, R.M. Community-Based Interventions in a System Of Care and Outcomes Framework. In Community Treatment for Youth: Evidence-Based Interventions for Severe Emotional and Behavioral Disorders. New York, NY: Oxford University Press, 2002.

Frensch, K., & Cameron, G. Treatment of Choice or a Last Resort? A Review of Residential Mental Health Placements for Children and Youth. Child & Youth Care Forum, vol 31, no 5, October 2002, pp 307-339.

General Accounting Office. Federal Agencies Could Play a Stronger Role in Helping States Reduce the Number of Children Placed Solely to Obtain Mental Health Services. Washington, DC: General Accounting Office, GAO-03-397, April 2003.

General Accounting Office. Stronger Efforts Needed to Ensure Childrens Access to Health Screening Services. Washington, DC: General Accounting Office, GAO-01-749, July 2001.

Glied, S., & Cuellar, A. Trends and Issues in Child and Adolescent Mental Health. Health Affairs, vol 22, no 3, 2003, pp 39-50.

Goldstrom, I., Jaiquan, F., Henderson, M. Male, A., & Manderscheid, R. The Availability of Mental Health Services to Young People in Juvenile Justice Facilities: A National Survey. In Mental Health, United States, 2000, Manderscheid, R.W., & Henderson, M.J., eds. DHHS Pub. No. (SMA) 01-3537. Washington, DC: Superintendent of Documents, U.S. Government Printing Office, 2001.

Hawaii Department of Health. Summary of Effective Interventions for Youth with Behavioral and Emotional Needs. 2004 Biennial Report from the Evidence Based Service Committee, Child and Adolescent Mental Health Division, 2004. (Available at http://www.hawaii.gov/health/mental-health, accessed October 2005).

Institute of Medicine. Improving the Quality of Health Care for Mental and Substance-Use Conditions. Washington, DC: The National Academies Press, 2005.

Ireys, H.T., Achman, L., & Takyi, A. State Regulation of Residential Facilities for Children with Mental Illness. Rockville, MD: Center for Mental Health Services, Substance Abuse and Mental Health Services Administration, 2006.

Ireys, H.T., & Cherlow, A. Using MSIS Data to Analyze Mental Health Service Use and Expenditures for Medicaid Beneficiaries with Mental Illness in New Jersey in 1999. Washington DC: Mathematica Policy Research, January 2004.

Joshi, P.K., & Rosenberg, L.A. Childrens Behavioral Response in Residential Treatment. Journal of Clinical Psychology, vol 53, no 6, 1997, pp 567-573.

Kamradt, B., & Connolly, C. Re-engineering Residential Treatment Challenges and Opportunities for Purchases and Providers. Milwaukee, WI: Wraparound Milwaukee, Child and Adolescent Services Behavioral Division, April 2003.

Knitzer, J., & Cooper, J. Beyond integration: Challenges for Childrens Mental Health. Health Affairs, vol 25, no 3, 2006, pp 670-679.

Koppelman, J. Children with Mental Disorders: Making Sense of Their Needs and the Systems that Help Them. Washington, DC: National Health Policy Forum, June 2004.

Koppelman, J. Mental Health and Juvenile Justice: Moving Toward More Effective Systems of Care. Washington, DC: National Health Policy Forum, July 2005.

Manderscheid, R., Atay, J., Male, A., Backlow, B., Forest, C., Ingram, L., Maedke, J., Sussman, J., & Ndikumwami, A. Highlights of Organized Mental Health Services in 2000 and Major National and State Trends. In Mental Health, United States, 2002, Manderscheid, R.W. & Henderson, M.J. (eds.). DHHS Pub. No. (SMA) 3938. Rockville, MD: Substance Abuse and Mental Health Services Administration, Center for Mental Health Services, 2004.

Mental Help Net. SAMHSA Awards $184.5 Million in Grants for Mental Health Services. October 2005.

New Freedom Commission on Mental Health. Achieving the Promise: Transforming Mental Health Care in America. Rockville, MD: New Freedom Commission on Mental Health, July 22, 2003. Available at http://www.mentalhealthcommission.gov.

Perkins, J., & Strickland, S. Early and Periodic Screening, Diagnosis & Treatment Case Docket-Mental and Behavioral Health Services. National Health Law Program, July 2004. Available at http://www.healthlaw.org.

Pires, S. Health Care Reform Tracking Project: Promising Approaches for Behavioral Health Services to Children and Adolescents and Their Families in Managed Care Systems-1: Managed Care Design & Financing. Tampa, FL: Louis de la Parte Florida Mental Health Institute, University of South Florida, November 2002.

Public Law 109-171, 2005 Deficit Reduction Act, February 8, 2006. (Available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_public_laws &docid=f:publ171.109.pdf, accessed May 2006).

Potter, D., & Mulkern, V. Making the Case for Flexible Funding. Community Living Exchange Issue Brief, Rutgers Center for State Health Policy, November 2004.

Pottick, K., Warner, L., Isaacs, M., Henderson, M., Milazzo-Sayre, L., & Manderscheid, R. Children and Adolescents Admitted to Specialty Mental Health Care Programs in the United States, 1986 and 1997. Chapter 20 in Mental Health, United States, 2002, Manderscheid, R.W., & Henderson, M.J. (eds.). DHHS Pub. No. (SMA) 3938. Rockville, MD: Substance Abuse and Mental Health Services Administration, Center for Mental Health Services, 2004.

Rosie D. v. Romney, No. 01-30199-MAP, January 26, 2006. Available at http://pacer.mad.uscourts.gov/dc/cgibin/recentops.pl?filename=ponsor/pdf..., accessed April 2006.

Saxe, L., & Cross, T. The Mental Health Services Program for Youth. In To Improve Health and Health Care - Volume II. Princeton, NJ: The Robert Wood Johnson Foundation, 1998.

Sheidow, A., Bradford, W., Henggeler, S., Rowland, M. , Halliday-Boykins, C., Schoenwald, S., & Ward, D. Treatment Costs for Youths Receiving Multisystemic Therapy or Hospitalization After a Psychiatric Crisis. Psychiatric Services, vol 55, no 5, 2004, pp 548-554.

Smith, G., OKeeffe, J., Carpenter, L., Doty, P., Kennedy, G., Burwell, B., Mollica, R., & Williams, L. Understanding Medicaid Home and Community Services: A Primer. Washington, DC: George Washington University, Center for Health Policy Research, October 2000. Available at http://aspe.hhs.gov/daltcp/reports/primer.htm.

Stroul, B. Health Care Reform Tracking Project: Promising Approaches for Behavioral Health Services to Children and Adolescents and Their Families in Managed Care Systems-5: Serving Youth with Serious and Complex Behavioral Health Needs in Managed Care Systems. Tampa, FL: Louis de la Parte Florida Mental Health Institute, University of South Florida, November 2003.

Stroul, B., & Friedman, R. A System of Care for Children & Youth with Severe Emotional Disturbances. (Revised edition). Washington, DC: Georgetown University Child Development Center, CASSP Technical Assistance Center, 1986.

U.S. Department of Health and Human Services. Mental Health: A Report of the Surgeon General. Rockville, MD: U.S. Department of Health and Human Services, Substance Abuse and Mental Health Services Administration, Center for Mental Health Services, National Institutes of Health, National Institute of Mental Health, 1999. Available at http://www.surgeongeneral.gov.

Waxman, H.A. Improving the Care of Children with Mental Illness: A Challenge for Public Health and the Federal Governemnt. Public Health Reports, vol 121, May-June 2006, pp 299-302.

Weiner, D., Abraham, M., & Lyons, J. Clinical Characteristics of Youths with Substance Use Problems and Implications for Residential Treatment. Psychiatric Services, vol 52, no 6, June 2001, pp 793-799.

GLOSSARY

Term	Definition
Administrative Services Organization (ASO)	An entity that contracts with a state or other purchaser to provide designated administrative services, such as billing or utilization tracking
Blended Funding	The process of integrating funds from different sources (e.g., Medicaid and block grant monies) to enhance flexibility in supporting an individualized set of services for designated patients
Braided Funding	The process of combining funds from different sources to support an individualized set of services so that expenditures from each source can be tracked and applied to specific individuals eligible for that funding
Capitation Rate	A fixed amount of money paid per person for covered services for a specific time; usually expressed in per member per month units
Care (Case) Management	Procedures and processes used by trained service providers or a designated entity to assist children and families in accessing and coordinating services
Case-Rate	A fixed amount of money paid per person to allow a provider or designated entity to pay for covered services needed by that person; rates are typically based on diagnoses of persons who present for services and expressed as monthly amounts
Cost (Budget) Neutrality	Refers to the requirement that if a State applies for Medicaid waivers under sections 1115, 1915(b) and/or 1915(c), they must demonstrate that the program does not exceed what the federal government would have spent without approving the waiver; states can do this by showing that the average per capita expenditure estimated by the state in any fiscal year for medical assistance provided with respect to the group affected by the waiver does not exceed 100 percent of the average per capita expenditure that the state reasonably estimates would have been made in that fiscal year for expenditures under the state plan for such individuals if the waiver had not been granted
Cost Shifting	The practice of obtaining care for a child at the expense of another party or agency
Level of Care Criteria	Guidelines employed to assist in the determining the appropriate setting and intensity of behavioral health treatment
Psychiatric Rehabilitation Option	An optional Medicaid service that can include (depending on state definitions) community support programs, school-based services, crisis intervention services, and out-patient psychotherapy services
Purchasing Collaborative	A collaborative behavioral health services model that brings all agencies tasked with the delivery, funding or oversight of behavioral healthcare services together to create a single behavioral health service delivery system
Section 1115 Research & Demonstration Projects	This section of Title XIX of the Social Security Act (SSA) provides the Secretary of Health and Human Services broad authority to approve projects that test policy innovations likely to further the objectives of the Medicaid program
Section 1915(b) Managed Care/Freedom of Choice Waivers	This section of Title XIX of the SSA provides the Secretary authority to grant waivers that allow states to implement managed care delivery systems, or otherwise limit individuals choice of provider under Medicaid
Section 1915(c) Home and Community-Based Services Waivers	This section of Title XIX of the SSA provides the Secretary authority to waive Medicaid provisions in order to allow long-term care services to be delivered in community settings
Title IV-E Demonstration Waiver	This title of the SSA provides states with an opportunity to design and test a wide range of approaches to improve and reform child welfare by waiving certain requirements; general objectives of the waivers include the development of family-focused, strengths-based, community-based service delivery networks that enhance the child-rearing abilities of families to enable them to remain safely together when possible or to move children quickly to permanent settings
NOTE: Definitions are adapted from Armstrong et al. (2006).

NOTES

Kansas and New York began operating their wavier programs in the mid 1990s, and had 2,020 and 1,700 children enrolled in their waivers, respectively, as of 2005; Vermont began its waiver program in 1982, and had 140 children enrolled as of 2004. Indiana and Wisconsin began their waiver programs in 2005, and had 20 and 190 children enrolled, respectively, at the end of that year. Michigan obtained approval for an HCBS waiver for youth with SED in October 2005--too late to be included in this study.
CMS awarded these grants on a competitive basis in 2003 to six states for the purpose of assisting states to develop comprehensive, community-based mental health service delivery systems, through Medicaid, for children with SED who would otherwise require care in a psychiatric residential treatment facility.
Although the summaries are based on information from state officials and related reports, the authors assume responsibility for the accuracy of the summaries and for the conclusions drawn in the lessons learned sections. The summaries are not and should not be viewed as officially sanctioned policy statements or program descriptions.
Recent Title IV-E waiver demonstration programs involving flexible funding models have led selected states to examine alternative methods for reducing the number of children entering out-of-home placements (Children Bureau 2005). Some of these methods involved payment for in-home parenting services and other community services for families of youth in the child welfare system, including youth with SED.
Having an HCBS waiver, however, does not automatically mean that a state does not also have problems with custody relinquishment because waivers typically serve very small numbers of children, and waiver eligibility criteria does not automatically include children whose need for treatment exceeds parental resources.
Alaska, Arkansas, Delaware, Maine, Minnesota, Mississippi, New Hampshire, Vermont, West Virginia, and Wisconsin.

APPENDIX A: STATES WITH COMPREHENSIVE STATEWIDE REFORMS

This appendix includes descriptions of statewide comprehensive reforms in two states (and the date when the description was finalized):

New Jersey (September 2005)
New Mexico (September 2005)

To the extent possible, we verified that the information in the descriptions was accurate as of the date indicated, but state policies and programs can change quickly in response to new legislative developments and implementation experiences. Consequently, the current situation in these states may differ somewhat from the information in the descriptions. Although the descriptions are based on information from state officials and various reports, we assume full responsibility for their accuracy and for the conclusions drawn in the lessons learned sections. The descriptions are not and should not be viewed as officially sanctioned program descriptions or policy statements.

Comprehensive Statewide Reform Of Child Mental Health Services: New Jersey

Policy Context

Child advocates in New Jersey have long identified the need for fundamental reform of the states system of care for children with behavioral and emotional disturbances. Before 1999, services for children with serious emotional disturbances (SED) were largely uncoordinated. For example, the Division of Youth and Family Services (DYFS), New Jerseys child welfare agency, provided funding for some intensive mental health services--including residential services--for children in state custody, and the Division of Mental Health Services (DMHS) and the Division of Medical Assistance and Health Services (DMAHS, the state Medicaid agency) provided funding for community and residential services for children not in state custody. None of these agencies had the authority to coordinate services to support children with intensive needs in the community. Moreover, there were no high-intensity, community services that would have otherwise allowed children with SED to remain at home while being treated.

In 1999, however, the commissioner of the Department of Human Services (DHS) initiated a major reform of New Jerseys child mental health system by establishing a steering committee comprising directors of DYFS, DMHS, and DMAHS as well as other executives such as the DHS chief fiscal officer. The committee was charged with developing plans for a coordinated system of care that would increase funding to expand community services statewide and broaden the target population to include children with a range of mental health service needs.

In January 2000, the steering committee published a concept paper outlining the DHSs vision of fundamental structural reform of the states system of care for children with emotional and behavioral disorders. The cornerstone of the reform was the Childrens Initiative, a community-based system of care that would bring together the once disparate child welfare, mental health, juvenile justice, and education systems as the means to maintaining and strengthening whenever possible the ties between children, families, and communities. To achieve this goal, the initiative would incorporate two basic principles: (1) all child-serving divisions within DHS will use a common screening and assessment process for determining service needs; and (2) regardless of the point at which children enter the public mental health system, they will have the same access to coordinated, community services.

While the Childrens Initiative was being implemented, a childrens rights advocacy group filed a class action lawsuit against DYFS, alleging that DHS was failing children in the state foster care system. New Jersey settled the lawsuit in 2004 by agreeing to a plan for child welfare reform that required the state to restructure DYFS, improve coordination and collaboration among child-serving systems, and develop community resources for children in the welfare system.

As part of the reforms related to the lawsuit, New Jersey passed legislation creating a new Office of Child Services (OCS) within DHS charged with implementing the child welfare reform plan. (The head of OCS, a deputy commissioner, reports directly to the commissioner of DHS.) The legislation also placed DYFS under the OCS and moved responsibility for the Childrens Initiative from a planning division within DHS to a new Division of Child Behavioral Health Services (DCBHS) within OCS. The DCBHS was also given responsibility for managing mental and behavioral health services for children with SED, a move intended to ensure the coordination across multiple child-serving agencies, including child welfare.

Expanding Community Services Through the Medicaid Rehabilitation Option

New Jersey opted to reform its childrens mental health system by using the Medicaid rehabilitation option because it wanted not only to enact system-wide reforms but also to develop a community-based system of care that would serve all children with mental health problems, including, but not limited to, those with intensive, high-end needs. The state also expanded use of the early and periodic screening, diagnostic and treatment program to provide mental health services for children under the age of 21, which allows it to provide screening and assessment services for children with a variety of mental health needs.

In January 2001, New Jersey selected ValueOptions, a contracted system administrator (CSA) to serve as the single point of entry into the mental health system for most children with mental health needs. The CSA conducts or arranges for a needs assessment for each child and provides a critical level of utilization review to ensure that children receive the services identified in the assessment. It provides the state with administrative support for the child mental health system without assuming any risk for the services it authorizes.

Children with SED are referred to the CSA from a variety of sources, including the child welfare system, the juvenile justice or mental health system, or the family. The CSA then either formally assesses a childs needs or helps the family secure an assessment with a community provider that is certified to conduct such assessments. In the former case, the CSA uses a standard instrument to determine the level of care each child needs, refers the family to providers in the community for community or residential treatment services, and assists the family in developing a coordinated plan of care if needed. The CSA does not manage admissions to acute care hospitals or access to outpatient day treatment services.

Children at risk of out-of-home placement are referred by the CSA to a care management organization (CMO). Created as part of the states reform plan, CMOs are local, private, nonprofit entities developed specifically to serve children with complex, multi-system needs. Using a child-family-team model, CMOs support the development of individualized service plans and provide intensive case management services. CMOs submit a plan of care to the CSA, which reviews the plan to ensure that it addresses the childs needs and, if so, then authorizes the services in the plan. The CSA also reassesses children regularly to determine the effectiveness of services, change the plan accordingly, and monitor provider performance. Currently, CMOs serve about 2,900 children. CMOs are now operating in all but two of the New Jerseys 15 service areas. Two more CMOs will be operational by January 2006.

In addition, CMOs are required by contract to partner with family support organizations, which are parent-run organizations that provide peer support, sponsor youth partnerships, and conduct outreach to contact families and help them apply for Medicaid and New Jersey Family Care, the states child health insurance program. State officials view the family support organizations as critical to the new system, and the state can claim Medicaid administrative dollars for outreach activities conducted by these organizations. In state fiscal year 2005, these organizations served 1,306 children and their families.

Financing Issues

New Jersey uses several approaches to financing the structural reforms to its child mental health service system. In 2001, the state began to draw down federal Medicaid dollars for services covered under its expanded rehabilitation option, including group home and home treatment services as well as intensive case management--services that previously were not available or were covered by state funds alone. New Jersey uses remaining state funds to support other community programs and to provide flexible funding for a variety of wraparound services (e.g., mentoring) that are not reimbursable through Medicaid. The state disperses these funds to CMOs, youth case management agencies, and mobile response and stabilization management agencies. Each CMO, which provides the most intensive level of care coordination, for example, receives approximately $500,000 per year for wraparound services and community development activities.

In addition, New Jersey identified services previously supported solely with state dollars that could be considered part of the Medicaid state plan. This allowed the state to secure federal funding for services that it had provided to children before 2001 for which it had not claimed the federal match. New Jersey used these freed dollars as seed money to build the infrastructure for new community services across the state.

In the first year of reform, New Jersey financed its share of Medicaid costs by combining $167 million in existing state dollars for children with SED from the child welfare and mental health divisions (including $117 million which was previously expended by DYFS on residential care) with $39 million in new funds authorized for children with SED in the governors 2001 budget.

CMOs arrange for children with SED to receive services listed in their individual service plans from community providers. Providers bill Medicaid directly, and Medicaid reimburses them only for services authorized by the CSA. This mechanism serves a check on the system insofar as only CSA-authorized services are provided. The CMOs receive a fee-for-service rate for the care management services they provide to children with SED.

To assist children who are exhibiting behaviors that may disrupt their living arrangements, New Jersey created 24-hour mobile response and stabilization providers, which offer immediate (within one hour of dispatch) in-home interventions. Mobile response and stabilization providers are responsible for providing care for the first 72 hours of the response. They can also (as needed) develop, and oversee the implementation of, a stabilization plan for up to eight weeks to ensure that children are linked to appropriate ongoing services and supports. These providers are reimbursed either by Medicaid or the state, depending on whether the child is Medicaid eligible. Either way, the reimbursement amount is the same, which ensures that services are provided equitably and without regard to insurance status. Private insurers pay for a small fraction of the services offered by these providers.

The Role of Residential Care

According to state officials, New Jersey had too few in-state residential care beds as well as too few home and community service alternatives to residential treatment before the DCBHS initiative. As a result, many children were placed in out-of-state residential settings. In 1999, 2.2 million children lived in New Jersey, but there were only 797 in-state residential treatment center beds, 369 group-home beds, 450 treatment-home beds, and 145 psychiatric community-residence beds. The state also maintained 40 beds at a psychiatric hospital for children. Since the initiative began, the state has reduced the number of psychiatric hospital beds to 18 and is currently in the process of closing the psychiatric hospital completely because it is required to do so under the DYFS lawsuit.

Although the psychiatric hospital is closing, New Jersey is adding residential capacity throughout the level-of-care continuum. This effort includes funding additional beds in family-like settings in the community. The state also is working to shorten out-of-home stays, thus allowing more children to be served within the existing system of residential facilities.

Spending on residential care has increased over the past five years because New Jersey has provided services to more children, expanded the capacity of the residential system to meet the need, supported the provision of specialized in-state services in lieu of sending children out of state, and raised the reimbursement it pays facilities. However, growth in spending for community services has dramatically outpaced growth in spending for residential care, meaning that residential care now constitutes a smaller fraction of the overall budget for childrens mental health than it did before New Jersey implemented system reforms (60 percent instead of 90 percent). State officials, however, believe that the amount spent on residential care, while a significant improvement, remains too high.

Lessons Learned

Support from the New Jersey legislature, the governor, and the commissioner of DHS was essential to implementing major structural reforms to the states child mental health system.

New Jersey was able to make major structural reforms to its system of care for children with SED for two reasons: (1) the governor and the commissioner of DHS were willing to re-direct state dollars once spent largely on residential treatment in the child welfare system to developing the infrastructure for a community-based mental health service system and to funding an expanded array of community services; and (2) with the governors encouragement, the state legislature appropriated additional funds to support DCBHS activities and approved an expansion of the state Medicaid plan.

While a strong local economy allowed the state to invest new resources in 2000 and 2001, according to state officials, current fiscal constraints have made it harder for New Jersey to implement major reforms. State officials cite two such barriers in particular. First, they note that major reforms hinge on the ability to invest new federal funds in the infrastructure needed to support community services, but new federal dollars are difficult to identify in the current fiscal climate. Furthermore, the ability to reinvest all or most of the state dollars saved from more efficient use of existing payment methods is critical to a major statewide reform effort, but again this strategy is less feasible when state Medicaid budgets are extremely tight. Second, they believe that the leadership in the federal Centers for Medicare and Medicaid Services is currently more focused on cost savings than service expansion and therefore would be reluctant to support major system reforms.

By pooling state and federal dollars, New Jersey has been able to provide more appropriate and timely services (including intensive and nontraditional community services in addition to residential treatment) in more settings to more children and their families, regardless of illness severity or insurance status.

Over the past five years, New Jersey has substantially reformed its child mental health system such that it now provides a continuum of services to children with varying levels of mental health needs. Children with SED now have access a variety of high-intensity, flexible services in the community in addition to residential treatment options. Children with less severe mental health problems have access to traditional treatment and preventive services that can preclude the need for residential care and support children in their homes after they are discharged from residential treatment. State officials hope these services will allow them to treat less severe mental health problems early, preventing the onset of more serious problems or the escalation of current ones.

New Jersey has supplemented (rather than replaced) traditional residential treatment with community-based residential care and in-home services for children with SED, and overall has reduced admissions and lengths of stay in residential care settings. Local mental health agencies, community-based providers, and regional CMOs now provide home and community services to children once served in distant residential treatment facilities.

According to state officials, New Jerseys ability to pool state and federal dollars has opened the door to an expanded access to an array of mental health services to more children in both community and residential settings than before the reforms were implemented. State officials expect the budget for childrens mental health services to continue to grow as more children with mental health needs are identified and referred for timely and appropriate treatment.

New Jersey opted to reform its childrens mental health system using the Medicaid rehabilitation option because it allowed the state to develop a continuum of services that would be commensurate with a range of mental health needs statewide; the home and community-based services (HCBS) waiver was perceived as being too administratively burdensome and inconsistent with the goal of serving all children in need, in all areas of the state.

New Jersey opted to reform its childrens mental health system by using the Medicaid rehabilitation option instead of an HCBS waiver because it wanted to enact system-wide reforms and to develop a community-based system of care that would serve all children with mental health problems, not just those who would otherwise be placed in a psychiatric institution (as required under an HCBS waiver). State officials felt the services covered under the rehabilitation option were sufficiently comprehensive to allow the state to meet the needs of children with SED and their families, without the added administrative burden required to apply for and operate an HCBS waiver. The rehabilitation option, however, does not allow New Jersey to use federal Medicaid funds to support services for children with SED who are not eligible for Medicaid or State Children's Health Insurance Program. Services for these children are financed using state dollars.

Comprehensive Statewide Reform of Child Mental Health Services: New Mexico

Policy Context

During the last several years, New Mexico has made steady progress in replacing an ineffective behavioral health care system with a single statewide system that will braid funds and expertise from a variety of state agencies to provide behavioral health care services to children with serious emotional disturbances (SED), among other needy groups of people. Salud!, the original statewide managed care system launched under a 1915(b) Medicaid waiver, involved contracts with three managed care organizations (MCOs), each of which was required to provide primary care as well as mental health and substance abuse services to Medicaid-eligible children and families.¹ By 1999, there was widespread dissatisfaction with the behavioral health care component of the system. According to several reports, the system was seriously fragmented as a result of several administrative layers, multiple funding streams, and a variety of service definitions, data systems, billing processes, and oversight mechanisms.² The reports noted evidence of waning access to mental health treatment and an absence of home and community services, especially for high-need populations such as children with SED and their families.

The main impetus for reform came in 2003, when Bill Richardson, the newly elected governor, instructed all agencies in New Mexico that deliver or fund behavioral health related services to work together to create a single purchasing collaborative that would establish a cohesive behavioral health service delivery system focused on recovery and resiliency. The report from the Presidents New Freedom Commission on Mental Health provided additional support for New Mexicos reform efforts. These forces culminated in the Behavioral Health Design Work Group, created in October 2003 and comprising representatives from all the agencies in New Mexico that deliver or fund behavioral health-related services potentially affected by a purchasing collaborative. Chaired by the Secretary of the Human Services Department (HSD) and co-chaired by the Secretary of the Department of Health (DOH), the work group began meeting in late 2003 to gather stakeholder input on program design issues.

During the 2004 New Mexico legislative session, House Bill 271³ was passed and signed into law by Governor Richardson. This legislation established two new groups: the Behavioral Health Planning Council and the Interdepartmental Behavioral Health Purchasing Collaborative (IBHPC).

Staffed by the DOH and the Children, Youth and Families Department (CYFD), the planning council includes gubernatorial appointees (consumers, family members, providers, advocates, state agency representatives, and others), no more than 49 percent of whom can be providers or state agency representatives. The councils mission is to provide input into the states behavioral health service delivery system.

The IBHPC, chaired by the Secretary of Human Services with rotating co-chairmanship by the Secretaries of the DOH and CYFD, includes staff from all state agencies that oversee mental health and substance abuse-related programs (17 in total).⁴ The goals of the IBHPC include: (1) identifying behavioral health needs statewide; (2) conducting an inventory of all the states behavioral health and substance abuse services; (3) planning, designing, and directing a statewide behavioral health system; and (4) contracting with a behavioral health organization to provide services throughout the state.

In its April 2004 concept paper, New Mexico Interagency Behavioral Health Purchasing Collaborative, the IBHPC recommended a fundamental restructuring of the states behavioral health system by establishing a single statewide entity to administer the states mental health and substance abuse programs. New Mexico considered, but rejected, implementing a home and community-based service waiver (HCBS) mainly because the states overall goal was to redesign the entire behavioral health system not implement incremental changes that would affect a limited number of individuals.

In fall 2004, New Mexico released a request for proposals in search of this entity and in the spring of 2005 awarded a contract to ValueOptions of New Mexico. On July 1, 2005, New Mexico officially made the transition to a single behavioral health service delivery system.

New Mexico conceptualizes its structural reforms in three phases: July 1, 2005 to June 30, 2006; July 1, 2006 to June 30, 2008; and July 1, 2008 onward. During each phase, the state expects the system to mature as additional funding streams are braided in, data systems are refined, local system-of-care collaboratives become stronger, additional unmet needs are fulfilled, and performance outcome measures are refined.

Creating A Single Behavioral Health Service Delivery System

Administrative Structure

The IBHPC has primary authority over statewide behavioral health reform in New Mexico. Operating as a board of directors, the IBHPC is responsible for overseeing the ValueOptions contract such that behavioral heath services are readily available throughout the state. The planning council serves as an advisory group to the IBHPC and reports annually to the governor and the legislature on the adequacy of behavioral health services throughout the state. The council consists of standing subcommittees, one of which focuses on children and adolescents.

Another component of New Mexicos reform was the creation of local collaboratives, which are based on a system of care model; there is one in each of the 13 judicial districts in the state and at least three more for Native Americans. Operated by community members (such as consumers, families, advocates, providers, and representatives of tribes, juvenile and adult corrections agencies, child welfare, and schools), the local collaboratives are responsible for identifying unmet needs in particular areas, developing plans and programs to address these needs, and evaluating the quality of services provided through the programs.

At the state level, DOH is responsible for nonMedicaid adult mental health and substance abuse services and prevention; HSD is responsible for Medicaid-funded behavioral health services for children, adults, and seniors; and CYFD is responsible for nonMedicaid eligible children and for funding of nonMedicaid covered services for Medicaid eligible children. Several other state agencies operate programs that fill in gaps, particularly in substance abuse services.

Overall, New Mexicos statewide behavioral health reform is intended to provide a seamless transition from the old system to the new. Children who previously qualified financially (and clinically) for behavioral health services still qualify under the reform system. Children with SED remain a priority in the state, as evidenced by concerted efforts to ensure that this population has access to behavioral health services, including community-based care.

Financing Issues

Funds for the single behavioral health service delivery system in New Mexico will be braided from the various state agencies that now purchase behavioral health services. First-year funds are to top out at approximately $350 million in state and federal dollars. In the second year, additional funding streams from the various agencies will be added to significantly increase the total fund. ValueOptions will manage the entire behavioral health system on a risk-based basis through capitation, fee-for-service, and other strategies. The IBHPC will work with ValueOptions to make the individual funding streams as flexible as possible within federal or state constraints. The following monies will be braided for child services:

HSD funds reserved for Medicaid mental health and substance abuse services for children.
DOH federal mental health and substance abuse block grants and general funds for community services for children.
CYFD, DOH and HSD funds for school-based behavioral health services.
CYFD general funds for children and for non-Medicaid covered services for Medicaid eligible children.
Flexible funding from CYFD, also known as the wraparound fund.

From July 2005 to January 2006, the behavioral health service package will include services previously covered under New Mexicos Medicaid plan (e.g., outpatient services, residential treatment, in-patient care, and case management) and the enhanced services previously offered under the states Medicaid managed care program (e.g., behavioral health respite, intensive outpatient services, in-home services, including multisystemic therapy, functional family therapy, and wraparound services). During these six months, ValueOptions will evaluate the effectiveness of these services and assess payment rates to determine whether changes are required.

Under the emerging system, eligibility will be based on a combination of financial eligibility, federal and state mandates, and the needs of individuals and their families. As specified in its contract, ValueOptions must ensure that all mandatory or entitled populations are served and that all mandated services are available.

Even before the statewide reforms took effect, New Mexico made important strides in covering mental health services for children. For example, the states childrens health insurance program (SCHIP) covers children through age 18 in families with an income up to 235 percent of the federal poverty level. New Mexico also uses the SCHIP presumptive eligibility option to extend limited Medicaid coverage to certain individuals from the time a qualified provider determines that the individuals income does not exceed the eligibility threshold until a formal determination of eligibility is made by the Medicaid agency.

In addition to these actions, New Mexico has taken advantage of the Medicaid family of one category (Category 32), through which certain children can become eligible for Medicaid based solely on their own (as opposed to family) income. If a childs condition warrants short-term placement in a residential treatment center (RTC), New Mexico uses flexible state general funds to pay for services for up to 30 days. This mechanism helps to keep families united because parents do not have to give up custody of their children in order to access necessary residential mental health services.

The Role of Residential Care

In New Mexico, residential care continues to play a key role in the service system for residents with mental illness issues. New Mexico is home to a variety of RTCs ranging from group homes to nonaccredited and accredited facilities. Some are private nonprofit, and some are private for profit. All RTCs are licensed and certified by the CYFD.

Under New Mexicos old behavioral health system, providers were required to obtain prior approval from the MCOs (or from CYFD for fee-for-service populations) for RTC admissions and continued stays. However, it was fairly easy for a child to gain access to an RTC, according to one state official. Furthermore, there was little coordination between providers or child-serving agencies in general in terms of determining a childs appropriate level of care.

In 1997, when New Mexico introduced managed care, there were about 1,200 RTC beds in the state. Four years later, that number dropped to about 600, a 50 percent reduction. Since that time, the number of beds has remained relatively stable. According to a state official, New Mexico does not expect the statewide behavioral system redesign to lead to another significant reduction in the number of RTC beds. However, the state feels that it will rely less and less on RTC beds as the emphasis in care shifts to keeping children in their homes and in their communities. For example, under the redesigned system, judges will be able to refer children with SED to a range of treatment programs and services, not just RTCs.

According to one official, state efforts to engage RTC leadership in its redesign efforts have been met with mixed success. Although New Mexico has tried to convince RTC providers: (1) of the value and effectiveness of home and community services; and (2) that the services will work as intended by keeping families together, few RTCs have expressed interest in developing a diversified product line (e.g., respite services or community-based crisis prevention services).

Lessons Learned

New Mexicos statewide behavioral health care system was created by the twin forces of visionary political leadership and the widespread perception of an inadequate public mental health service system.

New Mexicos commitment to reforming its behavioral health system is evidenced in: (1) the governors willingness to champion creative solutions to the critical problems around access to and quality of behavioral health services; and (2) legislative action to create a statewide behavioral health delivery system supported financially by multiple agencies. The new system officially began in July 2005, so it is too early to assess its impact. However, there is reason to be optimistic insofar as the new system involved key players at the state and local level, and has broad support statewide.

Financing of the new system rests on the states ability to braid dollars from various funding streams and state agencies. The state has hired a single entity, ValueOptions of New Mexico, to manage the distribution of resources. ValueOptions also will develop uniform service definitions, standard eligibility determination processes, and comprehensive data systems needed for effective resource management and patient tracking. The contractor will also aim to promote services, such as home and community care, that will minimize use of high-cost inpatient or residential treatment settings.

New Mexico did not implement a HCBS waiver for two reasons: it did not think the it could show budget neutrality, and its overall goal was to redesign the entire behavioral health system rather than to implement incremental changes that would affect a limited number of individuals.

New Mexico opted to reform its behavioral health system using a purchasing collaborative instead of a HCBS waiver because it wanted to enact system-wide reforms to better coordinate behavioral health services for all individuals with mental illness in the state, not just a specific group of high-need children. Furthermore, although New Mexico realizes the benefits of the HCBS waiver, in-patient psychiatric stays are typically quite short (usually five to seven days). As a result, New Mexico officials did not think they would have sufficient data to show budget neutrality. Moreover, New Mexicos new system should enable the state to accomplish the same goals associated with an HCBS waiver, according to a state official. For example, the new system will encourage the use of home and community services and greater accountability through performance measurement.

Before the states reform efforts, there was a noticeable absence of innovative programs for children with SED.

According to a state official, the MCOs that provided Medicaid-funded behavioral health services were not focused on developing home and community services as an alternative to psychiatric in-patient and residential treatment. The state had not applied the Medicaid rehabilitation option to mental health services for children. Furthermore, although New Mexico had a system of care grant in the mid 1990s, it was not sustained. Overall, the long-standing absence of innovation in services for children with SED made the need for major reform more urgent but has left the state with little experience in and few resources for actually implementing, managing, and coordinating home and community services for youth with SED.

Notes

The three MCOs were Molina Healthcare of New Mexico (formerly Cimarron Health Plan), Lovelace Health Plan, and Presbyterian Health Plan.
See, for example, Final Recommendations of the Behavioral Health Advisory Committee (2001), Comprehensive Needs Assessment and Gap Analysis of New Mexicos Behavioral Health Services and Systems (2002), and Infant Mental Health Plan (2002), which can be accessed at http://www.state.nm.us/hsd.
House Bill 271 can be accessed at http://www.state.nm.us/hsd/bhdwg/pdf/HB0271.pdf.
In addition to the secretary of human services, the IBHPC consists of the: (1) secretaries of health; corrections; children, youth and families; finance and administration; labor; public education; transportation; and Indian affairs; (2) directors of the agency on aging, the administrative office of the courts, the New Mexico office of Indian affairs, the New Mexico mortgage finance authority, the governors committee on concerns of the handicapped, the developmental disabilities planning council, the vocational rehabilitation division of the pubic education department, and the New Mexico health policy commission; and (3) the governors health policy coordinator.

APPENDIX B: STATES WITH HOME AND COMMUNITY-BASED SERVICE WAIVERS

This appendix includes descriptions of the Medicaid Home and Community-Based Waiver programs in five states (and the date when the description was finalized):

Indiana (September 2005)
Kansas (September 2005)
New York (June 2005)
Vermont (April 2005)
Wisconsin (October 2005)

The Home And Community-Based Service Waiver in Indiana

Policy Context

Indiana has been committed to expanding home and community services for youth with serious emotional disturbances (SED) and their families since 1994, when the state started covering mental health services for Medicaid-enrolled children through the Medicaid rehabilitation option. In the late 1990s, the Division of Mental Health and Addiction (DMHA) in the Family and Social Services Administration (FSSA) began providing counties with seed funding and technical assistance to develop local system-of-care programs that would further expand community services for youth with SED.

In 1995, the state legislature passed a bill giving Indianas 31 private nonprofit community mental health centers (CMHCs) authority over admissions to the states six public psychiatric hospitals, which have a total of approximately 90 beds for children and adolescents. Each CMHC is allocated a certain number of beds, depending on the size of its catchment area population. Subsequent legislation, passed in 2001, expanded the CMHCs responsibilities to monitoring the hospital stay, case management, discharge planning, and follow-up services. CMHCs do not, however, have authority over admissions to psychiatric residential treatment facilities. Rather, children are referred to these facilities by physicians, private and public mental health providers (including CMHCs), families, and staff in child welfare agencies, juvenile justice agencies, and schools. The facilities are licensed under the authority of the Division of Family Resources (formerly the Division of Family and Children) in the FSSA.

In 1997, two federally funded system-of-care (SOC) projects were launched: the Dawn Project in Marion County and Circle Around Families in Lake County. Because the federal grants ended and funds are no longer available, both projects now receive support from state and local resources. Choices, Inc., a nonprofit administrative services organization, manages the Dawn Project, which is described in more detail below.

As of 2000, the DMHA began offering funding to additional localities to develop SOC programs. By 2005, 32 single and multicounty SOC sites covered about half of Indianas 92 counties. Each site receives about $50,000 per year in state funding for up to two years. In state fiscal year (SFY) 2004, the SOC sites reported serving 723 children, and by SFY 2005, 993 children were being served. The DMHA funds Choices to provide SOC sites with technical assistance, including information about evidence-based practices.

Despite its commitment to providing youth with SED with home and community mental health services, Indiana has discovered that some parents must relinquish custody of their children to access the mental health services appropriate for them. Although the state passed legislation in 2001 to prevent parents from giving up custody, it did not allocate funds to help parents pay for the services they need to keep their children at home safely. In response to this problem, Indiana began to look for ways to finance the intensive community services that would allow children to remain at home and receive appropriate treatment.

The state considered several options:

Using provisions under the Tax Equity and Fiscal Responsibility Act (TEFRA, known also as the Katie Beckett provision).
Expanding the Medicaid rehabilitation option.
Implementing a 1915(c) home and community-based service (HCBS) waiver for youth with SED.

The TEFRA provision appeared to be a good candidate because it allows the state to waive family income in determining a childs eligibility for Medicaid. However, it requires children to be designated as disabled according to the Social Security Administrations (SSA) definition of disability and does not allow the state to provide any services not included in the state Medicaid plan. Indiana rejected this option primarily because including new intensive services needed for youth with SED and other disabilities as an entitlement would be likely to raise Medicaid costs. The state also recognized how difficult it could be for many youth with SED to meet SSAs definition of disability.

The second option, expanding Medicaid rehabilitation services, also was seen as financially risky. Moreover, it would not allow the state to change the rule governing the use of the familys income in determining a childs Medicaid eligibility.

In the end, Indiana came to believe that an HCBS waiver would offer the greatest promise for improving access to intensive community services for children with SED because it had the potential to provide a means for: (1) offering specific services designed to prevent out-of-home placements of children with SED; (2) helping children to make the transition from a state hospital to their home; (3) waiving family income in determining Medicaid eligibility; and (4) controlling financial risk by controlling the number of children in the waiver.

To complete the application for a 1915(c) HCBS waiver, the state appointed a task force consisting of representatives from multiple agencies and groups, including child welfare, the state Department of Education, juvenile justice, the Indiana Council of Community Mental Health Centers, the Dawn Project, and advocacy and consumer organizations. The application, filed and approved in 2003, officially went into effect on February 1, 2004.

In January 2004, however, Indiana lost a major class-action lawsuit involving custody relinquishment, forcing the state to expand the number of psychiatric residential treatment facilities (PRTFs). Before 2004, the states Medicaid plan did not cover services provided to children such facilities unless the children were wards of the state. Thus, parents who were unable to pay for residential care had to relinquish custody of their child if the child needed a residential level of care. As a result of the lawsuit, the state had to add coverage of PRTF services to its Medicaid state plan. This change has contributed to a rapid and continuing increase in the number of PRTF beds for children in the state. As of early 2005, there were 11 PRTFs in Indiana with a total bed capacity of 150, but state staff expect this number to increase substantially as new PRTFs are completed.

According to state officials, intensive community services that could be alternatives to residential and institutional care remain underdeveloped in many parts of the state, in part because children with SED typically have been placed in residential settings under the auspices of the juvenile justice, child welfare, and special education systems. Recent legal actions noted above have begun to change this pattern. Because funding for PRTF care is now reimbursed through Medicaid, more children with SED are being placed in these settings through mental health agencies. Nonetheless, the public mental health system still serves only a small percentage of children with SED.

The HCBS Waiver

Under Indianas HCBS waiver, children who would otherwise not be eligible for Medicaid can be enrolled in the program and provided with intensive services beyond those available through the standard Medicaid benefit package or the rehabilitation option if they are 4-19 years old and at high risk for placement into a state psychiatric hospital, as determined by clinical staff at a CMHC using the Institutional Level of Care instrument. Their families also must meet certain financial eligibility criteria.

The additional services available under the waiver include:

Assistance in accessing wraparound services.
Respite care (only available if the child is using any other waver service, that is, a child cannot receive only respite services).
Family support and training.
Independent skills training.

In the first year that the waiver was implemented, Indiana expected to fill 50 slots distributed across ten counties varying in their experience with SOC programs. (Counties were chosen on a competitive basis.) However, only 30 applications were completed in the first 15 months of operation (January 2004 through March 2005), and only 20 children were enrolled in Medicaid under the waiver. Five of these children were transferred to out-of-state psychiatric hospitals. As of March 2005, three cases were closed because the children no longer met clinical eligibility criteria (i.e., their condition had improved to the extent that they could be treated through less intensive care). According to state officials, enrollment in the waiver program has been slower than expected primarily because of administrative barriers, such as the difficulty experienced by front line staff when they used the required management information system (discussed below) and delays in processing waiver applications at CMHCs.

Those who were enrolled in Medicaid through the HCBS waiver receive services as stipulated in the individual plans of care (IPCs) developed by the treatment team in conjunction with the child and family. Depending on the needs of the child, IPCs can change frequently and are formally revised every three months.

As a result of the waiver, members of family support organizations can be designated as SED providers, entitling them to be paid as mentors to engage, educate, and otherwise support families of enrolled children. This change has made family support and respite more available to many rural communities.

A key operational component of the HCBS waiver program is the Indiana In-Home Services Information Systems (INsite), a state-funded software package that is used to: (1) track children as they move through the mental heath system; and (2) develop and update IPCs. Indiana uses INsite for participants in all of the states waiver programs, including the waiver for youth with SED.

Despite the value of INsite, it was one of the major hurdles in implementing the HCBS waiver. For example, training staff in CMHCs to use INsite proved to be more challenging than anticipated because: (1) some case managers were unfamiliar with or had no access to computers; (2) some staff were reluctant to learn a new software program; (3) some CMHCs were unwilling to invest the resources required to ensure that staff could master the package; and (4) the person who used INsite to enroll a child in the program may not have had access to key information because he or she was not necessarily the childs case manager. This problem was especially prominent in larger counties where multiple staff were involved with the same family. According to state officials, some CMHC staff were frustrated because, given that INsite was designed to be used for people in all of the states waiver programs, only 10-20 percent of the fields in the package were actually relevant to youth with SED. As a result, users had to wade through many irrelevant screens.

According to state officials, however, most of these problems have been resolved. All case managers now have access to computers (CMHCs purchased them), and designated staff in CMHCs were further trained in the use of INsite. However, the learning curve has been uneven throughout the state. Staff in counties in which few children have been referred to the waiver program continue to struggle with INsite because they have not used it often enough to have mastered it yet.

Overall, state officials note that the waiver has been more successfully implemented in rural systems of care than in the more developed and previously funded urban systems. For the rural areas, the waiver has provided a way to fund previously unavailable intensive community services. Several rural counties that do not now have waiver-enrolled children have expressed interest in offering waiver services when resources allow for expansion.

Financing Issues

In the original waiver application, Indiana estimated that: (1) the cost of Medicaid services for youth enrolled under the waiver would be about half the cost of care in state hospitals, which is about $23,000 per child per year; and (2) the services listed in IPCs would cost about $3,000 in any quarter, or about $12,000 annually. For the 20 children enrolled through March 2005, expenditures have been about twice the anticipated level. As of March 2005, state officials estimated that IPCs have been costing roughly $6,000 a quarter, which represents all Medicaid costs (including costs for physical health services) or approximately $24,000 a year. The average time of enrollment in the waiver program is 220 days, slightly longer than anticipated, which may explain some of the unexpectedly high costs. Approximately 70 percent of children enrolled through March were already on Medicaid. Most of the remaining children were covered by private insurance but had exhausted their mental health benefits.

Officials cautioned against drawing premature conclusions from the data, stressing the point that as enrollment grows, average costs and enrollment spells are likely to change.

The DMHA provides the majority of matching funds for the HCBS waiver, but other agencies play supportive roles. For example, as specified in a memorandum of understanding (MOU) between the Department of Corrections (DOC) and the DMHA, DOC contributes $100,000 per year for as long as the HCBS waiver is in operation. The MOU between the DMHA and the Department of Education (DOE), however, does not specify DOEs contribution. According to state officials, DOE will refer children to the waiver program but its financial role will be limited. Furthermore, the child welfare agency has not yet contributed funds to support waiver services for children referred from child welfare offices.

Managing Access to Residential Care

As mentioned, Indiana covers PRTF services through the Medicaid state plan under the terms of a law-suit settlement in January 2004. Providers refer children to residential care, but Health Care Excel (HCE), an outside entity that has a contract with the state to administer its Medicaids Prior Authorization programs, makes the final decision regarding PRTF admissions. According to state officials, HCE is contractually obligated to perform prior authorization to ensure that the state pays only for services that are medically necessary, appropriate, and cost-effective.

When a provider refers a child to residential care, he or she must provide HCE with supporting documentation, including an intake assessment, a prior authorization request form, a certificate-of-need-for-admissions form, a physician history and physical results, a current in-patient treatment plan, physician progress notes, nursing notes from any in-patient treatment, and a physician letter recommending the child for residential placement. If HCE approves admission to residential care, the approval is back-dated to the date of the admission or to the date of the initial request.¹

If HCE approves residential placement for a child, and the child is Medicaid eligible, Medicaid will pay for the treatment. Counties must pay the full amount of the state match of federal Medicaid dollars for PRTF services, and they usually use their child welfare dollars to do so.

The Dawn Project: An Example of a County-Based SOC Program

Launched in 1997, the Dawn Project in Marion County, Indiana (which includes Indianapolis) represents the states effort to coordinate services for children that are provided through multiple systems. A managed behavioral health carve-out for children with SED, the project is modeled on the Wraparound Milwaukee program. The Robert Wood Johnson Foundation supported efforts to design the Dawn Project in the mid 1990s.

Since its inception, the Dawn Project has served more than 1,000 youth and families,² blending funding from several sources, including the federal Substance Abuse and Mental Health Services Administration (SAMHSA), state departments of mental health and child welfare, and city and county agencies. The Dawn Project contracts with Indiana Behavioral Health Choices (Choices), a nonprofit entity, to manage childrens clinical and financial processes and to monitor outcomes.

For children referred by child welfare or juvenile court who are at risk of entering or who are in residential care, the Dawn charges a case-rate of $4,379 per child per month to provide mental health services. Another case-rate of $1,809 per member per month provides intensive community services for children identified by Indianapolis public schools. No residential services are involved in the second case-rate. For Medicaid-eligible children, Dawn bills Medicaid directly for services covered through Medicaid. Medicaid does not contribute to the per-member-per-month case rate.

Although the Dawn Project has been a good learning experience for the state mental health authorities and other counties, several factors limit the states ability to expand this model statewide. Most important, mental health services are largely county-organized in Indiana, and counties other than Marion County have little experience in managed behavioral health care. According to state officials, at least 100 youth must be enrolled in a managed care plan that uses a risk-based case rate if that plan is to be sustainable. Moreover, the development of a program in which services are integrated, as they are in the Dawn Project, requires sustained and effective collaboration among the leadership in several county agencies.

According to state officials, three SOC sites, are now seeking SAMHSA funding for a child mental health initiative grant, and two of them may work with Choices to implement a managed care program similar to the Dawn Project.

Lessons Learned

Implementing an HCBS waiver requires a substantial amount of administrative effort during the initial years.

Indiana has faced several challenges in implementing the HCBS waiver, not the least of which was a large volume of administrative work. During the first year of implementation, there were long delays for many children between the initial application for waiver services and actual approval of the application (the shortest wait was about 35 days, and the longest was about three months). Other administrative challenges included high CMHC staff turnover, coordinating the activities of the person who enrolled a child in the waiver program with the person responsible for case management, and a lack of provider familiarity with the Medicaid enrollment and billing system.

Unexpected legal challenges underscore the need for statewide consensus on future directions.

When Indiana lost a major class-action lawsuit that involved custody relinquishment, the state was forced to add PRTF services to its Medicaid plan. This change engendered a rapid increase in the number of PRTF beds for children--a trend that is inconsistent with DMHAs interest in expanding community-based service systems as alternatives to residential care. Residential treatment costs are likely to increase unless the state either finds a way to closely monitor the process through which children with SED are placed in PRTFs or divert children to community-based alternatives. In addition, some state officials express concern that mental health providers may come to rely on PRTFs as the primary mode of treatment and, as a result, not see the need to support the state in its efforts to finance an expansion of intensive community services as an alternative to out-of-home placements.

Implementing local SOC programs in multiple counties has been a useful experience for the state, but differences among counties make it challenging to replicate any single model.

The Dawn Project in Marion County, which serves children who have been or are about to be placed in residential treatment facilities, is an example of an effective Medicaid managed care behavioral health carve-out for children with SED. The extent to which the state can replicate this approach in other counties is variable, however, because of a long-standing tradition of county autonomy and because other counties lack the experience and infrastructure that allowed Marion County to develop the project. However, the unexpected success in implementing the waiver in rural areas suggests that SOC models may be an effective way to serve children with SED in these areas if local leaders within and across multiple counties can work together to develop economies of scale for intensive community and family support services.

Overall, the state can play a major supportive role in providing counties with seed monies and technical guidance to help them develop their own community services for children with SED. For example, when counties had trouble determining whether their wraparound programs were consistent with core program principles, the state developed the Wraparound Fidelity Index, a special instrument designed to assess compliance with the values and principles of the wraparound model, identify training needs, improve local planning, and develop technical assistance plans. In addition, by bringing together the various agencies responsible for child welfare, Indiana has begun to develop a comprehensive state mental health plan for children and their families, and including a routine screening, assessment, and treatment process for those in the child welfare system.

Changes in administration at the state level can affect the level of support for implementing an HCBS waiver.

The November 2004 state-level elections resulted in a restructuring of FSSA priorities. As a result, there has been less attention within the overall Medicaid context to addressing problems with HCBS waiver implementation. In addition, some officials have expressed concern about the implications for continued support of the waiver if expenditures for waiver-enrolled children continue to be higher than expected.

The Home And Community-Based Service Waiver in Kansas

Policy Context

Throughout the 1980s, Kansas ranked 42nd in the nation in providing care for individuals with serious mental illness. There was little coordination between services delivered by state hospitals and community mental health centers (CMHCs)³ and the majority of funds for mental health services were allocated to institutional care even though most individuals with mental illness were not institutionalized. In recognition of the serious problems in the mental health system, the state launched several initiatives by the end of that decade.

First, it applied for and received in the late 1980s and early 1990s two grants through the Child and Adolescent Service System Program (CASSP) to help develop a comprehensive mental health system of care for youth with SED and their families. Though short-lived, the grants gave the state experience in implementing home and community services, prompting it to adopt CASSP principles as guidelines for subsequent mental health policies and programs throughout the state.

Second, the state passed the Mental Health Reform Act of 1990 in an attempt to transform the adult and child mental health service systems by shifting the emphasis from institutional care to community services. Specifically, the Act authorized the state to distribute $33 million in grants (approximately $6 million of which were designated specifically for children) to all 29 CMHCs according to each centers population base and historical use of state psychiatric facilities. Key elements of the legislation included the following:

A new screening process (also known as a single-point-of-entry) for all state hospital admissions.
Funds for CMHCs to increase the availability of community mental health services.
Catchment areas designated specifically for each CMHC.
Requirements for CMHCs to establish state hospital liaison services through which care and discharge planning would be coordinated between a hospital, the CMHC, and other community resources.

Third, in the early 1990s, Kansas began covering certain mental health services--including training in social skills--for Medicaid-enrolled children through the Medicaid rehabilitation option

By the mid 1990s, state policymakers realized that the Mental Health Reform Act was having a greater impact on the adult mental health system than on the child mental health system. To address this imbalance, the state applied for and, in 1994, received two system-of-care (SOC) grants from SAMHSA: The Family and Children Community Services in Sedgwick County and KanFocus, which would cover a group of counties in the southeastern part of the state. These grants allowed the state to more fully develop its experience with a family-centered approach to mental health care, interagency collaboration, and performance measurement strategies. Using outcome data from an analysis of these two SOC grant projects as well as information gathered from focus groups with consumers, meetings among key stakeholders, and a series of planning conferences held in different regions of the state, the Kansas Mental Health Authority (MHA) developed a comprehensive strategic plan for enhancing child mental health services. The plan evolved into the Childrens Mental Health Initiative, which officially began in November 1996. Through the initiative, the state legislature increased appropriations specifically to enhance the CMHCs capacity to provide community services to youth with serious emotional disorders (SED).

Kansass experiences with statewide mental health reform and the Childrens Initiative helped it to develop its application for an HCBS waiver for youth with SED. When the state began to implement the waiver in June 1997, it had already taken major steps toward building a comprehensive community-based mental health service system for youth with SED. The waiver added a component to this emerging system. As these developments made mental health services more available in the community, Kansas closed Topeka State Hospital, a state psychiatric hospital for adolescents, in the late 1990s and used the savings to further develop home and community services.⁴

In 2000, the state launched the Mental Health Initiative, which, in addition to providing additional resources to the CMHCs for crisis intervention and diversion services, instituted additional reporting requirements for the public mental health system. In the same year, Kansas also added services under its Medicaid rehabilitation services option. CMHCs now receive other state dollars for intensive in-home services and family support interventions for children with mental illness and their parents who are either uninsured, underinsured, or do not qualify for the home and community-based services (HCBS) SED waiver. As a group, the CMHCs receive:

$10 million in general state aid, giving the centers the flexibility to pay for intensive or specialized mental health services that would not otherwise be covered.
$5 million from the states tobacco settlement designated specifically as Family Centered System of Care (FCSC) funds and distributed according to a CMHCs population base and catchment area socioeconomic status.

The state also awards monies to CMHCs for special projects on childrens mental health on a competitive basis. For example, a $1 million annual allocation was recently divided between six CMHCs for providing therapeutic services to preschool children.

Overall, Kansas has a well-integrated network of CMHCs, the majority of which are private, nonprofit entities with their own governing boards. Under state contracts and licensing regulations, CMHCs are required to serve not only individuals regardless of their ability to pay but also youth with SED and their families as a specific contractual responsibility. CMHCs are also responsible for determining clinical eligibility for the waiver, providing mental health services to all residents in their catchment area, establishing medical necessity for admissions to psychiatric in-patient units and some residential treatment facilities, providing diversion services in the community, and reporting on both service delivery and outcomes. CMHCs, especially those in rural areas, have been challenged to find enough qualified staff to provide intensive home and community services and to develop adequate means for measuring their quality.

The HCBS SED Waiver

The HCBS waiver for youth with SED is an important component of the overall service system because it allows Kansas to provide, in addition to general Medicaid services, intensive mental health services to children with SED who would otherwise be ineligible for Medicaid because of family income. State officials believe that the waiver is especially valuable to children and families who have private insurance coverage but have exhausted their mental health benefits or whose private insurance does not cover community-based rehabilitative mental health services.⁵

In addition to the mental health services provided through the standard Medicaid package, the waiver makes four additional services available to children and their families:

Respite care (up to 300 hours per year).
Parent support services.
Wraparound facilitation.
Skill-building for independent living.

Eligibility for services provided under the waiver is based on clinical and financial status. The former is determined by CMHCs in terms of the risk for state psychiatric hospitalization, which must be imminent. The latter is determined by local offices in the Department of Social and Rehabilitation Services (SRS) on the basis of the childs income alone, so very few children are deemed financially ineligible for the waiver.

In addition to determining clinical eligibility for waiver services, CMHCs develop individualized services plans based on meetings with the child, the family, other natural supports, and staff from other agencies as needed. The centers are also responsible for updating these plans periodically and for monitoring and reporting on services provided to all waiver-enrolled children.

To reduce the number of children who are institutionalized by providing treatment in both the home and community, the Kansas MHA and the CMHCs have contractually agreed to a bed-day allocation process through which each CMHC has use of a pre-determined number of state psychiatric hospital beds. Implemented as a management tool to reduce inpatient care, the bed-day allocation was established based on a formula that considered the CMHCs historical use of state hospital care. By providing children with mental health services through the waiver, CMHCs can keep their bed-day allocations under the allotted number, thus showing the state that they are being accountable for the delivery of care. The MHA conducts quarterly reviews of the HCBS SED waiver plans of care to ensure services are meeting childrens needs.

The state has increased waiver enrollment from 305 children in 1998 to 2020 in 2005, with a corresponding increase in its financial commitments.

Financing Issues

In its annual report to CMS for fiscal year 2003 (the 372 report), Kansas indicated that average annual per capita expenditures for all waiver and other Medicaid services provided to the 1,614 children enrolled in the waiver totaled $13,575 per child. The state estimated that had the waiver not been available, the average annual costs would have been $26,186 per child served.

In fiscal year (FY) 2004, the state estimated that the average annual expenditures for services to the 1,789 children then enrolled in the waiver program were $14,035 per child. Overall, in FY 2004, Kansas spent a total of $27,000,000 for all medical and mental health services for youth enrolled in the HCBS waiver. Of this amount, $1,024,503 was spent on the specialized services available through the waiver. Specifically, a total of $518,170 was spent on wraparound facilitation, $328,134 on parent support and training services, $177,199 on respite care, and none on skill building for independent living, which overlaps with community services covered under the rehabilitation option and other methods. According to state officials, respite care is used infrequently because it is not fully reimbursed, and it requires substantial documentation (e.g., a state license is required if respite care is provided for more than 24 hours).

CMHCs are paid on a fee-for-service basis for providing mental health services covered under the standard Medicaid benefit package, the rehabilitation option, and the expanded service package authorized through the waiver. CMHCs bill Medicaid for parent support services and wraparound facilitation services in units of 15 minutes under rates set by the state. CMHCs typically subcontract out for respite care, and that provider bills the CMHCs on a fee-for-service basis, and the CMHC bills Medicaid in turn.

According to state officials, Kansas is facing several key issues in terms of providing mental health care for children with SEC:

In the past, the state has increased Medicaid funding for mental health services as needed. In light of the current Medicaid budget crisis at both the state and federal levels, state staff are concerned about the potential for future budget cuts, which could force them to reduce either coverage of mental health services or payments to providers, or both.
Community services and supports to waiver-enrolled children are provided as needed in the school setting. Although schools systems have become more aware of the impact of SED on childrens learning and are willing to send staff to planning meetings with mental health service providers, the school system does not typically cover any services provided to children enrolled in the SED waiver.
Youth with SED who are discharged from detention centers or residential treatment programs operated under the authority of the juvenile justice agency and their families typically need reintegration services to help them adapt to community life. Toward this end, however, there is very little formal collaboration between the juvenile justice system and public mental health service providers. Furthermore, Medicaid funds cannot be used to pay for services provided to youth in detention centers or correctional facilities and, as a result, access to treatment services is reduced.
Medicaid does not cover several potentially useful services. For example, in-home family therapy can be reimbursed only if the child is present even though it is sometimes clinically necessary for therapists to work with the parents alone. In addition, parent-to-parent support services or respite services can be extremely helpful for many families but are typically only reimbursable for waiver-enrolled children. Finally, federal rules restrict Medicaid from paying for services that could facilitate a childs discharge from an institution for mental disease (IMD).

In the absence of the HCBS SED waiver, state officials report that the MHA could probably find alternative ways to finance the array of nontraditional services now covered through by the waiver for Medicaid-eligible youth with (e.g., CMHCs could use state grant dollars to provide respite care). However, according to state officials, Kansas remains committed to the waiver because it is a valuable resource and other alternatives are limited. Officials note that:

Obtaining CMS approval for including respite care or parent support services in the states Medicaid state plan would be highly unlikely.
Implementing the Tax Equity and Fiscal Responsibility Act provision (TEFRA, also known as the Katie Beckett provision) would have a relatively small impact on the target population in Kansas because, according to state staff, only a small number of children with SED would be defined as having a disability according to the definition in the TEFRA provision, and they would not have access to the intensive services covered by the states HCBS SED waiver.⁶
Increased funding of nontraditional services through state general funds is highly unlikely because of the current fiscal environment.

Managing Access to Residential and Inpatient Care

CMHCs must approve admissions to state psychiatric hospitals, but they have never been responsible for serving as gatekeepers to residential treatment centers. Most children are referred to residential treatment facilities from the child welfare agency or the juvenile justice agency. Historically, there has been little collaboration between the MHA and either child welfare or juvenile justice in relation to residential care placements. Recent negotiations among these agencies, however, have transferred management responsibilities of some residential facilities to the MHA.

The two types of residential treatment facilities in Kansas--referred to as Level 5 and Level 6--have traditionally been funded and managed by the child welfare system. Placement in these facilities depends on a childs specific needs and severity of mental illness, with Level 6 facilities generally reserved for children with more severe mental illnesses. On July 1, 2004, the fiscal management for Level 6 facilities was transferred to the state Medicaid agency, and negotiations are currently underway to transfer programmatic management of Level 6 facilities to the state MHA. Overall, these changes should improve the connections between local mental health service providers, residential treatment facilities, and providers of community services.

If a child enrolled in the HCBS waiver is placed in a residential treatment facility or an inpatient setting for more than 14 days, he or she is no longer eligible for waiver services. The child can, however, reapply for the HCBS SED waiver when he or she returns to the community.

Lessons Learned

CMHCs in Kansas have developed a relatively uniform approach for providing a comprehensive set of intensive home and community services for children with SED, regardless of whether they are enrolled in the waiver.

CMHCs draw on a variety of funding sources to provide comprehensive services to individuals in their catchment areas, including children with SED. These sources include state and local funds, Medicaid, and special grants or contracts. The HCBS waiver for youth with SED is essentially a means for obtaining reimbursement for certain services provided to children who are at risk for admission to a state psychiatric hospital. Children with SED who are not enrolled in the waiver receive community mental health services covered under the state Medicaid plan and some additional intensive services covered through other mechanisms. However, virtually all children with SED who meet the clinical criteria for the waiver are enrolled because most of them are also financially eligible.

It takes time, patience, dedicated individuals, a clear long-term strategic plan, and stakeholder consensus to build a comprehensive state mental health system.

Kansas began to build a comprehensive community-based mental heath system in 1990 with the Mental Health Reform Act. Over time, that system has been expanded through other initiatives. Now 15 years later, many community service options are available, but, according to state officials, more work needs to be done. Throughout that 15-year history of service development, stakeholder consensus has been critical to gaining additional resources for providing mental health services to youth with SED. Each time the state has devoted a major share of its resources to the mental health system, program administrators have been in agreement about what was needed, and they worked with the legislature and the state agencies toward obtaining resources for the mental health system. This is true for all major system enhancements achieved through the Mental Health Reform Act of 1990, the Childrens Initiative and subsequent HCBS SED waiver, the Family Centered System of Care, and the 2000 Mental Health Initiative.

The availability of outcome data on the states two SAMHSA-funded SOC grants helped Kansas gain legislative and financial support for expanding community services for youth with SED, including the HCBS waiver.

Kansas used the data from the two SAMHSA-funded SOC grants to show the legislature that community services could lead to positive outcomes for youth with SED. The data also enabled the state to illustrate gaps in services, leading to further funding opportunities and program development such as funding for the FCSC program and the success of the HCBS waiver application.

Young children and older adolescents with SED need services that are not now covered by existing mechanisms.

State and local mental health professionals in Kansas remarked on the increase in the number of children under five years of age who are entering the mental health system with serious behavioral and emotional problems. Several officials noted the importance of supporting early intervention programs in efforts to identify and prevent mental health problems.

Mental health professionals also noted that as they make improvements in serving youth with SED, they are finding that, by the time these individuals are 21, their symptoms no longer conform to the diagnosis of severe and persistent mental illness turn 21, which is basis for obtaining Medicaid coverage for mental illness throughout adulthood. Officials underscored not only the importance of helping young adults to obtain coverage but also the need for earlier and more comprehensive access to vocational training that can help adolescents with SED to make a successful transition to employment in adulthood.

The Home And Community-Based Service Waiver in New York State

Policy Context

New Yorks mental health service system for youth with serious emotional disturbances (SED) is shaped by the states county-based structure of governance. At the county level, departments of mental health and social service play a key role in service delivery because the counties provide half of the nonfederal Medicaid match (i.e., the states share of Medicaid costs). Counties are also required by state law (Article 41 of the Mental Hygiene Law) to develop plans for mental health services, but the availability of services, including waiver services, is driven by both state and county policies. At the state level, the Office of Mental Health (OMH) is required by law to develop programs and services for individuals with mental illness. The state Department of Health (DOH), which is the single state agency for Medical Assistance (i.e., Medicaid), and the Office of Children and Family Services (OCFS), which is responsible for child welfare and juvenile justice also play important roles in the care of children, including those with SED.

All of OMHs child mental health initiatives build on Child and Adolescent Services System (CASSP) principles, also known as system-of-care (SOC) principles. The agencys first efforts in this area began in the early 1990s, when it instituted the Coordinated Childrens Services Initiative (CCSI) to support localities in creating systems of care to ensure that children at risk of residential placement remain at home and in the community whenever possible and to address barriers to developing a system of care in which services are based on individual needs. Since the initiative was developed, CCSI principles have been implemented in over 50 counties, including the five boroughs of New York City.⁷ The CCSI was signed into legislation in 2002.

In the mid 1990s, the state took three additional steps to enhance home and community services for youth with SED. First, several counties obtained CASSP grants to build community-based systems of care, and the state OMH used CASSP dollars to support the development of five statewide consultant positions for parents of children with SED. These consultants work to encourage family involvement in local planning and to facilitate family support activities by bringing parents into the process. Currently, New York State has four SOC sites funded by the Substance Abuse and Mental Health Services Administration (SAMHSA).⁸

Second, reinvestment dollars were designated to pay for some child mental health services and service integration projects across the state. The money was first made available in state fiscal year 1994-1995, when New York closed some of its psychiatric institutions and eliminated nongeriatric beds in the institutions that remained. Initially, the state used a standard formula to distribute this money to all 62 counties including the five boroughs of New York City. Although the statute mandating the distribution of this money has expired, funds continue to be authorized and counties continue to use them for child mental health service programs previously approved.

Third, New York began planning for Medicaid managed behavioral health care in the mid 1990s. In 1995, the state applied for a home and community-based services (HCBS) waiver to help support what it anticipated would be a broadly managed behavioral health plan. Partly in response to these developments, Oneida County began a special program for children with SED (described in detail in the section below on county-level programs) in 1998. By the late 1990s, however, the state had backed away from implementing managed behavioral health plans, and most mental health services for children are paid today under fee-for-service arrangements.

Despite New Yorks extensive experience with SOC principles in the early 1990s, a study commissioned by OMH in 1999 noted continuing problems in interagency coordination. These problems were addressed in 2000-2001 by the Governors New Initiatives Guidelines. Under these guidelines, OMH requested counties to designate a Single Point of Access (SPOA) agency to identify children at the highest risk of placement in out-of-home settings. The SPOA process was designed to: (1) implement a universal intake form to facilitate entry into services; (2) develop a process to manage access to high-end services; (3) use a comprehensive functional assessment to develop an individualized plan of care; and (4) develop appropriate strategies to support children with SED in their communities. The SPOA process complements existing initiatives in each locality. In addition, many localities have extended the use of the SPOA process to children who need multiple services from multiple agencies, regardless of mental health status. SPOA processes for children are operational in every county and in the Bronx. In 2002, SPOA agencies referred nearly 6,000 children for mental health services.

Medicaid covers some out-patient mental health services for children under the standard clinic option. Although New York has elected the Medicaid rehabilitation option and uses it for some mental health services for children, it has not been used to support intensive community services for children with SED. These services are financed through state dollars, without regard to childrens Medicaid eligibility. The cost of Medicaid services is divided evenly between the Federal Government and the state. For most services, the state splits its portion of the bill with the counties.⁹

Because counties do not contribute to the cost of care in psychiatric residential treatment facilities (PRTFs), they have a financial incentive to place youth in such facilities instead of supporting the development of community services, to which they do contribute. The state, however, has assumed the responsibility for paying the local share of Medicaid services for youth with SED who are enrolled in the HCBS waiver to avoid creating a disincentive to developing community services.

The HCBS Waiver

New Yorks HCBS waiver formally began in January 1996 with 125 slots throughout 11 counties including the five boroughs of New York City. Today, 610 slots are spread across 40 of New Yorks 57 counties and all five boroughs. The waiver currently serves about 1,700 youth with SED ages 5-18 (or up to age 21 if the youth enters the program before his or her 18^th birthday) who need an institutional level of care.¹⁰

The waiver allows the state to:

Waive the amount, duration, and scope of Medicaid services, thereby enabling it to offer specialized services that are not available as mandatory or optional Medicaid services or through other state or county programs.
Lift parental deeming requirements, thereby providing access to intensive mental health services for youth who might not otherwise meet the financial eligibility criteria for Medicaid (which in New York is a family income below 100 percent of the federal poverty line, effective April 1, 2005).
Waive statewideness requirements, allowing the state to phase in the waiver by county.
Control costs by limiting the increase in waiver slots and managing its exposure to high-cost cases.

Waiver services in each county are organized by Individualized Care Coordination (ICC) agencies, which are private, nonprofit entities with current Medicaid certification. Children are referred to waiver services by the local SPOA agency; however, the ICC agency makes the final eligibility determination. The ICC agency also develops a service plan and creates an individualized budget for each child served under the waiver.

There are six core waiver services, which were developed with input from the county mental health departments, providers of childrens mental health services, and families across the state:

Individualized care coordination.
Family support.
Crisis response.
Skill building.
Intensive in-home services.
Respite care.

Financing Issues

New York views its waiver as a financial mechanism that allows it to pay for an expanded array of community services while controlling costs by limiting the number of children who have access to this expanded benefit package. The state OMH contracts with ICC agencies to ensure that: (1) the ICC agency makes available all six services; and (2) individuals enrolled in the waiver receive the services in their individual service plan. ICC agencies are required to provide individualized care coordination directly and to offer families a choice of providers whenever possible for the remaining five services.

The structure of the fee received by ICC agencies depends on whether a service is provided by a contracted provider or by the agency itself. The agencies can contract out for all services (except individualized care coordination) and bill Medicaid a fee-for-service basis. They can also bundle three types of services (individualized care coordination, intensive in-home services and crisis response services) and provide them directly, in which case they receive a previously negotiated case rate from Medicaid.¹¹

New York State requires each ICC agency to bill $1 for each service-hour (even if services are bundled and the ICC agency is receiving a case rate) so that it is possible to track utilization rates. However, the incentive for doing so is weak because it is costly for the ICC agencies to file the necessary billing paperwork. As a result, there is significant under-reporting of the use of waiver services.

In 2003, New York spent $25.6 million on services (including medical care) on youth enrolled in the waiver program. About 65 percent ($16.8 million) of these dollars went to the six core waiver services. Of these services, individualized care coordination cost the most ($12.8 million) because it is a part of every childs service plan.

ICC agencies also receive $2,500 per slot from Medicaid to pay for wraparound services (for example, recreational camps) related to a childs treatment plan. ICC agencies contract out for these services and are then reimbursed by DOH, which, in turn, is reimbursed by OMH from federal Medicaid matching funds. OMH pays the entire state share of waiver services.

In 2004, New York renewed its HCBS waiver. As in previous waiver applications, the state showed cost neutrality by comparing the cost of community treatment with the cost of treatment in in-patient psychiatric hospitals, including PRTFs. New York state law defines hospitals as including in-patient psychiatric facilities, which, in turn, are defined as including residential treatment facilities.¹² Using calendar year 2002 data on utilization and expenditures in the waiver program, in PRTFs, and in in-patient psychiatric settings, the state estimated that it would spend an average of $28,324 per youth per year, including $18,028 for waiver services, on community treatment in 2004. By contrast, it estimated that residential treatment would cost an average of $113,572 per youth per year.

In rural areas, in which there are few children in the waiver, OMH and the ICC agencies have had trouble making services available because demand for particular services is too low for contracted providers to justify hiring staff for the waiver. This problem is exacerbated by Medicaid Freedom of Choice requirements, which prevent New York from limiting provider choice by contracting with a limited number of providers in certain areas (particularly those that are rural and have few of the states 610 waiver slots). New York has not yet determined how best to balance federal requirements and the desire to give families a choice of providers with the limits this places on their ability to ensure access to care in all areas of the state.

Managing Access to PRTFs or In-patient Care

New York controls access to PRTFs fairly tightly for children with SED. Before a child with SED can enter an PRTF, the SPOA agency reviews the case and, if it is determined that the family has tried all lower levels of care, refers the child to the state-mandated Pre-Admission Certification Committee (PACC). The PACC committee has final authority for placing children in any of New Yorks 539 PRTF beds for youth.

County Level Programs

Although New York State has taken numerous steps to improve community services for children with SED, some counties have collaborated with the OMH to further develop such services. Two such counties are Oneida and Westchester.

Oneida County

When the state began developing the HCBS waiver program, Oneida County initiated Kids Oneida, its own program to expand the services available to all youth with SED in the county. Developed in part through a Mental Health Services Program for Youth Initiative replication grant of $75,000 from the Robert Wood Johnson Foundation, Kids Oneida offers services similar to those available through New Yorks HCBS waiver. Having enrolled the first group of children in the summer of 1998, Kids Oneida was providing services to 162 enrolled children and 52 siblings by 2003.

The Kids Oneida budget ($4.2 million in 2003) comes from two sources: Oneida County Department of Social Services (DSS) and Medicaid. Oneida County DSS pays $2,550 per child per month via a blend of state (65 percent) and local (35 percent) funds. Kids Oneida was established as a state-certified out-patient mental health clinic and receives a bundled Medicaid case rate of $1,225 per month for each child it enrolls who is Medicaid eligible (about 65 percent of enrollees have Medicaid). Program staff estimate that it spent $2,318 per family per month in 2003 on community mental health services, 44 percent less than was spent per family per month in residential treatment (where the average cost was $5,268).

Westchester County

Westchester County has relatively substantial local resources, little to no turnover in its leadership, and a history of extensive interagency collaboration. As a result, it has been especially successful in creating an integrated community-based service system for children with SED. In the mid 1980s, the county obtained a small grant from the state to develop interagency collaborations modeled on CASSP principles and designed to foster a coordinated SOC for youth with SED. Westchester County was also one of the counties that received state funds throughout the 1990s to support cross-system efforts for children with SED. In addition, in 1999, the county obtained a six-year SAMHSA grant to further develop its SOC around the needs of families that have children with SED. The main thrust of the SOC project has been to develop infrastructure that could support community services. The result was Family Ties, a 501(c)(3) organization that runs five resource centers for families, supports a thriving family and youth movement, and works to improve coordination among the various agencies that serve children.

Westchester has also expanded its SPOA process by creating a Single Point of Return program, which helps children make the transition into the community when they are discharged from RTFs. The county estimates that it has saved $12 million over three years by diverting children from residential to community care through SPOA.

Lessons Learned

The counties in New York State have responded in various ways to the challenges of developing community services for children with SED; the state itself reflects the diversity of approaches characteristic of the nation as a whole.

From a statewide perspective, the HCBS waiver is a small but important component of the mental health service delivery system for children in New York. It allows the state to finance services for up to 1,700 youth with SED who need intensive services in order to remain in their homes or communities. For the 45 counties that have waiver slots (out of 62 counties including the five boroughs of New York City), the HCBS waiver is essential because it allows them to finance an array of nontraditional services that go beyond those available through the standard state Medicaid plan and other state programs. In addition, many children enrolled in the waiver would not have access to these services because they are not otherwise eligible for Medicaid.

For example, in Orange County 16 children are typically enrolled in the waiver at any one time; without it, some of them would not be eligible for Medicaid, and all would have little access to intensive community services because Orange County has limited resources for providing them with state funds or through the Medicaid clinic option.

In contrast, in Westchester County, 26 children usually are enrolled in the waiver program, and there are a variety of other community programs and supports funded by: (1) state reinvestment dollars; (2) resources pooled from OMH, Medicaid, and the local DSS; and (3) its SAMHSA grant. As a result, the waiver supplements, rather than defines, the services available to children with SED. Oneida County has taken yet a different approach by implementing a funding model that relies on case-rates and fiscal collaboration among county departments of social service and mental health. Nevertheless, the waiver services offered to children with SED in Westchester resemble those offered by Oneida County at a similar per child cost. In each case, the current system emerged from the vision of key program leaders who, on the one hand, have used similar government resources in different creative ways and, on the other, have generated unique opportunities through service grants.

Legislative mandates that promote individualized service planning and collaboration among key agencies at the state and local level have created an environment that enhances the effectiveness of HCBS waivers and other efforts to finance home and community services.

Current systems and processes, such as SPOA and CCSI, are the means through which core SOC principles are implemented at local, county, and state level and, as a result, have created the fabric through which services are delivered to youth with SED. The CCSI, by uniting a variety of child-serving agencies, has spawned the infrastructure for a coordinated community-based system of care. The SPOA process allows officials from the critical agencies to work with families to ensure that children with SED receive the services they need in the community and to develop a comprehensive and individualized plan of care for each child and family. SPOA agencies offer a variety of community services and manage access to other services, including the HCBS waiver program and residential treatment facilities. State officials believe that the SPOA initiative has reduced the need for out-of-home placement by helping ICC agencies to identify and plan for services early in the treatment process.

Despite the progress that many counties in New York State have made in developing a community-based system of care through the CCSI and county-based programs, integrating the services offered by different systems (i.e., mental health, justice, welfare, education) and the funds they receive from general state revenues is a continuing challenge. Even counties that have strong interagency partnerships struggle to develop integrated, community-based systems of care, especially during periods when funds are limited in all of the service sectors. CCSI continues to support training and technical assistance to allow for collaborative planning. In many counties, SPOA agencies have expanded their scope to plan for all children who are high risk or high need by working with other child-serving agencies to serve these children despite regulatory and funding restrictions.

The ability to waive parental deeming and statewideness requirements was useful for New York State during the implementation of the HCBS waiver.

The HCBS waiver allows New York to expand the population of youth it is able to serve because it allows the state to consider the youths income alone when determining financial eligibility. As it is, the waiver serves only a very small fraction of children with SED in the state. In addition, the waiver has allowed the state to expand services incrementally, control costs for services to a high-need population, and give counties the option of participating.

New York continues to face challenges in managing admissions to PRTFs for children with SED.

Counties do not share responsibility for the costs associated with treating youth in PRTFs, but they do share responsibility for the costs associated with community-based treatment alternatives (excluding waiver services). As a consequence, counties have a strong financial incentive to place youth with SED in PRTFs if waiver slots are unavailable or if there is no waiver program in that locality as opposed to developing community-based systems of care.

Many children served by the HCBS waiver are not eligible for Medicaid upon discharge because parental deeming rules come back into play outside of the waiver. New York pays for some services with state dollars, but in many cases, there is a need for more services than are available through the state alone. The state will need to address this critical problem if children who are not Medicaid eligible are to successfully make the transition out of the waiver.

The Home And Community-Based Service Waiver in Vermont

Policy Context

The home and community-based services (HCBS) waiver, implemented in Vermont in 1982, has been one in a series of steps taken by the state to cover children with serious emotional disturbances (SED) who are not eligible for Medicaid. Before 1982, Vermont provided mental health services to Medicaid-enrolled children with SED only through the clinic and rehabilitation options. The latter, however, included coverage of intensive services such as community support and skill-building as well as one-on-one supportive services provided at home or in school. When the waiver was implemented in 1982, the state was able to cover additional home and community services (e.g., respite care, therapeutic foster-care, and environmental modifications) for children with SED who were at immediate risk for hospitalization or out-of-home placements, some of whom would otherwise be ineligible for Medicaid.

Vermont initially applied for an HCBS waiver because more and more children were being served in residential treatment centers, in part because the state relocated children to these centers from the state psychiatric hospital in the 1970s. Vermont saw the waiver as a sustainable funding source that would minimize the use of residential treatment by making community services more readily available and thus ensuring that the deinstitutionalization process would have positive outcomes. Today, the waiver has become an indispensable component of the overall system of funding home and community services for children with SED.

Since obtaining the waiver, Vermont has taken several steps to improve the child mental health service system. In 1988, the state passed Act 264, which mandated interagency collaboration, coordination, and parental involvement at all levels of decision making. The act provides families of children with SED the legal right to have a coordinated plan of care and gives local community mental health centers (CMHCs) the responsibility for convening staff from mental health, special education, and child welfare agencies to develop such plans. The resulting local interagency teams work out coordination issues and determine appropriate funding strategies using dollars from different agencies as appropriate. In the rare instances when the teams cannot develop an appropriate plan (e.g., for children with especially complex needs), a state interagency team steps in. That team may involve staff from the health department, child welfare agencies, juvenile justice, or advocacy organizations. However, the majority of problems are worked out at the local level.

In 1991, Vermont began to cover children with SED and other disabilities under the Tax Equity and Fiscal Responsibility Act option (TEFRA, also known as the Katie Beckett provision). This provision gives states the option to waive the deeming of parental income and resources for children with disabilities under 18 years old who are living at home but would otherwise be eligible for Medicaid-funded institutional care.¹³ Children who qualify for TEFRA are eligible to receive the same services provided under the states Medicaid plan. Approximately 410 children are now enrolled in this coverage group in Vermont. Although the state could not provide the specific number of these children who have SED, a previous report indicated that in 2002, about half of the children who enrolled in Medicaid through the TEFRA provision had SED.

Financial support for community services was strengthened further in the 1990s, when the state expanded the rehabilitation option to include targeted case management. This service now accounts for the largest number of dollars billed under the option.

By the end of the decade, Vermont had built a fairly comprehensive service system for youth with SED based on the HCBS waiver, the interagency collaboration mandated by Act 264, the TEFRA option, and the expanded rehabilitation option. The state Medicaid agency pays for mental health services for most enrolled children on a fee-for-service basis. Managed behavioral health plans have a minimal role in providing services to children with SED.

The HCBS Waiver

As one component in the overall service system, Vermonts HCBS waiver is important because it allows the state to provide children under 18 years old with SED who meet financial eligibility criteria with intensive services beyond those available through the standard Medicaid benefit package or the rehabilitation option. Some of these children would be ineligible for Medicaid absent the waiver.

Out of about 3,800 children estimated to have SED, approximately 140 were enrolled in Vermonts HCBS waiver program in 2004. From 90 to 100 children are enrolled in the waiver at any one time. Average time in the waiver program is 14 months. Mental health professionals determine clinical eligibility for the waiver by using a standard behavioral checklist and information from evaluations of functional status. Children who are referred for possible enrollment into the HCBS waiver must be at high risk for placement into a residential treatment facility or a psychiatric in-patient program or facility.

The HCBS waiver entitles eligible children and their families to all standard Medicaid services, including those provided under the rehabilitation option and the following additional services:

Respite care.
Home and family supports.
Additional community and social supports and crisis intervention.
Environmental modification.
Adaptive equipment.
Therapeutic foster care.

Like other children with SED, those enrolled in the HCBS waiver program receive services through one of ten nonprofit CMHCs and one specialized agency that are spread over Vermonts 14 counties. To ensure that services are coordinated for any child with an SED, CMHCs develop individual plans of care (IPCs) in collaboration with the parent, schools, pediatricians, and other key stakeholders, as specified under Act 264. The plan specifies a budget for services (typically $100-$200 per day depending on the needs of the child) and identifies the fiscal responsibilities of each agency. Every three months, a psychiatrist is required to sign off on the IPC, and each one is rewritten and audited annually, or every six months if necessary. Under Vermonts door always open philosophy, no child who needs an IPC goes without one.

When developing IPCs, CMHCs consider various factors, such as the childs strengths, natural resources, clinical needs, and the extent to which the child and the parent want to be involved in the decision-making process. As described below, IPCs include specifications for how services will be financed in addition to how they will be coordinated. The information on service needs and financing strategies included in an IPC is used to determine whether a CMHC will refer a child to Division of Mental Health (DMH) for enrollment into the HCBS waiver. Although local CMHCs are responsible for developing IPCs, DMH monitors the IPC process closely.¹⁴

Financing Issues

To be financially eligible for the HCBS waiver in Vermont, a child (though not the family) must be financially eligible for Medicaid. The states Medicaid eligibility limit is up to 300 percent of the federal poverty level, which is more generous than most states. Under the terms of the HCBS waiver, Vermont can disregard standard Medicaid financial eligibility rules, thus allowing only the childs income to be considered. As a result, very few children who meet the clinical eligibility requirements for enrollment into the HCBS waiver are found to be financially ineligible. DMH staff re-examine eligibility every six months.

Total Medicaid funding for children enrolled in the HCBS waiver program is capped. In 2003, the cap was $3,212,100. This money is allocated to the care of waiver-enrolled children via the budgets specified in their IPCs. In 2004, the average cost of Medicaid services for waiver-enrolled children was $156 per day and $57,000 per year, compared to $1,200 per day and $438,000 per year for psychiatric in-patient care.¹⁵

Because of the cap, the dollars specified in all IPCs combined cannot exceed the total amount of funds available. In some instances, therefore, an IPC may be rewritten in order to free up funds for another child, assuming that neither plan of care is compromised. Vermonts triage system ensures that children most at risk of institutionalization are prioritized for funding. In addition, once a child is enrolled on the waiver, Vermont assesses each childs clinical progress and continued waiver eligibility, allowing the state to remain within its cap while serving the neediest children.

Service costs are shared by all agencies involved, including special education and child welfare, according to IPC specifications. For example, if a child under the custody of the child welfare system is placed on the HCBS waiver, child welfare will pay for designated services, billing Medicaid for the portion of services covered under the waiver provisions. The state uses the dollars contributed by child welfare (or any other agency) as part of the state Medicaid match. In recent years, however, the Department of Education has substantially reduced its financial support for mental health services by discouraging the inclusion of mental health services in individualized educational plans.

A small amount of money ($60,000 per year for all children served through the CMHC system combined) can be used for special services not funded through other means. For example, these dollars could cover costs for a special summer camp. CMHCs request these dollars from DMH on behalf of specific children. The money, 100 percent general fund, and are not reimbursed by Medicaid or funded by the waiver.

CMHCs typically provide most of the mental health services for waiver-enrolled children, billing Medicaid as appropriate and drawing from their share of state general funds to cover other services.¹⁶ When services are provided to waiver-enrolled children, CMHCs use a standard form to document that these services are consistent with a childs IPC.

Managing Access to Residential or Inpatient Care

If the IPC process indicates that not even waiver enrollment will provide the necessary level of care for a child with SED, then the CMHC recommends inpatient psychiatric care or placement in a residential treatment setting. DMH reviews the recommendation and makes the final placement decision.

At any one time, about 225 children, all of whom have an IPC, are in a residential setting. This number includes about 200 children under the custody of child welfare, most of whom are placed in these settings because of delinquent or dangerous behaviors (e.g., sex offenders) and the absence of a community entity that specializes in serving these youth. DMH is responsible for the remaining 20 to 25 children. Judges in the juvenile justice system, which is administratively part of the child welfare agency, do not usually send youth with SED to residential care without first referring them to a CMHC for an IPC.

Residential treatment facilities in Vermont are private nonmedical institutions (PNMIs), which determine the rates for education, treatment, and room and board. The Department of Education funds the education portion, Medicaid funds treatment services, and general state revenues cover room and board. There are three PNMIs for children ages 6-12 and six facilities for adolescents. The average length of stay in both is 9-10 months. The state also has two mental health assessment facilities, which are designed for short-term stays.

Although Vermont does not have inpatient hospital facilities that specialize in adolescents, the state can send individuals to designated psychiatric facilities in New Hampshire or New York. On any given day, these facilities have one or two adolescents from Vermont residing in them. Even though placement is out of state, the CMHCs in Vermont control their childrens access to these facilities by conducting screenings, making the referrals, and organizing after-care and discharge planning.

Lessons Learned

Vermonts system of care is firmly supported by legislation that aims to ensure financial support for services included in the ICPs that are developed for all Medicaid-eligible youth with SED; although this legislation forms the bedrock for providing access to community services, according to state officials, the HCBS waiver adds an essential component to the states capacity to finance services for children with SED.

Vermont has a comprehensive and flexible system for providing mental health services to most youth with SED. Act 264 ensures that multiple agencies work together to fund a set of services tailored to a childs needs. Also, the basic Medicaid package is itself quite broad with respect to the mental health services available to youth with SED.

In the minds of some agency staff, the robust structure of the current system raises questions about the utility of the HCBS waiver. For example, one individual suggested that Vermont would probably not apply for an HCBS waiver today if it did not already have one, exploring other options instead, such as expanding the states use of the TEFRA option. Furthermore, managing the waiver process requires substantial provider involvement and administrative time to plan for services for a relatively small proportion (slightly more than 1 percent) of youth with SED. Demonstrating cost neutrality, for example, can be a complex process that would not be needed if waiver services were included in the states general Medicaid plan.

Despite these reservations, Vermont remains committed to maintaining the HCBS waiver and in early 2005 submitted to CMS its application for continuing the waiver. This step underscores the waivers value in helping the state manage the costs of care for high-need children even with other financing strategies available. One child with SED who is placed in a residential treatment setting or in psychiatric in-patient care can cost the state a substantial amount of money. So, if Vermont uses the waiver to pay for extra services that will divert even a few children from these placements, it will save money that can be used to support community services for additional children with SED. Furthermore, the waiver represents a means for expanding coverage to an extremely high-risk group of children without altering the basic financial eligibility criteria for Medicaid. By creating this pathway to Medicaid while capping total expenditures for waiver-enrolled children, the state can serve needy children while slowing the growth of mental health care expenditures.

The IPC process, and the fact that final authority over placement decisions resides with the DMH, ensures that the road to expensive residential and in-patient care for most of the states children with SED is closely monitored.

Act 264 provides an effective mechanism for controlling access to expensive residential and in-patient care for youth with SED by: (1) establishing a collaborative process among key stakeholders, including the family, that ensures access to the intensive community and family support services that may prevent out-of-home placement; and (2) designating a single agency (DMH) as the final authority for placement decisions, including decisions affecting children in the custody of child welfare. This arrangement has allowed Vermont to minimize costs for unnecessary residential or in-patient services, use limited dollars to provide intensive services to more children, and prioritize the use of scarce resources from a statewide perspective.

One factor contributing to placement of children in residential care is the absence of providers who have the training and experience to provide intensive home or community services. Provider shortages are especially acute in rural areas. Although Vermont has developed the infrastructure to manage placements in high-cost settings, the effectiveness of this infrastructure depends in part on the availability of mental health professionals who have the training and experience in providing intensive home and community services.

The Home And Community-Based Service Waiver in Wisconsin

Policy Context

Wisconsins system of care for children with serious emotional disorders (SED) has its roots in legislation enacted in the late 1980s and in other related efforts around that time to build capacity for home-base care. By passing the Children Come First Act in 1988, Wisconsin began to implement basic system-of-care (SOC) principles by establishing integrated service projects (ISPs) in five of the states 72 counties. These projects allowed counties to develop home and community wraparound services for children with SED who would otherwise have been treated in out-of-home settings (e.g., psychiatric hospitals, residential treatment centers, or foster care homes). The state currently allocates about $80,000 in mental health block grant funds to each of nineteen counties that have ISPs. In providing at least an equal match to these dollars, counties have an equally important role as the state in the funding and delivery of mental health services for children and families.

Around the same time, Wisconsin began to close child and adolescent psychiatric in-patient units, re-allocating some of the savings to the development of more services in the community. These funds, referred to as diversion dollars, though variable from year to year, have provided critical support for community services, which reduce risk for out-of-home placements and are not otherwise covered by Medicaid. In 2005, the state allocated about $1.2 million of these funds to various programs, including a multicounty crisis intervention and stabilization program.

Wisconsin continued to show its commitment to developing home and community services throughout the 1990s, when ISPs and diversion dollars allowed counties to implement a variety of approaches to delivering these services. Two counties (Dane and Milwaukee) established wraparound service systems based on a managed care model and supported by funds from several agencies that serve children. Specifically, the counties assumed the risk for providing a specific package of services and in turn negotiated capitation or case rates with key funding agencies. Wraparound Milwaukee, one of the better known and most replicated models of a managed SOC for children with SED, emerged during this period of time (see the description below). According to state officials, most counties, however, have used ISPs and diversion dollars to develop fee-for-service home and community services for three reasons: (1) county staff did not believe that there were enough children in the county to justify the development of capitation or case rates within a managed care approach; (2) they were unwilling or unable to enter into multicounty purchasing collaboratives; or (3) they were unwilling to invest the county dollars needed to support program expansions.

By the end of the 1990s, Wisconsin had developed solid experience in the development of community services for children with SED. In 1997, for example, the state established the Childrens Long-Term Support Redesign Committee, which was modeled on a similar initiative for adults and drew its members from the state Medicaid, mental health, children with special health care needs, and developmental disability agencies. Other members included parents, child advocates, providers, and staff from county mental health, child welfare, and education agencies. The goal of the committee was to redesign long-term support services for children with serious mental health and developmental needs by identifying service gaps, enhancing the capacity of counties to improve childrens services, and making childrens services more consistent across counties. The committee released a comprehensive report for re-designing Wisconsins SOC for children in 1998 and has continued to play an important role in the development of several initiatives in the early 2000s, including applying for a 1915(c) home and community-based services (HCBS) waiver on behalf of the state.

In 2000, the Centers for Medicare & Medicaid Services (CMS) indicated that it could not approve Wisconsins continued use of state Medicaid fee-for-service dollars to support intensive in-home treatment services for children with autism spectrum disorders, which were covered through the states Medicaid Rehabilitation Option. These services were considered habilitative and therefore more appropriate to a waiver context. The state therefore added these services to its comprehensive children services waiver application originally intended to cover three groups of children: those with developmental disabilities, those with SED, and those with physical disabilities. Before approving the waiver request, CMS required the state to submit three separate waiver applications, one for each group.

Among its other goals, the HCBS waiver for youth with SED was seen as the means through which the state could support intensive services for children with autism that would not otherwise be covered. Children with autism remain the single largest group of children now enrolled in the waiver.

In 2002, Wisconsin began to award selected counties with competitive three to five-year grants to support coordinated service teams (CSTs), whose mission is to improve the infrastructure for providing services to children with SED with funds from several agencies. The idea was to base service delivery and financing on a nonmanaged care, braided-funding model. Braided dollars are typically used to support cross-agency training and technical assistance at the county level. Actual services, however, continue to be covered through individual agency dollars, including Title IV-E monies, Medicaid, special education funds, and state and local general revenue dollars. The state supports CSTs with both mental health and substance abuse treatment block grant dollars along with diversion dollars and child welfare funding.

Wisconsins Medicaid program elected to pay for childrens services under the Rehabilitation Option beginning in the mid 1990s. In 2005, the state re-configured these services so that two levels of care are now available under the option. One level includes community level support programs, such as assertive community treatment for adolescents with SED who are making the transition to adult services. The second level, referred to as comprehensive community services (CCS), covers a wide range of rehabilitation services such as psychotherapy, symptom management and support, medication management, recovery planning, and rehabilitative in-home supports. Now operating in nine counties (including some counties with ISPs or CSTs), CCS helps to support comprehensive wraparound programs customized to meet the needs of any individual child. To obtain CCS coverage for an individual child, counties must develop child-specific individualized service packages via multidisciplinary teams that include family members and staff from county-level child-serving agencies. The state must approve these packages.

Wisconsin expanded access to Medicaid (including the Rehabilitation Option) by implementing the Tax Equity and Fiscal Responsibility Act (TEFRA) Medicaid amendment provisions (also known as the Katie Beckett provisions) since 1981. Through TEFRA, Wisconsin is able to provide children who are Medicaid eligible because of their need for long-term inpatient services with services in the home if appropriate. The level-of-care standard present in these provisions also appears in the HCBS waiver.

Wisconsin has received two SOC grants from the Center for Mental Health Services (CMHS), Substance Abuse and Mental Health Services Administration (SAMHSA). The first, awarded in 1994, helped to launch the Wraparound Milwaukee project; the second, awarded in 1997 and terminated in 2004, helped the Northwoods Alliance for Children and Families, a coalition of six counties, to enhance home and community services in rural areas and tribal communities.

The HCBS Waiver

Wisconsins HCBS childrens waivers were approved in November 2003 and officially went into effect on January 1, 2004. Broadly speaking, the SED waiver allows the state to: (1) enroll a specific group of children (i.e., individuals from birth through age 21 with SED who meet specific level-of-care and financial eligibility criteria); and (2) provide them with intensive services beyond those available through the standard Medicaid benefit package or the Rehabilitation Option. Were it not for the waiver, some of these children would be ineligible for Medicaid. Children eligible for the HCBS waiver program must be at risk for placement into a state psychiatric hospital or residential treatment center as established by the level-of-care determination process, which includes documentation not only of an emotional disability that has persisted for at least six months and is expected to persist for a year or longer but also symptoms or functional impairments that would place the child at risk for hospitalization. In addition, the child must be receiving services from two or more systems that serve children.

The HCBS waiver entitles children and their families to all the standard Medicaid services available through the fee-for-service payment system, including those provided under the Rehabilitation Option, as well as the following community-support services:

Support and service coordination (case management).
Respite care.
Supportive home care (personal care services).
Day habilitation and supported employment services.
Daily living skills training.
Home modifications and specialized transportation.
Adaptive and communication aids as well as specialized medical and therapeutic services.
Personal emergency response systems.
Foster care.
Consumer education and training.
Consumer and family-directed supports, including financial management counseling.
Counseling and therapeutic services.
Training in daily living skills.
Intensive in-home autism treatment.

For each child enrolled in the waiver, clinical county level teams develop an individualized service plan. Only the services listed in these plans are covered through Medicaid waiver funds. Although Wisconsin is seeking to standardize assessment and treatment practices across counties (for example, by requiring counties to use the same eligibility assessment and service delivery methods and developing one tool for determining the service needs of enrolled children), the actual process of developing these plans accounts for the needs and circumstances particular to each county.

In its SED waiver application, Wisconsin projected that 280 children would be enrolled in the waiver in the first year, rising to 654 in the third year. Actual enrollment is about on par with expectations. As of September 30, 2005, 190 children had been enrolled in the waiver. About half of them, according to state officials, are receiving intensive in-home therapeutic and rehabilitation services, and about half have moved to less intensive services, such as service coordination. Because the waiver is still relatively new, the state is just beginning to assemble the data needed to track service trends.

Financing Issues

In its application for the HCBS waiver, Wisconsin estimated that total Medicaid costs for waiver-enrolled children would be approximately $20,200 per child in the first year of the waiver, compared to approximately $24,100 per child for services that would have been used if the waiver were not available.

State officials also projected that intensive in-home autism treatment would account for a substantial proportion of total expenditures. Specifically, it was assumed that, in the first year of the waiver, 65 children with autism would need on average 47 units of treatment (defined as one-week of intervention) per year at a cost of $740 per unit for a total annual projected cost of approximately $2.3 million. The next highest annual total cost projection ($892,000) was for counseling and therapeutic resources (including treatment provided by psychotherapists, registered nurses, speech and language pathologists and occupational, recreational, art, music, or physical therapists). Support and service coordination was projected to be the third most expensive category, at $457,000 in annual costs. Actual costs for children enrolled in the waiver are not yet known because the waiver is still relatively new, and complete data for children enrolled in 2004 are not yet available.

In terms of financing, counties are required to provide 40 percent of the cost of many community mental health services (i.e., targeted case management, crisis intervention, community support, and comprehensive service programs) provided to children enrolled in Medicaid. These dollars usually derive from county tax revenues or general funds from the state. However, counties do not have to provide this match for many children enrolled in the HCBS waiver. As of June 2005, for example, about 1,400 of the 1,661 children enrolled in all three waivers combined were fully matched by the state, meaning that counties were not covering any portion of care.

Wisconsin has the funds to fully cover the costs of many children enrolled in the waiver program because it was willing to continue covering intensive in-home therapy for children with autism even after CMS signaled that it would not allow these services to be covered under the standard Medicaid program. Around the same time (1999-2000), a total of 1,325 children with autism were receiving home-based services at a cost of about $36.5 million dollars annually. The state enrolled most of these children in the waiver program and now covers the services they receive at a cost of about $26 million as part of the its match for waiver services. These dollars allow the state to cover intensive in-home services for children with autism at no expense to the counties.

State officials report that many counties were initially concerned that they would not be able to come up with the requisite match dollars for the HCBS waiver. However, these concerns were allayed by a combination of factors--including substantial outreach, training, and technical assistance from the state and opportunities to receive federal matching dollars for a major segment of the enrolled population--that eventually persuaded most counties to enroll children in the HCBS waiver program.

Under the terms of the HCBS waiver, the state waives standard Medicaid financial eligibility rules, thus allowing only the childs income to be considered. As a result, most children who meet the clinical eligibility requirements for enrollment are found to be financially eligible as well. Eligibility is reviewed annually or whenever there a childs condition changes substantially.

Managing Access to Residential Care

For the past decade, if not more, most counties in Wisconsin have been able to proactively manage access to residential care for children with SED because ISPs and CSTs have provided the infrastructure for identifying and tracking the needs of these children and the services they use. As a result, the childrens length of stay in most of the states residential treatment centers has become dramatically shorter. Prompted by these trends and encouraged specifically by the Wraparound Milwaukee staff, many of these centers have begun to offer new community services, including such wraparound services as intensive case management and in-home therapies.

CSTs afford other advantages as well. For instance, counties that have CSTs must demonstrate to the state that key child-serving agencies are working together, which means that child welfare and juvenile justice agencies are beginning to work more closely with mental health agencies at both the state and local levels. In some counties, this new degree of collaboration is prompting the agencies to avoid out-of-home placements for children in the juvenile justice system by accelerating access to family education and support services as well as intensive in-home therapy.

A Model Local Program: Wraparound Milwaukee

Supported originally by a 1994 SOC grant from the CMHS of the federal SAMHSA, Wraparound Milwaukee was established as a managed care organization under the auspices of the County Division of Child Mental Health Services. It operates without any type of federal waiver.

Funds once allocated to child welfare and juvenile justice for behavioral health services now flow to Wraparound Milwaukee through a case rate formula; in addition, Medicaid covers mental health, substance abuse, social and other support services through capitated payments for enrolled children. Pooled dollars from child welfare, juvenile justice, Medicaid, and mental health allow Wraparound Milwaukee not only to accept full risk for enrolled children but also to purchase a broad, flexible array of services and supports. When necessary, the program pays residential treatment centers for care (generally very short-term) on the basis of negotiated fee-for-service arrangements, as it does for all other types of services and supports. Children enrolled in Wraparound Milwaukee have been adjudicated through the citys juvenile court system, all of whom were involved in either the child welfare system, the juvenile justice system, or both.

According to one report,¹⁷ Wraparound Milwaukee reduced not only the average number of children in residential placements from 375 in 1997 to 50 in 2003, but also the average residential stay from 14 months to 90 days over the same period. At that time, the volume of in-patient psychiatric care fell from 5,000 to 200 days a year, bringing a corresponding drop in total expenditures.

Since the early 2000s, Wraparound Milwaukee staff have moved to re-engineer residential treatment by partnering with residential care providers to bring the two systems of care closer together. The partners have set their sights on creating better linkages between residential care and community services, forging close working relationships between residential and community program staff around comprehensive treatment and transition planning, and involving family and other caregivers in treatment provided during residential stays.

Wraparound Milwaukees success as a full-risk managed behavioral health organization has been linked to the following key achievements:

Obtaining public support for a change in the roles of child welfare and juvenile justice and thus breaking with tradition by purchasing community services instead of placing children in long-term residential treatment programs.
Creating pooled or braided funds by persuading state agencies of the potential savings that might accrue as a result of purchasing services through case rates and capitated arrangements.
Forming and sustaining partnerships with residential treatment centers in addition to providing them with training to ensure that they could play a substantive role in developing new services and products.
Establishing clear benchmarks and measurable outcomes in order to assess performance and identify successes and problems.

Beyond these accomplishments, Wraparound Milwaukee was recently tapped by an HMO in Milwaukee County to provide behavioral health services under their contract with the state to manage not only behavioral health care but also all physical health and dental care for all children in foster care, or about 3,000 children county-wide. About 1,500 subsidized adoptive families will be able to opt into the program as well.

Lessons Learned

Many roads lead to system transformation.

Wisconsins counties have considerable autonomy in shaping mental health services for children with SED, and as a result, their efforts to build comprehensive, integrated mental health service systems for these children vary widely. When dollars for improving mental health services for children with SED first became available in the late 1980s, some counties began to develop systems that were more integrated in that they included wraparound services in addition to standard mental health treatment. Two counties implemented a managed care model; others used a traditional fee-for-service approach.

During the past two decades, as the state has made other dollars available to counties for improving mental health services for children, counties have found additional ways to integrate services traditionally provided by separate agencies. Some have come together to implement new services, such as a multi-county crisis response teams. Others have used the Medicaid Rehabilitation Option to support wraparound services. The HCBS waiver fits into this mix of options by providing counties with still another way to pay for intensive, special services not otherwise covered by Medicaid or to cover children not otherwise eligible for Medicaid.

Wisconsin has also benefited from the presence of Wraparound Milwaukee, a financing model that has attracted national interest, evidenced by the fact that it has been replicated in several sites in other states as well as in Dane County, Wisconsin, where it is known as Children Come First. The Wraparound Milwaukee staff continue to consult extensively with state and county officials, but the former have not pushed for broad implementation of the model because many other counties: (1) could not or did not want to take on the financial risks inherent in a managed behavioral health model; (2) wanted to establish systems that were more independent of the juvenile court system than in Wraparound Milwaukee; or (3) could not generate the necessary level of leadership and interagency collaboration. Also noteworthy is the fact that two important state features affect its ability to make Medicaid managed care programs like Wraparound Milwaukee financially feasible. First, almost all of Wisconsins seventy-two counties are primarily rural. Second, the counties provide matching funding for many Medicaid-funded community services for children. Together, these features make it justifiably difficult for the state to ensure that it has both enough covered lives and enough money to support either a county or a noncounty-based managed care organization.

The state sought the three Medicaid HCBS childrens waivers because they afforded federal matching funds for significant unmatched amounts of state and local funds committed to children services.

Although Wisconsin funds home and community services for children with SED in a variety of ways, state officials saw the HCBS waiver as a way to avail itself of another important opportunity to support intensive home and community treatment and wraparound services, especially for children with autism. Because CMS required Wisconsin to remove in-home treatment services for children from coverage under the Rehabilitation Option, these services were added to the HCBS waiver for children with SED.

State support goes a long way in terms of a countys ability to improve mental health services.

Technical assistance from the state can help counties to: (1) develop effective practice models and appropriate system infrastructures; and (2) find financing for specific services. For example, some counties have been awarded CST grants to build inter-agency relationships and infrastructure by providing joint training to key staff from the various county-level agencies that serve children. Wisconsin is also working closely with its counties to develop strategies for identifying and enrolling children into the HCBS waiver.

State officials noted the value of separating practice models from funding models. Although the states various child mental health initiatives have been based on similar SOC principles, the development and implementation of actual programs has varied across counties because of differences in leadership, local resources, and population characteristics. In addition, funding strategies have varied over time in response to changes in both policy and economic conditions in the state. According to state officials, the critical tasks are to help counties identify system improvements and then help them find the best strategies for financing these improvements given the prevailing opportunities and challenges. The nature and extent of assistance with these two tasks depends in part on the background and experience of the leadership in county mental health agencies.

It is possible to forge new relationships between Medicaid and mental health at both the state and county level through efforts to redesign states systems of care, including efforts to develop an HCBS waiver.

The process of defining desired outcomes in five key areas and related guiding principles led to increased collaboration among key divisions in the states Department of Health and Family Services (which houses both Medicaid, and the bureaus that house the states HCBS childrens waivers). As part of this process, staff from the state mental health agency have had to learn more about Medicaid rules, regulations, and approaches to funding services based on eligibility groups and state plan provisions. In turn, staff from the Medicaid program have learned more about the need for flexibility in access to specialized services for selected children with SED.

Enhanced collaboration among key agencies at the state level has led to a strong foundation for providing guidance and technical assistance to county mental health agencies, which typically have little awareness of Medicaid HCBS Waiver procedures. Increased understanding of these procedures (and sustained access to technical assistance from state staff) has led to an enhanced ability among county staff to implement the waiver effectively and, more broadly, to cobble different resources together to: (1) improve training of key agency staff in relation to services for children with SED; and (2) enhance access to coverage of intensive home and community services.

It takes time and effort to build local support for systems of care for children with SED.

The state mental health agency began work on wraparound services and SOC principles for children with SED as far back as 1988. That the current system evolved essentially at a snails pace is a product not so much of a lack of interest in improving care for these children but of an initial reluctance on the part of child-serving agencies in many counties to adopt these principles or to support wraparound services. Over the past several years, however, the perspective appears to be changing. For example, some county child welfare agencies are now contributing Title IV-E dollars to CSTs, and some school districts are beginning to contribute special education dollars. In addition, staff in the state mental health agency have recently been asked to play a role in a new program designed to enhance mental health services in local child welfare agencies. State officials suggested that these developments signal a deeper willingness among key agencies to work together more closely to support a comprehensive, community-based service system for children with SED.

Notes

Indiana Health Coverage Programs, Provider Bulletin, February 2004. Available at [http://www.indianamedicaid.com/ihcp/Bulletins/BT200404.pdf]. Accessed June 30, 2005.
Indiana Consortium for Mental Health Services Research. Sixth Annual Evaluation Briefing of the Dawn Project Evaluation Study. September 2005. (see https://www.choicesteam.org/content/choices/documents). Accessed 10/5/05.
Rapp, C.A., & Hanson, J. Towards an agenda for mental health in Kansas: Analysis of mental health financing. Lawrence, KS: The School of Social Welfare, University of Kansas, 1987. Torrey, E., Wolfe, S., & Flynn, L. Care of the Seriously Mentally Ill, Second Edition, National Alliance for the Mentally Ill; Legislative Post Audit).
There are two remaining state mental health hospitals in Kansas that serve children but the number of admissions and average lengths of stay has decreased in both hospitals, in part because of ongoing expansions of community based mental health services at the local level.
Some state officials believe that the state would not need the HCBS SED waiver to cover this segment of the population if there was parity between mental health and physical health coverage in private health insurance or if private insurance companies adequately covered psychiatric rehabilitative services.
To be eligible for the TEFRA provision, a child must have a disability as defined by the Social Security Administration (SSA) and have needs consistent with institutional care but that could be safely met at home. Children who qualify for Medicaid through the TEFRA provision have access to services covered by the states standard Medicaid plan.
The CCSI works across and within the child and family service system on three tiers. Tier I is the interagency team that works with specific children and families to develop an individualized, strength-based family support plan. Tier II and Tier III are interagency committees at the county and state levels, respectively. The agencies in the Tier III committee include OMH, OCFS, the State Education Department, DOH, the Council of Children and Families, the Office of Alcohol and Substance Abuse Services, the Department of Probation and Correctional Alternatives, the Office of Mental Retardation and Developmental Disabilities, and the Office of the Advocate for Persons with Disabilities. In addition, five family representatives sit on the Tier III committee.
The sites include Westchester County (described in more detail below), Erie County, Albany County and New York City. An earlier site in Mott Haven also was awarded a SOC grant.
Counties pay 25 percent of the cost of most services, which is half of the nonfederal Medicaid match.
In its most recent renewal application, New York estimated that 1,695 children and youth would use waiver services in 2004. This represents a small subset of the population of children with SED in New York. In July 2004, the Census Bureau estimated that there are approximately 5.2 million children aged 0-19. Assuming a prevalence rate of 3 percent, more than 152,000 children in New York have SED.
The state chose to negotiate these case rates as a means of more fully utilizing case management staff at ICC agencies that had small caseloads. In 2004, the average case rate received by an ICC agency was $2,195 per month per child.
According to New York State law, hospital means the in-patient services of a psychiatric center under the jurisdiction of the office of mental health or other psychiatric in-patient facility in the department, a psychiatric facility maintained by a political subdivision of the state for the care or treatment of the mentally ill. New York State defines PRTFs as a type of in-patient psychiatric facility.
This option requires states to determine that: (1) the child has a disability as defined by the Social Security Administration disability definition; (2) the child requires the level of care provided in an institution; (3) providing care inside of the home is appropriate; and (4) the cost of care at home is no more than the cost of institutional care. For financial eligibility determinations, children are considered a family of one. Children who qualify are eligible to receive the services provided under the states Medicaid plan. The federal regional CMS office can approve this option. As of 2002, 20 states had a TEFRA option, but of these, only ten included children with SED (Bazelon, 2002).
Anyone can convene 264 meetings, but DMH must be involved in all of the meetings. The agency that calls the meeting is responsible for leading the meeting. Regardless of which agency leads the meeting, the DMH is responsible for deciding whether or not a child qualifies for an HCBS waiver.
When Vermont initially applied for the HCBS waiver, the state used data from inpatient beds at the Vermont State Hospital to demonstrate cost neutrality. When the state hospital ceased operations, Vermont estimated their cost, based on estimated growth patterns, calculated annually. The Retreat is the only psychiatric in-patient facility in Vermont, but is not a licensed hospital, as it does not have an emergency room. Therefore those costs may not be used in determining the cost of in-patient care in Vermont.
Vermont reimburses CMHCs for waiver services, as detailed in the IPC, in the form of a daily rate. Total reimbursement is then calculated based on the waiver budget period. This reimbursement mechanism poses challenges because the state has to estimate the services that are likely to be provided in IPCs. These services vary and change depending on the condition of the child. Consequently, payments often fail to correlate with the intensity, range, and volume of services actually provided. This is problematic for CMHCs because they have to spend considerable time on reconciliation efforts each year.
Kamradt, B., and C. Connolly. Re-engineering Residential Treatment Challenges and Opportunities for Purchases and Providers. Paper prepared for the Center for Health Care Strategies, April 20-03. Available from Bruce Kamradt, Director, Wraparound Milwaukee, Child and Adolescent Services Behavioral Division, 9201 Watertown Plank Road, Milwaukee, Wisconsin, 53226. Additional information on the program is available at http://www.milwaukeecounty.org by entering wraparound in the search box on the home page.

APPENDIX C: STATES WITH A CMS GRANT FOR A FEASIBILITY STUDY AND DEVELOPMENT PROJECT FOR COMMUNITY-BASED TREATMENT ALTERNATIVES FOR CHILDREN WITH SED

This appendix includes descriptions of projects supported by grants from the Centers for Medicare and Medicaid Services (CMS) to five states (and the date when the description was finalized):

Illinois (August 2005)
Maryland (June 2005)
Mississippi (October 2005)
Missouri (August 2005)
Texas (November 2005)

Feasibility Study and Development Project for Community-Based Treatment Alternatives for Children with SED in Illinois

Illinois supports children with serious emotional disorders (SED) through the Individual Care Grant (ICG) program. Operated by the Division of Mental Health (DMH) in the Department of Human Services (DHS), the ICG program includes children who have severe impairments in accurately understanding the world around them (e.g., psychotic symptoms) and who are not in state custody. Eligibility is determined based on severity of mental illness, severity of impairment, and residency status (i.e., child resides with family and the family members are residents of the State of Illinois). There are no financial eligibility criteria for participation in the ICG program. About half of the children in the ICG program are enrolled in Medicaid. With an annual budget of approximately $25 million, the program serves about 440 children.

The ICG program offers families of enrolled children two placement options: residential setting or community services. The latter includes such services as one-on-one therapeutic stabilization, behavioral management skills training, and therapeutic recreation and after-school services. The decision as to whether children are placed in a residential facility or in the community-based program rests with the family. Currently, about 25 percent of enrolled children are in the community-based program.

Illinois also operates a pre-screening program for youth with mental health problems, including children with SED in the ICG program, called the Screening, Assessment, and Support Services (SASS) program.¹ SASS agencies offer a single point of access to the mental health system for children with SED who are referred for hospital level residential care and provide services to a wide range of low-income children with SED, including those in the child welfare system. The agencies are financed by DMH, the Department of Public Aid (DPA, the states Medicaid agency), and the Division of Children and Families (DCFS, the child welfare agency).

In 2003, DHS received a $100,000 Real Choice Systems Change grant from the Centers for Medicare and Medicaid Service (CMS) to conduct a study that would allow it to develop recommendations geared to improving the ICG community-based program as an alternative to residential treatment. Specifically, the study was conducted to gather information from consumers and providers regarding barriers to community care for this group of children and to identify ways to improve community services so that more families would elect to place their ICG-enrolled children in this option. Such improvements could include additional provider and consumer training, changes in program administration, modifications to the administrative rule that governs the ICG program, or securing an home and community-based services (HCBS) waiver through which additional services for youth with SED could be financed.

Background

Developed in the mid 1970s, the ICG program initially offered only residential care. Five years ago, the administrative rule governing the program was amended to allow community treatment. As a result, approximately 10 percent of the 400 youth in the program began receiving community services at that time; as noted, this figure has risen to 25 percent. DMH currently pays an average of approximately $19,000 per recipient per year in the community-based program and $85,000-$90,000 per recipient per year in residential care. DMH pays providers on a fee-for-service basis. Illinois views the ICG program as an entitlement, which means that funds for individual ICG recipients (and for the program as a whole) are uncapped.

About half of the children in the ICG program are not Medicaid eligible, and DMH uses state dollars to cover community-based ICG services provided to these children. For Medicaid-eligible children, Medicaid pays for all standard services offered under the state plan, including services covered under the clinic and rehabilitation options. The Medicaid rehabilitation option in Illinois is quite comprehensive in terms of services offered. Illinois draws down the federal financial participation (FFP) dollars for these services and deposits them into its general revenue. DMH pays for some mental health services, and the state returns the federal match for these services to a special mental health fund. Although Medicaid covers a portion of residential services, the ICG program only began to bill Medicaid for such services as recently as this year. Before then, DMH used state dollars to pay the entire cost of residential treatment for youth in the ICG program. DMH also pays for some community services offered through ICG program that are not covered by Medicaid, including one-to-one therapeutic stabilization services, behavior management, and therapeutic recreation and after-school services.

All families in the ICG program have contact with SASS agencies, which help families navigate the service system and provide referrals to the least restrictive, most appropriate level of care given a childs mental health status, including a residential facility for ICG youth whose parents have elected the residential care option. All ICG families also receive ongoing case coordination services from SASS agencies. For families who elect the community-based option, SASS helps to plan for and, in some cases, provide the community services and supports listed on the familys treatment plan. These services can include:

Therapeutic stabilization services, such as one-on-one interventions between professionals and the ICG participant to enhance specific social or life-management skills.
Child support services, including therapeutic recreation such as camps and after-school services.
Behavior management services, including, for example, a weight-reduction program offered by a dietician.

In 2003, Illinois passed the Childrens Mental Health Act, which created the Childrens Mental Health Partnership and mandated that DPA, DHS, and DCFS work together through the SASS program to provide screening, assessment, and treatment for any child at risk of psychiatric hospitalization; enhance access to coordinated community services in lieu of or following residential treatment; and effectively link families to the appropriate level of care to meet their childrens needs. The partnership is working to develop a childrens mental health plan that will include short and long-term recommendations for: (1) providing comprehensive, coordinated mental health services related to prevention, early intervention, and treatment for children; (2) possible changes to the state budget for childrens mental health services; and (3) mechanisms for integrating federal, state, and local funding streams to support mental health care for children. This plan is scheduled for release in 2005.

The Feasibility Study

As noted, Illinois received a grant from CMS to conduct a feasibility study that would develop recommendations for improving its community-based option as an alternative to residential treatment for youth in the ICG program. DMH hired a health care consultant to conduct a series of focus groups and telephone surveys in late spring 2004 with 15 ICG providers, 58 parents, and six ICG program participants. The purpose of these focus groups was to assess barriers to providing community-based mental health care.

To support the development and implementation of its feasibility study, DMH established an 11-member governance council that included six parents, two ICG program staff, and staff from three SASS agencies. DMH invited one of the parents from the governance council to serve as co-principal investigator for the study. This parent worked with DMH staff to write the CMS grant proposal and will do the same with regard to the final report, which is due to be completed later this year. A teen advisory council, established by DMH, also assisted in the design of the survey for the youth focus groups.

Focus Group Findings

According to ICG staff, findings from the parent focus groups suggests that parents:

Like therapeutic stabilization services partly because the one-on-one interactions between children and the mental health professionals give parents some respite.
Value therapeutic recreation services because they provide children with normative developmental experiences.
Are not clear about the role that SASS providers do or could play in the provision of ICG services.
Expressed the need for more respite services, transportation, linkages with the special education system, and assistance with transition.

The youth who participated in the focus groups said that they need more family therapy, particularly during stays at residential treatment facilities or psychiatric hospitals, so that they (and their families) are better prepared when they re-enter the home after being discharged from the facility. In addition, these youth want more vocational and transitional support services to help them enter college or find employment.

According to results from the provider focus groups, providers believe that SASS staff need training to help them better understand their role and the relevant service delivery systems so that they can advocate more effectively for the youth they serve.

Next Steps

Based on the focus group findings, the governance council developed a report indicating its recommendations for changes to the ICG program. Many of these recommendations are programmatic, focusing on issues such as SASS provider training. However, some of the recommendations address services that are not currently available, including respite care, wraparound facilitation, and transportation and transitional services. In the coming months, DMH will assess these recommendations to decide which to implement and how best to pay for them. DMH is considering two financing options to make these services more widely available: applying for a Medicaid HCBS waiver, changing the Illinois administrative rule governing the services available through the ICG program, or both. DMHs final decision will be influenced by the findings and recommendations of the Childrens Mental Health Partnership.

Lessons Learned

State legislation brought with it the opportunity to improve the system of care for children with SED in Illinois.

Through the Childrens Mental Health Act of 2003, Illinois has taken a critical step in developing a single point of access for hospital level care by requiring SASS agencies to respond directly to hospitals and emergency rooms whenever a child presents with symptoms that require immediate hospitalization or crisis intervention services. Additionally, SASS agencies and inpatient facilities are beginning to coordinate discharge planning to ensure that youth with SED are adequately prepared to re-enter their homes and communities when they are released from these facilities.

Although the ICG program has given Illinois extensive experience in developing and operating home and community services for a targeted group of children with SED, the state still faces major challenges in developing service capacity and selecting the most appropriate strategy for expanding community services.

Through the ICG program, Illinois has developed an array of community services for children with high-end, multisystem needs. However, the state faces several challenges to improving the community services available to ICG program recipients and to other children who could benefit from intensive home and community services. For instance, several of the services parents requested in focus groups are either not part of the current service array or limited to families with access to Medicaid or KidCare, the State Childrens Health Insurance Program. In addition, some community services, such as therapeutic stabilization services, are also scarce, especially in rural areas.

Overall, if Illinois is to improve its community services, it will need to show the families of ICG program participants that such services are available and effective, allowing parents to keep their children at home safely. Illinois appears to be succeeding in this effort because the number of families selecting the community-based option has increased during the last five years. However, many families that could benefit from community services are still choosing residential treatment, suggesting that there is room for more progress.

In addition to increasing the numbers of providers, Illinois could expand community services either by funding a broader array of services or by making services available to more children with SED. Although the state would like to make more community services available in the future, it is still trying to determine the best way to reach this goal. A 1915(c) waiver is one possibility, but the state is still in the early stages of determining which services it would cover with a waiver, which children with SED would be served under the waiver, and how to show cost neutrality relative to in-patient hospitalization.

Feasibility Study and Development Project for Community-Based Treatment Alternatives for Children with SED in Maryland

Since 1997, Marylands Mental Hygiene Administration (MHA) has explored various strategies for re-allocating dollars from residential treatment to community services for youth with serious emotional disturbances (SED). In July of that year, for example, the MHA applied for an HCBS waiver for youth with SED. The application was denied, however, because the state had used residential treatment facilities (RTFs) rather than psychiatric hospitals or inpatient facilities as the basis for establishing cost neutrality.²

As a result, the MHA is exploring the possibility of implementing a wraparound model of service delivery in which selected entities would be paid a standard case rate for managing services for selected children with SED. In return, the entities would be expected to assume the risk for all mental health service costs but not for the costs of physical health services, pharmaceuticals, or laboratory tests.³ In 2003, the MHA received a $100,000 Centers for Medicare and Medicaid Services (CMS) Real Choice Systems Change grant to implement a wraparound model for delivering effective home and community services for children with SED, based on the experience of Wraparound Milwaukee. The MHA is using grant funds to develop appropriate case rates, strengthen the interagency foundation needed to test a wraparound program in two locations, and build support for this model among the leaders of the states RTFs.

Overview

In 1997, Maryland received an 1115 waiver to implement a Medicaid managed care program, which the state named HealthChoice. Under this program, physical health and substance abuse treatment services are delivered by health maintenance organizations. Mental health services are delivered through a carve-out overseen by the MHA, which also has responsibility for the carve-outs Medicaid match. MHA shares its oversight responsibility with local core service agencies (CSAs), which receive money from the MHA to contract with mental health care providers for services. MHA also contracts, on a nonrisk, fee-for-service basis, with an administrative service organization for utilization management, provider enrollment, and claims payment.

In the late 1990s, Baltimore Citys CSA developed a partial capitation pilot program for its adult chronically ill population, the goal being to move adults with serious and persistent mental illness out of psychiatric in-patient and residential settings and into community services. Over the past several years, Maryland has designed but not yet implemented a similar program for children in or at risk for entering residential treatment settings. As mentioned, the program is modeled on Wraparound Milwaukee and expects to pay providers a standard case rate. The current plan is to pilot-test the program in two jurisdictions: Baltimore City and Montgomery County.⁴ At present, MHA Medicaid pays for virtually all youth in residential treatment, including children not eligible for Medicaid, because the states family of one option allows it to waive income limits for youth who meet disability criteria for RTF placement.

The state plans to enroll 200 children in the program, but it has not decided how many children will be enrolled from each jurisdiction. Eligible families will be able to choose between the pilot program with wraparound services and RTF placement. The state will finance the pilots by redirecting what are now largely Medicaid dollars that pay for Baltimore City and Montgomery County youth in and at risk for residential treatment. A small amount of the redirected funds will be set aside in a risk pool for children with particularly severe conditions, the cost of which may exceed the case-rate. The state plans to contract with a local management entity in each of the two pilot sites to manage care for program participants. The average treatment spell is expected to range from 16 to 18 months and to cost about $4,500-5,000 per child per month (compared to current RTF stays of about 12 months on average at a cost as high as $7,000 per child per month).

Both Baltimore City and Montgomery County volunteered to be pilot jurisdictions. In addition to wanting to build on its partial capitation pilot program for adults with chronic mental illness, Baltimore City is one of the top jurisdictions in terms of the number of children in residential treatment settings. Montgomery County, where a substantial number of children with SED are in residential care, volunteered $1.6 million in funds to match federal dollars. If, through the pilot, Baltimore City or Montgomery County reduces the overall cost of services for participating children, it is not yet clear whether either jurisdiction will be allowed to keep a portion of the savings.

Both pilot-tests are being launched under the auspices of the Maryland Wraparound Committee, an interagency body, formed after House Bill 1386 was passed, that is dedicated both to strengthening a coordinated system of care for children who are likely to be placed in residential treatment settings and facilitating their re-integration into the community. The committees mission reflects the legislatures growing interest in reducing its heavy reliance on residential care in favor of family support and community services.

Despite support for the wraparound model, the legislature has indicated that no new dollars will be made available for the pilot programs. However, if the state can increase access to community services and if this leads to the closure of residential treatment beds, then the funds once used to support these beds may be re-directed to expanding community services for youth with SED.

Marylands RTFs have not opposed this initiative, in part because the MHA has developed positive and collaborative relationships with the residential treatment center community. Center representatives and MHA leaders meet every six weeks to review issues of common interest. Although some centers have begun to develop experience in providing community services, many residential treatment providers remain concerned that a rapid transition to community services will threaten their viability.

The Feasibility Study

As noted, Maryland received a grant from CMS to examine the feasibility of implementing a wraparound model for delivering home and community services for children with SED. In terms of building support for community-based alternatives to residential treatment for children with SED, Maryland has used or is planning to use the CMS grant funds to:

Subcontract with the Center for Mental Health Services Research at the University of Maryland to conduct actuarial analyses that will define the capitation rates for the pilot programs in Baltimore City and Montgomery County.⁵
Explore how wraparound concepts and case rate strategies can be applied to Baltimore City and Montgomery County by consulting with the directors of Wraparound Milwaukee, the Dawn Project of Indianapolis (which is also based on a wraparound model), and the Baltimore adult capitation project.
Convene an expert panel to provide information and guidance in a roundtable format to the leaders of residential treatment centers, the goal being to support efforts to redirect funds from residential care to community services.

Continuing Challenges

Although the state is building the foundation for a full-scale wraparound program, it has yet to find an administrative mechanism that will allow Medicaid to pay for all of the types of intensive home and community services that will be included in that program but that are not part of the states standard Medicaid plan. MHA and the Maryland Wraparound Committee are exploring several waiver-related options for addressing this challenge.⁶

A second challenge involves persuading other agencies to participate in the wraparound program. Specifically, the MHA is hoping that social service and juvenile justice agencies will contribute dollars to fund the program because they are responsible for large numbers of children with SED in residential settings. However, they do not have an incentive to support the program because as long as a child is in a residential facility, MHA (through the Medicaid match) picks up the cost of care. The Wraparound Committee is working on getting child welfare and juvenile justice to understand the role that a wraparound system of care can play in reducing direct costs to their systems, such as costs related to group homes, detention centers, and foster care. The MHA also is beginning discussions with the state Department of Education to investigate whether improvements in community-based care will affect the use of nonpublic day school programs for youth with SED.

Lessons Learned

Finding a way to support community services can be time-consuming even when a detailed plan is available.

The individuals who developed the wraparound program submitted a report in July 2003 that described the proposed model for delivering effective home and community services for children with SED, but the state has yet to implement the program statewide for various reasons. In addition to facing budget constraints, the state has not yet identified the appropriate administrative mechanism, waiver or otherwise, through which to implement the program. State Medicaid officials believe that a waiver is needed for two reasons: (1) to ensure that Medicaid can cover intensive services for children with SED that are not now in the state plan without opening up the entitlement to additional services for all children; and (2) to provide the mechanism for controlling costs by controlling the number of individuals eligible for the waiver.

Prudent arguments for strengthening home and community services involve redirecting existing funds rather than projecting substantial cost savings.

In light of recent actuarial analyses, state officials have concluded that a comprehensive plan to strengthen home and community services should be based not on the possibility of the cost savings that could result, but on re-directing existing dollars from residential services. Although this argument is the more realistic one, it may not be the more appealing in terms of generating legislative support.

Braided funding is an effective way to garner financial support for a wraparound program because it allows each agency to retain some control over its dollars.

Maryland has turned to braided funding as the means for bringing other agencies on board with regard to developing a large-scale wraparound program. Unlike pooled funding, braided funding allows each agency to see where its money goes because each contribution covers a specific portion of a defined case-rate for a defined number of children.

Feasibility Study and Development Project for Community-Based Treatment Alternatives for Children with SED in Mississippi

Mississippi has been working to enhance its capacity to provide care for children with serious emotional disorders (SED) and their families since the mid 1990s, when it passed legislation allowing the state level social service agencies to blend their funding streams for mental health services. The Department of Human Services (DHS, which includes the child welfare and juvenile justice agencies), and the Department of Education each contributed $50,000 per year, and the Department of Mental Health (DMH) put in $100,000 per year. The Robert Wood Johnson Foundation also provided a $100,000 technical assistance grant through its initiative, Mental Health Services for Youth Replication.

In addition, in 1996, the Pine-Belt community mental health center (CMHC) was awarded $600,000 to initiate a small pilot project in Forrest County with a blended global rate for flexible wraparound services for children with SED who had been hospitalized or who were at immediate risk of hospitalization. The project, Mississippi Connections, served 43 children from 1996 thorough 2000. It reduced out-of-community placements by 95 percent in its first year of operation and spent $1.2 million (or an average of $53 per client per day) over four years.⁷ Residential treatment costs, in contrast, were about $250 per child per day. Despite its success, Mississippi Connections ended in 2000, when the state political landscape level changed and DHS withdrew funding.

In 2000, the state established the Mental Health Services Division, the first unit in Medicaid focused specifically on mental health services. In 2001, the Mississippi legislature passed a law creating a state system-of-care (SOC) program in an effort to divert youth with SED from inappropriate institutional placement. The law mandated that the states child-serving agencies work together to plan and develop a service system through the Interagency Coordinating Council for Children and Youth and the Interagency System of Care Council (ISCC). The council brings together executive staff from the state agencies that serve children with SED, including DHS, Medicaid, DMH, the Department of Education, the Department of Rehabilitation Services, and the State Department of Education; the council also includes Mississippi Families As Allies (a parent organization). The ISCC comprises mid level managers from the respective agencies, who are responsible for long-range planning for at-risk children. At the county level, Mississippi has established Multidisciplinary Assessment and Planning (MAP) teams, which work with families of youth with SED to develop individualized service plans.

Although these developments have enhanced access to community services for many children with SED, children with the most serious conditions still enter residential care because the intensive services required by them and their families are not available in the community. To address this problem, the state Medicaid agency obtained a Centers for Medicare and Medicaid Services (CMS) Real Choice Systems Change grant in 2003 to examine the feasibility of using a home and community-based services (HCBS) waiver to provide nontraditional services for children with SED who require a very high level of care.

Service Environment

Mississippi provides community-based mental health services for children through 15 regional CMHCs, each of which serves several counties. The CMHCs are quasi-governmental, public entities operated by local commissions and comprising representatives appointed by the Board of Supervisors from each county in their catchment areas. The state DMH monitors CMHC performance and secures state Medicaid match funds for the CMHCs through the legislative process but has no direct line of authority over the CMHCs. Aside from providing traditional counseling and distributing medications, CMHCs vary widely in the services they offer and especially in their capacity to provide intensive, individualized services for children with SED.

Although Mississippi has the Medicaid rehabilitation services option, the state does not use it to pay for the intensive in-home support and crisis-diversion services frequently required by this group of children and their families. Medicaid does pay for residential treatment, however.

DMH, the states child mental health agency, has very limited general revenue funds for community services. DHS provides therapeutic foster care and therapeutic group homes but has limited funds for nontraditional community services.

Mississippi has approximately 250 beds for youth at six in-state psychiatric residential treatment facilities (PRTFs) and access to an additional 65 beds (including five specifically for children with SED who are deaf) in residential facilities in Tennessee, Texas, and Florida. Any child-serving agency can refer children for placement in a PRTF, although admission must be pre-certified as medically necessary by a peer review organization or a quality improvement or utilization management organization. HealthSystems of Mississippi now performs this function. Some PRTFs have begun to develop their own set of community services to help children as they move through different levels of care. However, this type of continuum-of-care approach is scarce in most parts of Mississippi.

In 33 of the states 88 counties, local MAP teams work with families of children with SED to develop individualized service plans. The teams receive a small amount of flexible funding ($15,000-25,000 per year per team) from the DMH for services that are not reimbursable through Medicaid. Children and youth with SED whom MAP teams cannot serve are referred to a state level case review team, which is charged with developing an appropriate service plan through interagency collaboration.

The state covers some children with SED under the Tax Equity and Fiscal Responsibility Act option, although services under this option are limited to children with SED who also have mental retardation or developmental disabilities.

Current Community Level Projects

Mississippi currently has a Substance Abuse and Mental Health Services Administration (SAMHSA) funded SOC project in the Jackson metropolitan area (Hinds County) that is providing services to 244 children. The project, Children of Mississippi and Their Parents Accessing Strength-Based Services (COMPASS), brought together DHS, DMH, Catholic Charities (the social service agency of the Catholic Diocese of Jackson), Mississippi Families As Allies, and schools in Jackson to improve the system of care available to children with SED.⁸ The project helped the regional CMHC, which had been one of the lowest performing centers in the state, to draw down more state match funds from Medicaid for children with SED. COMPASS also established satellite clinics of the CMHC in local schools, allowing them to deliver mental health services to additional children. This year, the project expanded to include Rankin County, which is served by another regional CMHC. Now in its sixth year, COMPASS recently received an extension from SAMHSA to continue through August 2006. The state is working on a plan to ensure that the children now enrolled will continue to have access to community services when the project ends next year, but the success of these efforts is dubious, given the historical absence of public mental health services.

The Feasibility Study

Mississippi awarded the contract to conduct its feasibility study to Vanderbilt University, which will work with the state to:

Determine whether to apply for a Medicaid 1915(c) waiver or a Medicaid 1915(b)(c) combination waiver;
Examine how many children either waiver could cover;
Develop a waiver application;
Establish a case rate for the target population; and
Build support for a 10-year implementation grant from CMS.

In a recent study, staff at DMH identified 700 children with SED as high-end users. If possible, the state would like to develop a waiver application that would allow it to serve all of these children.

Either type of Medicaid waiver under consideration would allow Mississippi to finance an expanded array of community services for a limited number of children who are poorly served by the current system. This approach is attractive to state officials because it would allow them to control costs by limiting the number of children served. Either waiver also would give Mississippi the opportunity to serve children who are not Medicaid eligible under the states regular eligibility rules and to limit services to certain areas in the state (such as the Jackson metro area) where a community-based program would be feasible.

State officials also are investigating the possibility of contracting with a management entity that would accept risk for providing a continuum of services to selected children with SED (basing eligibility upon medical necessity criteria) and be financed through multiple sources. Using this approach, the state could avoid submitting a waiver. Overall, state officials noted that a major reason for conducting the feasibility study was to position the state for a possible ten-year implementation grant from CMS.

The study itself will involve the analysis of state Medicaid claims and administrative data, the goal being to develop a single case-rate for providers willing to serve as the management entity for the target population. The study also will include a series of public meetings, supported by the state and led by Mississippi Families As Allies, to identify the services that families believe are needed to support children with SED in their homes.

Lessons Learned

Although the state has implemented several community projects for children with SED and has established a variety of mechanisms at the state and local level to support interagency collaboration in service planning and development, this experience has not been enough to overcome funding constraints that are preventing DMH and Medicaid from paying for intensive community services for youth with SED.

The hallmarks of Mississippis effort to improve services for children with SED include the Mississippi Connections project in Forrest County, the COMPASS project in the Jackson metropolitan area, the Interagency Coordinating Council for Children and Youth, local MAP teams, and the state level case review team. But despite these achievements in program development and infrastructure, Mississippi has not been able to adequately serve the majority of children with SED because of funding constraints and less than full use of the rehabilitation option. Neither DMH nor Medicaid can pay for the intensive community services that would allow children with SED to remain in their homes, and the state has not used the rehabilitation option to the full extent because it would require the state to increase substantially its investments in community services and make services available to a large group of children with mental health needs.

The absence of a residential care gatekeeper is adding to Mississippis fiscal problems.

Although Medicaid pays for all residential care and acute in-patient treatment for children with SED in Mississippi, the program has little control over the amount it pays out for this service because any child-serving agency (including DHS, DMH and the 15 regional CMHCs) can refer a child who meets medical need criteria for residential placement. The state health plan determines the number of PRTF beds, and additional beds are granted through the legislative process. As more PRTF beds are opened each year, and more children are referred for residential treatment, the escalating cost of treatment is compounding the states fiscal problems. In state fiscal year 2004, for example, 94 new residential beds became available at an average cost per bed per day of $250.

An HCBS waiver is attractive to Mississippi for two reasons: (1) it would support the expansion of services for children with SED while limiting the states liability; and (2) it may be the avenue for a substantial infusion of federal grant funds if they become available.

Mississippi hopes to use information gathered through its feasibility study to pursue a long-term HCBS waiver implementation demonstration, a project that would be fully funded by the Federal Government. Even if the state is unsuccessful in these efforts, it views a waiver as being more feasible to implement than other options (such as expanding state services or expanding the Medicaid rehabilitation option) because a waiver provides the means for limiting the states liability by limiting the size of the population eligible for intensive services.

Mississippi will only be able to move forward with a waiver application if the rule requiring it to show budget neutrality relative to in-patient expenditures is modified to include PRTF expenditures. Because most children with SED in Mississippi who need hospital level-of-care do not stay in in-patient hospitals for more than 10-15 days before moving to PRTFs, average annual per-child Medicaid expenditures for hospital level care in Mississippi are relatively low. As a result, the state would be unable to demonstrate that community services are budget-neutral relative to in-patient expenditures. If the rule were amended to allow comparisons with PRTF expenditures, Mississippi would have the data needed to show budget neutrality in a waiver application.

Feasibility Study and Development Project for Community-Based Treatment Alternatives for Children with SED in Missouri

Policy Context

As part of its continuing effort to improve its mental health system for children, Missouri has focused recently on ensuring that parents do not have to relinquish custody of their children in order to gain access to mental health services. In 2003, the state passed Senate Bill 266 (SB266), which requires the Department of Mental Health (DMH) and the Department of Social Services (DSS) to jointly prepare a plan to provide mental health services and related support to children who would otherwise be placed in DSS custody solely to receive mental health services. DMH and DSS were charged with determining the feasibility of securing federal funds, including Medicaid waivers, to provide mental health services to these children.

In the summer of 2003, the state convened an interagency group to: (1) identify children placed in state custody solely to access mental health services; and (2) explore how the mental health needs of these children might be met without placing them in state custody. The group included representatives from the state DSS Childrens Division, DMH, the Office of State Courts Administrator, Citizens for Missouris Children, and parents and local representatives. Based on information indicating that many children placed in state custody need a residential level of care that families are often unable to pay for, the group developed a statewide protocol to divert children from state custody solely to access mental health services. This protocol is predicated on the belief that no parent should have to relinquish custody of their child in order to access mental health services if clinically appropriate services and supports, either within or outside the home, can be provided.

In 2004, Missouri passed Senate Bill 1003 (SB1003), expanding SB266 in several ways. First, it requires the Childrens Division to both identify children who are in its custody solely because of their mental health needs and develop an individualized service plan for each child in conjunction with the appropriate agencies and the family within 60 days of when childrens mental health needs are identified. These plans, which indicate which agencies will provide and pay for services, subject to appropriations, are submitted to the juvenile court for approval, after which children are returned to the custody of their families.

Second, SB1003 expands SB266 by creating a new funding relationship between DMH and the Childrens Division. After children return to the custody of their family, DMH can bill the Childrens Division for the cost of services as specified in the individualized service plan and in the associated financing agreement between the two agencies.

Third, the legislation waives the standard means test for children in need of mental health services to avoid custody transfers to DSS and authorizes DMH, in partnership with the state child serving departments, to establish the Comprehensive System Management Team (CSMT). This interagency team, which is charged with developing a comprehensive, coordinated childrens mental health service system, includes representatives from DMH, DSS, the Department of Elementary and Secondary Education, health, public safety, juvenile justice, child advocacy organizations, family run organizations, and family members.

Based on the interagency efforts to improve mental health services for children, especially those in DSS custody, Missouri pursued and was awarded a three-year, $99,821 Real Choice Systems Change grant in 2003 from the Centers for Medicare and Medicaid Services to conduct a feasibility study that would guide the state in designing and implementing a comprehensive system of community services and supports for children with serious emotional disturbances (SED). DMH and DSS hope that the feasibility study fulfills the requirements of SB266 by allowing the state to:

Identify children with SED who are in the custody of DSS exclusively because they need for mental health services and where there is no instance of abuse, neglect, or abandonment.
Estimate the extent and nature of current Medicaid, DMH, and DSS expenditures for these children.
Determine the cost of providing mental health services for these children in the community.

Background

Mental health services funded by DMH are currently provided through 25 nonprofit, community mental health centers (CMHCs) that contract with DMH. Most CMHCs provide services in-house, although a few also contract with other providers in the community. These services include screening and assessment, crisis services, general out-patient services, targeted case management, and medication management.

CMHCs also administer Missouris community psychiatric rehabilitation program (CPRP), which is supported by the Medicaid rehabilitation option and provides an array of community services such as evaluations, crisis intervention, community support, medication management, and psychosocial rehabilitation to individuals with severe, disabling mental illness. CPRP started as a program for adults but began serving children five to six years ago. Children with SED receive maintenance, rehabilitation, or intensive levels of care based on need. Because of budget constraints, however, CPRP cannot support all children with SED.

In 2000, the child-serving divisions in DMH, DSS, and the Department of Health and Senior Services, along with the Department of Elementary and Secondary Education launched the Interdepartmental Initiative for Children with Severe Needs, a behavioral health carve-out for children with serious and complex disorders. These divisions pooled their funding to support community-based alternatives to residential care, intensive case management, and activities to ensure child-serving agencies partner with families in developing individualized care plans for about 250 children with severe behavioral health needs in the St. Louis area and in an 18-county area in central Missouri. Services available under the initiative were provided through a care management organization, which received a case-rate for each enrolled child, financed by contributions from divisions within DMH (14 percent) and DSS (86 percent).⁹ The initiative ended in 2002, two years after it was launched.

In addition to the CMHCs, Missouri operates two residential treatment facilities (RTFs), which are monitored by DSSs Family Support Division. The state also contracts with many residential treatment providers. Historically, children with SED have been placed in RTFs by the courts or by private physicians following emergency placement in a psychiatric hospital.

In 2003, the interagency group convened by the state to identify ways to prevent children from entering state custody solely to access mental health services determined that many of these children were being discharged from in-patient psychiatric facilities with recommendations for long-term residential treatment. However, because most insurance plans do not cover this kind of treatment, families had no recourse but to give up custody directly to the Childrens Division or to refuse to pick the child up on the day of discharge, leading the facility staff to call the Child Abuse Hotline and transfer custody to the state on the basis of abandonment. In response, the group developed a statewide protocol whereby families would be linked to appropriate community services after their children were discharged from in-patient psychiatric facilities or PRTFs. In addition, during the past several years, DMH has been working with the state juvenile courts both to assess the level of care needed by adjudicated youth with mental health problems and to find alternatives to residential placement. As a result, DMH has begun to see a drop in court-mandated residential placements.

The Feasibility Study

Goals

Missouris feasibility study was intended to develop a demographic, service use, and cost profile of the children placed in the states custody solely to receive mental health services. Missouri also hoped the study would identify financing options for a comprehensive system of care capable of providing these children with services in the community. The central issue examined in the study was how to expand access to mental health services and supports in order to prevent parents from having to turn to the child welfare system for help.¹⁰

Methods

Missouri contracted with a consultant to develop the study, which would focus on children age 3-17 who had been removed from their homes because of a behavior problem, a disability, alcohol abuse (either by the parent or the child), abandonment, or relinquishment, or who had been placed in an institutional setting within 90 days of removal and had received mental health services within six months of placement. Utilization and payment data from DMH and DSS were used to estimate the quantity and cost of mental health services provided to children placed in state custody for the purpose of accessing mental health services before and after entering the states care. The study excluded children for whom there was a substantiated report of abuse or neglect and those with moderate or severe retardation or developmental disability.

Findings and Recommendations

In calendar year 2002, a total of 296 children were in state custody solely for the purpose of accessing mental health services. Virtually all of these children received Medicaid while in custody, but only 15 percent were eligible for Social Security Act Title IV-E funding for services received through the Childrens Division. The total number of children in state custody for mental health services rose to approximately 600 by November 30, 2003.

The study indicated that the quantity and mix of services needed by children with SED changed markedly when they entered out-of-placements under state custody. For instance, in 2002, the average cost per child per month to Medicaid more than doubled (rising from $455 before placement to $1,000 after placement) largely because these children had greater access to and consequently utilized far more mental health services (including psychiatric rehabilitation, psychiatric therapy, pharmaceuticals, and residential treatment) than they would have had they remained in their homes. Forty-nine percent of these children also received services paid for by DMH (versus 43 percent before placement); as a result, DMH spending rose from $1,292 to $2,926 per child per month. Altogether, it was estimated that the total annual cost of providing care to children placed in the states custody to obtain mental health services was approximately $43,000 per child in 2002.

On the basis of study findings, the contractor identified five options open to Missouri in terms of what it could do to improve its mental health system so that parents would not have to relinquish custody of their children in order to gain access to mental health services.¹¹ The contractor also recommended why or why not the state should adopt each option.

Option 1: Implement a Voluntary Placement Option Under Title IV-E of the Social Security Act. The study contractor recommended that Missouri should immediately implement voluntary placement under Title IV-E of the Social Security Act, allowing families to relinquish physical but not legal custody of their children to gain access to Medicaid and residential services covered by the child welfare agency through Title IV-E funds. The study findings suggest that this option would reduce the stigma and emotional stress associated with relinquishing custody and ensure that parents stay involved in their childrens care. This option also would limit Missouris financial exposure for mental health services for youth with SED because it would not expand the population of children eligible for publicly funded mental health services through the mental health system.

Option 2: Apply for a 1915(c) Waiver for Children with SED. The study contractor argued that a 1915(c) waiver would allow Missouri to build capacity and develop home and community resources without exposing [itself] to unlimited financial pressure because the waiver could limit the number of children made eligible for services.¹² That is, a waiver would allow the state to focus on a small group of children with SED who are poorly served under the current system.

The study findings also indicate that there are three barriers to implementing a waiver program: (1) the lack of state funds to pay the its share of Medicaid costs for more mental health services; (2) the federal eligibility requirement that children need an institutional or hospital level of care; and (3) the federal requirement that community services be cost neutral with respect to in-patient treatment provided in psychiatric hospitals. The state continues to examine these issues.

Option 3: Apply for a Section 1115 Research and Demonstration Waiver to Blend Federal Funding Streams and Support a Comprehensive System of Care for Children. According to the contractor, a Section 1115 waiver would act as a long-term strategy to develop a comprehensive system of care for youth with SED. For instance, it would allow Missouri to waive many Medicaid federal provisions, giving the state the opportunity to blend federal funding streams, waive parental deeming rules, and serve a larger population of youth with SED because, under the waiver, the state would not be limited to serving those who meet institutional level of care requirements.

Options 4 and 5: Expand Services Under the Medicaid Rehabilitation Option and the Tax Equity and Fiscal Responsibility Act. Although both of these options are open to all states, the study did not show that they would be useful in Missouri because they cannot be applied to the population of children in custody for mental health services without also expanding eligibility to other children, thus dramatically increasing Missouris costs. In addition, in order to adequately serve youth with SED, the state would need to expand the services available through Medicaid, further adding to the financial burden. According to state officials, these changes are not feasible in the current political climate.

Next Steps

Missouri has decided to apply for a Section 1915(c) waiver. Thus far, DMH has both collected data on hospitalizations and started to compare the cost-effectiveness of providing home and community services for children with SED to the cost of in-patient hospitalization for the same population. The state also is considering waiving the parental deeming rules so that it can serve children who would not otherwise be Medicaid eligible. The waiver application also will include an expanded list of flexible services and supports for youth with SED. Despite a limited provider capacity in many rural areas, Missouri does not plan to apply for a waiver of the statewideness provision because it does not want to preclude any child in need from receiving waiver services.

Assuming that its waiver application is accepted, Missouri will target home and community services to children with in-patient psychiatric hospital stays of 30 or more days during the year, hoping to serve between 200 and 266 children in the first year of the waiver program.

The state also is working to improve its information management system by centralizing DMH and DSS expenditure and utilization data in an information warehouse. Through this approach, Missouri expects to make it easier to identify all services used by children with SED and their costs than it was when each agency had its own unique data management system.

Lessons Learned

New state laws to prevent custody relinquishment and coordinate mental health services have helped to lay the groundwork for a comprehensive service system for children in Missouri.

Passage of SB266 and SB1003, as well as the development of the state level CSMT, reflects Missouris commitment to improving its mental health service system for children through greater interagency collaboration. DMH, the leading clinical authority, has started to give technical assistance to other agencies in terms of designing mental health services and managing mental health expenditures. Missouri also used the feasibility study findings as the basis for developing a central data management system that will support a comprehensive service system for children with SED, including those placed in DSS custody to receive mental health services.

To finance mental health services for children with SED, Missouri has applied for a Section 1915(c) waiver because it will allow the state to control Medicaid expenses while providing mental health services to children who, until now, have not been served adequately.

Although Missouri uses the Medicaid rehabilitation option to finance comprehensive substance abuse treatment and the CPRP, DMH does not believe it is feasible to expand the option to provide services to children with SED. Instead, Missouri plans to pursue a Medicaid home and community-based services (HCBS) waiver in order to serve children with SED who cannot access many of the mental health services in the state without entering DSS custody. Missouri favors the waiver because it is a mechanism that would allow the state to expand services slowly and incrementally. Given the current political climate and escalating Medicaid costs, state staff emphasize the need to carefully manage the costs of providing mental health services to a new group of beneficiaries.

A Medicaid HCBS waiver would bring some children with SED under the public service umbrella; however, it would leave out those who have SED but do not require intensive hospital level care. According to state officials, the larger group of children with SED could be served only through a more systematic effort to create a comprehensive system of care.

It is expected that a data system that consolidates information from the various social service agencies will better support efforts to create a comprehensive system of care.

Through its feasibility study, Missouri found that it was unable to identify all of the services used by children with SED (and the associated expenditures) because each agency has its own data collection system. The development of a data warehouse should provide more complete information about the services used by children with SED use and how these services are financed. The resulting ability to more accurately identify the costs of institutional care will support Missouris efforts to develop a 1915(c) waiver application.

Feasibility Study and Development Project for Community-Based Treatment Alternatives for Children with SED in Texas

Policy Context

Over the past 15 years, Texas has supported four initiatives to improve its community-based child mental health service system.

The first, authorized by state legislation passed in 1987, established community resource coordination groups (CRCGs), which are county-based inter-agency teams charged with developing individual plans of care for youth receiving services from several agencies. CRCGs have been supported with existing local revenues.

The second, referred to as the Texas Integrated Funding Initiative (TIFI), was implemented in the late 1990s in four sites that serve children with serious emotional disturbances (SED) and their families in selected counties. The TIFI provides an opportunity for child-serving state agencies and private sector organizations and associations to enhance interagency coordination and collaboration to better serve children with SED and their families. Each site receives $40,000 annually from state general revenues to develop a local system-of-care (SOC) infrastructure and deliver direct services through a wraparound approach. In some sites, state funds are supplemented by local dollars and in-kind contributions from child-serving agencies.

The third initiative involves four sites¹³ that have received grants from by the Substance Abuse and Mental Health Services Administration to enhance SOC for youth with SED. These grants have provided the state with strategic experience in financing intensive in-home and community services.

Fourth, the Texas legislature passed House Bill 2292 in 2003, which was designed to fundamentally transform the delivery of health and human services in the state. Prompted by both this legislation and results from a consensus conference among key stakeholders, Texas public mental health system piloted a resiliency and disease management (RDM) approach in community mental health and mental retardation centers in four selected sites to develop services that foster recovery for persons with mental illness. The RDM initiative sought to define: (1) eligibility criteria for mental health services; (2) an appropriate service package; (3) methods for managing utilization; (4) strategies for tracking costs of services; and (5) expected outcomes of services. For example, based on clinical diagnosis and functioning level, a child with SED would be assigned to one of four levels of care, each of which contains different service packages and rates for those services. In accordance with HB 2292, the initiative was rolled out statewide in September 2004.

In 2003, the Texas Health and Human Services Commission (HHSC), the agency responsible for the state Medicaid program, received a $100,000 Centers for Medicare and Medicaid Services (CMS) Real Choice Systems Change Grant to assess the feasibility of the following three options for providing services to children with mental health issues in a community setting instead of in an in-patient psychiatric facility: a 1915(c) home and community-based service (HCBS) waiver, an 1115 demonstration waiver, and a state-funded-only project. Having completed its final report on the study in January 2005, the state has started to implement some of the recommendations from the report, including detailed financial analyses that will lay the groundwork for an HCBS waiver.¹⁴

Service Infrastructure

The responsibility for providing mental health services lies with four agencies that operate under the umbrella of the Texas HHSC.¹⁵ Other agencies such as juvenile justice, education, and the child welfare system also fund mental health services for children. Of the 41 community MHMRs, 39 serve as the Mental Health Authority (MHA) for single counties (in urban areas) or several counties (in rural areas). Each MHA must provide the mental health services covered by the state Medicaid plan, including assessment, counseling, and crisis intervention. The MHMRs receive most of their funding from Medicaid and general state revenue.

Each MHA also partners with one of nine state hospitals that provide in-patient mental health and substance abuse services and that account for a total of 361 child and adolescent beds. Furthermore, a residential treatment program for adolescents with SED is offered by the Waco Center for Youth, and 29 private mental health hospitals are licensed by the state to provide mental health services.

The Department of Family and Protective Services (DPS) licenses 24-hour child care facilities, some of which provide mental health services. Services provided to children in DPS custody are funded through Title IV-E, Temporary Assistance for Needy Families, and general funds. Parents, juvenile probation units, child protective services, and local school districts may also place children in these facilities.

Medicaid covers rehabilitation services, including psychosocial rehabilitation and family therapy but not psychiatric residential treatment for children.

The TIFI sites and the CRCGs are local inter-agency collaboratives designed to improve the child mental health system. TIFI sites collaborate with a variety of agencies to provide wraparound planning for children in order to prevent residential placements or to return children to their home from an institutional or residential setting. The idea is to seamlessly deliver services provided by several agencies. The CRCGs provide a coordinated plans of care for children with complex mental health needs who would otherwise be served in a more fragmented way by a variety of agencies. CRCGs also seek to provide these children with access to a fuller array of services that may not have been available through traditional channels. Despite recent improvements in inter-agency coordination, however, some state officials indicated that the states overall funding for child mental health services remains severely limited.

Feasibility Study

Study Goals and Activities. The broad goals of the feasibility study were to: (1) identify community alternatives to out-of-home placement; (2) give families more treatment options to choose from; and (3) identify ways to expand the array of high-quality intensive treatments and supports. To achieve these goals, Texas contracted with Community Ties of America, Inc., an outside consulting company to examine various service delivery and funding options that would allow more children to live at home and receive treatment in their community as opposed to in an institution. The options included a 1915(c) waiver, a 1915(c) and (b) combination waiver, an 1115 demonstration waiver, or changing current Medicaid and block grant services. Community Ties of America was also charged with describing the current system of mental health service for children in Texas, determining the number of children in the priority population served in an in-patient mental health hospital setting during fiscal year (FY) 2003, and determining the cost of in-patient mental health hospitalization for these children. Texas defined the priority population as children ages of 3-17 with a serious emotional, behavioral, or mental disorder and who either have a serious functional impairment, are at risk for out-of-home placement because of psychiatric symptoms, or are enrolled in special education because of a severe emotional disturbance.

Findings and Recommendations. In its final report on the study, Community Ties of America documented detailed findings on the mental health system for children in Texas and made recommendations on the feasibility of using the standard federally sanctioned delivery and financing options for covering children with mental illness. Findings on the state mental health system for children include the following:

In FY 2003, community MHMRs served 26,452 priority population children.
4,660 children had an in-patient stay in a private or public psychiatric hospital covered in FY 2003 by Medicaid or by state dollars; this total does not include children in Medicaid managed care plans or whose stay in a private hospital was not covered by state funds. The cost to the state to cover the 4,660 children was over $150 million. In addition, these children represent those who could potentially be diverted from in-patient hospitalization if they were provided with community services.
Average length of stay in both private and public psychiatric hospitals was 52 days (slightly less than three months) per admission at an average daily cost of $535 per child and an average annual cost of $27,569 per child. That amount represents the target for budget neutrality in an HCBS waiver application.

With regard to the 1915 waivers, 1115 waivers, the Medicaid state plan, and other funding streams, the report recommended that the state develop a 1915(c) waiver program based on a case management model of service delivery. In this model, the case manager interacts regularly with the child and the family and monitors the service plan to ensure that the child receives high-quality, appropriate services. The state would designate an administrative lead agency, likely DSHS, to develop the waiver. The report also recommended that Texas perform a site comparison analysis to identify the communities, cities, or regions in which the waiver might be most successfully implemented.

Although Texas is likely to move forward with a 1915(c) waiver application, state officials noted initial enrollment in the waiver program will be limited (possibly to 400 children) so that the state can more easily and accurately track Medicaid expenditures and potential savings in state funds from the reduced use of psychiatric hospitalization.

Although the report examined the potential utility of several different funding streams, it did not specifically address the implications of the following: modifying the Medicaid rehabilitation option to broaden access to intensive community services, developing case rates or other strategies involving the blending of funds across state agencies, or implementing a Tax Equity and Fiscal Responsibility Act/Katie Beckett provision. According to state officials, the third strategy was not examined because it was seen as financially risky.

Lessons Learned

The CMS grant established a framework for bringing a diverse set of state agencies together to collaborate in developing the HCBS waiver.

CMSs Real Choice Systems Change Grant gave Texas agencies that serve children an opportunity to collaborate in an evaluation of options for enhancing community-based services for children with SED. This process may provide a foundation for further collaboration as the wavier application is developed and, if awarded, when the actual program is implemented.

An HCBS waiver is desirable for Texas because it has several attractive features.

According to state officials, an HCBS waiver will give Texas the flexibility to: (1) expand services incrementally by managing the number of waiver slots available; and (2) obtain federal reimbursement for some services now supported entirely by the state (e.g., wraparound services and foster care placement).

A lack of qualified providers, especially providers of intensive home and community services, is hindering Texas effort to expand mental health services to children with SED.

Texas realizes that it will be challenging to implement an HCBS waiver in areas of the state that do not have enough qualified providers. Even special initiatives in urban areas (e.g., The Childrens Partnership, an SOC site in Austin) that have funds to purchase additional services for children with SED have found it very difficult to find appropriately trained providers, especially providers of nontraditional services. Intensive services such as mobile response and stabilization, and in-home crisis interventions, though essential to a community-based service system for youth with SED, will not be available in areas that lack appropriate providers. Implementation may also be stymied by resistance on the part of facility-based providers (e.g., residential treatment facilities) to re-engineer and provide- home and community services.

Notes

Two separate SASS programs were operated by the DMH and DCFS until June 30, 2004. As a result of the Childrens Mental Health Act of 2003, these programs were integrated and expanded to cover all children with Medicaid including children in the ICG program.
Maryland relies on psychiatric hospitalization primarily for short-term stays and, as a result, the state decided it was not cost-effective to use them as the comparison entity as required in a home and community-based services waiver application.
See Report of Joint Baltimore City/Montgomery County Child Work Group. Department of Health and Mental Hygiene, Medicaid and Mental Hygiene Administration. July 31, 2003.
Prior to volunteering for this project, Baltimore City and Montgomery County both had federal Substance Abuse and Mental Health Services Administration grants. The grant to create the East Baltimore Mental Health Partnership was awarded to the Mental Hygiene Administration in 1996. The grant was administered by the Baltimore Mental Health Systems and operated by the Johns Hopkins University for the purpose of developing a system of care for selected East Baltimore neighborhoods. Montgomery County obtained a six-year system of care grant in 1999. Since then, Montgomery Countys project called Community Kids, an initiative of the Montgomery Countys Health and Human Services Department and the Montgomery County Collaboration Council for Children, Youth and Families, has been developing wraparound services, interagency collaboration, and family partnerships for children with SED and their families.
Although the case-rate has not been determined yet, it will probably be between $4,500-5,000 per member per month.
Maryland participated in a conference call with CMS to see if the state needs to obtain a waiver to conduct the pilot programs in Baltimore City and Montgomery County. CMS recommended that Maryland submit a waiver request, but they were not sure which waiver (e.g., 1915(b), 1915(c), or an add-on to Marylands existing 1115 waiver). Maryland is waiting to hear back from CMS.
These figures are from a study of the Mississippi Connections project commissioned by Pine-Belt Mental Healthcare Resources.
Catholic Charities operates the COMPASS project.
Figures from the Office of the Assistance Secretary for Planning and Evaluation, U.S. Department of Health and Human Services website (http://www.aspe.hhs.gov/hsp/CW-financing03/apa.htm#MO).
"Children in State Custody Solely for Mental Health Needs and More Comprehensive Strategies for System of Care Development: Study and Recommendations, Alicia Smith & Associates, 2004.
The contractor also noted that the state had a sixth option--advocating for mental health parity in the private insurance market--but did not address this option in any detail.
"Children in State Custody Solely for Mental Health Needs and More Comprehensive Strategies for System of Care Development: Study and Recommendations, Alicia Smith & Associates, 2004.
The four sites are located in: Austin (The Childrens Partnership), El Paso (Border Childrens Mental Health Collaborative), and Fort Worth (Community Solutions), and Harris County. The grant to The Childrens Partnership officially ended in 2005; the other two grants are scheduled to end in 2008. The Harris County grant will begin October 2006.
Community Ties released three reports as part of the study: Feasibility Study for Community-Based Treatment Alternatives for Children with Severe Emotional Disturbance, in September 2004; Implementation Report for Community-Based Treatment Alternatives for Children with Severe Emotional Disturbance, in December 2004; and Final Report of Feasibility and Implementation for Community-Based Treatment Alternatives for Children with Severe Emotional Disturbance, in January 2005. These reports are available from Jason Wolcott (Jason.Wolcott@hhsc.state.tx.us).
HHSC is one of five agencies established at the end of 2004, when Texas consolidated 12 health and human services agencies into five. The other four include the Department of Aging and Disability Services, the Department of Assistive and Rehabilitative Services, the Department of Family and Protective Services, and the Department of State Health Services (DSHS). HHSC administers the Medicaid program, and DSHS is responsible for the mental health services provided by the state hospitals and oversees the administration of the local mental health agencies.

APPENDIX D: VALUES AND PRINCIPLES SUPPORTING THE SYSTEMS-OF-CARE APPROACH

Underpinning Child and Adolescent Service System Program (CASSP), and subsequently the Community Mental Health Services program, has been the conceptual framework by Stroul and Friedman that defined and illustrated a system of care model for children with serious emotional disturbances (SED). According to Stroul and Friedman (1986), systems of care should exhibit three core values: child centered and family focused, community-based, and culturally competent. Furthermore, Stroul and Friedman outline ten guiding principles of the systems of care philosophy:

Children should have access to a wide array of services that address their social, educational, physical, and emotional needs.
Children should receive individualized services designed to meet the unique characteristics and situations of each child as delineated in an individualized service plan.
Children should receive services in the least restrictive, clinically appropriate setting.
Families and guardians of children should be involved in all aspects of service planning and delivery.
Children should receive an integrated set of services, with all child-serving agencies planning, developing, and coordinating services.
Children should be provided with case management in order to assure that their services are coordinated and they are able to move through the established system of care as their needs change.
Systems of care should promote early identification and intervention for children with SED.
Smooth transitions to the adult service system must be assured for children with SED.
The rights of children should be protected, and advocacy for children with SED promoted.
Children should receive services without regard to race, religion, national origin, sex, or physical disability in a culturally competent and sensitive manner.

APPENDIX E: COST OF SERVICES PROVIDED THROUGH HCBC WAIVERS

State	Year	Waiver Service	Average Unit Cost ($)
New York	2004	Individualized care coordination	$2,195.00
		Intensive in-home services	41.00
		Crisis response	38.00
		Skill building	25.00
		Respite: Hourly Daily	24.00 153.00
		Family support	19.00
Wisconsin	2003	Support and services coordination (hourly)	55.00
		Support and service coordination transitional (hourly)	55.00
		Respite care	13.35
		Habilitation: Day services Supported employment	18.05 32.60
		Home modifications	2,000.00
		Specialized Transportation: By trip (one way trips) By mile (per mile)	13.50 0.33
		Specialized medical equipment and supplies	148.00
		Adaptive aids	102.00
		Communication aids	400.00
		Personal emergency response systems (monthly)	35.00
		Childrens foster care (daily)	70.00
		Consumer education and training (hourly)	21.00
		Daily living skills training (hourly)	18.95
		Consumer and family directed supports (daily)	4.85
		Financial management services (daily)	4.85
		Counseling and therapeutic resources (hourly)	50.00
		Supportive home care (hourly)	15.14
		Intensive in-home autism treatment (weekly)	740.00
Indiana	2004	Independent living skills (hourly)	85.60
		Family support and training (hourly)	60.00
		Respite care: Hourly Foster Crisis Scheduled day	16.00 100.00 120.00 80.00
		Wraparound facilitation (hourly)	115.00
Vermont	2003-4	Services coordination	70.11
		Flexible support (respite care, habilitation)	23.85
		Skilled therapy services	87.00
		Environmental modifications and adaptive services	14.77
Kansas	2005	Wraparound facilitation/community support	20.00
		Independent living/skills building	40.00
		Parent support and training	10.00
		Respite	6.00
SOURCE: State applications for Medicaid 1915(c) HCBS Waivers.

Files

youthSED.pdf (pdf, 606.99 KB)

Topics

Mental Health | Human Services Financing & Expenditures | Home- & Community-Based Services (HCBS) | Behavioral Health | Behavioral Health

Populations

Youth | Children

Location- & Geography-Based Data

Urban Communities | State Data

Public Financing of Home and Community Services for Children and Youth with Serious Emotional Disturbances: Selected State Strategies

Public Financing of Home and Community Services for Children and Youth with Serious Emotional Disturbances: Selected State Strategies

Henry T. Ireys, Sheila Pires and Meridith Lee

Mathematica Policy Research, Inc.

June 2006

TABLE OF CONTENTS

Methods

Findings

Implications

Notes

A. Research Questions and Methods

B. Overview of Report

A. Number of Youth with SED in Residential Care and Costs Associated with Their Care

B. Sources of Federal Funding for Child Mental Health Services

C. Financing Mechanisms

D. Financial Incentives for State Agencies

E. The Role of Residential Treatment Facilities

A. Comprehensive Statewide Reforms

B. Incremental Reforms

C. Contemplating Future Reforms

D. Summary

A. HCBS Waivers

B. Medicaid Rehabilitation Option

C. Case-Rates Used by Designated Care Management Entities for High-Risk Populations

D. The TEFRA Provision

Notes

Notes

Notes

Connect with Us