Map of the state's mental health agencies or LMEs
Map of the proposed mental health agencies in North Carolina from late 2011. By that time, Cardinal Innovations' footprint had grown from five counties to 15. Eventually, the organization would manage mental health care for more than 20 counties before boards of commissioners started pulling their constituents out. Image courtesy NC DHHS

By Lydia E. Wilson

Proud legislators. Sobbing parents. Promises of substantial savings. Legal battles. These are all hallmarks of the first year of a new mental health plan enacted by North Carolina’s General Assembly in 2011.

Mental Health 3.0 series Image

Last summer, the legislature decided to turn the agencies that oversee $2.5 billion worth of publicly-funded mental health services into small insurance companies. The plan is based on the experience of one agency that has been functioning as a pilot project for the past six years.

Most of the money to pay for mental health services comes from Medicaid, the federal and state-financed health care program for people with low incomes or disabilities.

The legislature argued that aggressive financial oversight of public services could save the state tens, possibly hundreds of millions of Medicaid dollars while improving prospects for mental health consumers. Leaders in the state’s mental health system said they wanted more flexibility in creating and running mental health programs.

“We want [oversight of disability services] to remain a publicly managed system, so that we can keep that local presence and local accountability,” said Beth Melcher, a psychologist, and former advocate for people with mental health problems, who is now an assistant secretary in North Carolina’s Department of Health and Human Services. “This is not about managing Medicaid dollars. This is about a network of community care.”

But for all the good intentions and high-minded rhetoric, the changes have been fraught with controversy in the courts, anxiety, and ‘misunderstandings’ between the state’s model provider agency, mental health consumers, local officials and advocates.

Map of the state's mental health agencies or LMEs
Map of the proposed mental health agencies in North Carolina. Image courtesy NC DHHS

A disability advocacy group has filed lawsuits, resulting in a federal court stopping some parts of the reform from moving forward as quickly as originally intended. Critics say the risk of the state’s elaborate funding experiment falls too squarely on the shoulders of North Carolina’s citizens most in need of support, those with mental health or substance abuse disorders, and people with intellectual or developmental disabilities.

Under the new system, the agencies, known as  Local Management Entities, or LMEs, get a pot of money for every Medicaid consumer in their area to pay for all mental health services consumers need. The LMEs also get the power to approve or deny the claims providers submit on consumers’ behalf.

The ‘managed care’ model revives the way health maintenance organizations, or HMOs ‘manage’ the care for their pool of customers, with all the trappings of HMOs that made them so unpopular in the 1990s: a limited choice of providers, having someone play the role of ‘gatekeeper’, and a service review process that has the LME sometimes telling consumers, “No.”

That service review process is core to how commercial insurance companies make their money, but the LMEs will remain public, regulated by state statute. To change in function and culture quickly, the agencies are posting jobs that sound Fortune 500 positions: “Financial Claims Manager,” “Systems Network and Infrastructure Administrator,” “Help Desk” and “Staff Accountant,” among others.

On the other hand, managed care has been successful with Community Care of North Carolina, the state’s Medicaid program for physical health. Managed care organizations can hire clinical staff to review care, often those nurses and social workers suggest additional services for patients, not fewer.

Many of the  staff  the new managed care organizations are hiring are trained and have experience in the clinical care of consumers. The agencies’ service review process also includes the creation of a treatment plan meant to account for whether services providers are requesting will help consumers become healthier.

Critics protest that the new business model could violate state and federal laws if the emphasis on saving money forces consumers into institutionalized care. If that’s true, North Carolina would be in violation of federal civil rights law.

Critics have also complained about the appeals processes in place if an agency cuts back on someone’s services. An advocacy group has already taken some complaints to the courts. And already, a federal judge found  the appeals process violates the U.S. Constitution.

Everyone agrees North Carolina’s recent history of delivering mental health services is marked with upheaval, controversy, colossal waste, and, not infrequently, tragedy. But, if North Carolina’s newest reform succeeds, the state could be poised to be a national leader in how to manage Medicaid funding creatively.

Whether successful or a failure, the reforms are starting to affect the lives of consumers, families, providers and taxpayers today. The LMEs that will cover all 100 North Carolina counties are rushing to implement the state-mandated business model successfully by Jan 1, 2013. Otherwise LMEs will  be taken over by another agency that has.

Courts are just starting to weigh in on what that business model should look like.

Tomorrow… The Birth of An Idea… Of How to Change the Mental Health System

Mental Health 3.0 is adapted from Lydia Wilson’s thesis for a Masters in Journalism from UNC Chapel Hill’s Medical Journalism Program. The title image is adapted from a portrait of Dorothea Dix, a 19th century crusader for better mental health care, that hangs at the National Portrait Gallery.

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Rose Hoban is the founder and editor of NC Health News, as well as being the state government reporter. Hoban has been a registered nurse since 1992, but transitioned to journalism after earning degrees...

One reply on “To Save Money, Improve Health, NC Changes Mental Health System – Again”

  1. Thanks so much for writing about the mental health system — there are so many complexities, and we need journalists to bring the issues to light. There’s alot at stake in the decisions that will be made by our legislators this session. I continue to hope that we can keep the people served in the system at the heart of what we do.

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