Two counties are at odds with California over mental health obligations

Sacramento and Solano counties are in a standoff with the state over mental health coverage for a portion of Medicaid patients in those counties — a dispute that threatens to disrupt care for nearly 50,000 low-income residents who are suffering from severe mental health problems mental illnesses are treated.

The Department of Health Care Services, which administers Medi-Cal, the state Medicaid program, says Sacramento and Solano counties must take on the management and delivery of specialty mental health care for thousands of Medi-Cal patients living in Kaiser Permanent plans are enrolled. It insists on shifting responsibility as California’s remaining 56 counties are already operating in this way. State officials argue the change would simplify the state’s disjointed mental health system and is required to implement a larger transformation of Medi-Cal, an initiative called CalAIM.

State health officials gave counties until March 15 to admit Kaiser Permanente patients, allowing California to properly transfer its specialty mental health care to counties by July 1. However, the two counties oppose the transfer, arguing that without more resources, they could not adequately care for a large influx of Medi-Cal patients with serious mental illnesses such as schizophrenia or bipolar disorder. Medi-Cal officials, meanwhile, are threatening hefty penalties or the potential termination of mental health contracts with these counties.

Local officials warn that if the state goes through with its plan, about 39,000 patients in Sacramento County and about 8,000 in Solano County could see their care interrupted and be forced to find a new psychiatrist, for example.

“For someone suffering from schizophrenia or another serious mental disorder, it has taken a long time to build a trusting relationship with their provider and now they will see care cut or they will have to find another provider,” he said Debbie Vaughn, Assistant Borough Administrator for Solano County. “There will be risks that people will get into a crisis.”

Ryan Quist, director of behavioral health services for Sacramento County, said counties not only need more funding, but more time to transfer patient care. “The state is playing chicken with their lives,” he said.

Under state law, counties are responsible for the administration and delivery of specialty care for Medi-Cal patients with severe mental illness. Medi-Cal Managed Care insurers are responsible for providing treatment for mild or moderate mental illness, such as anxiety or mild depression.

But as part of a decades-old agreement between the state and Sacramento and Solano counties, California has paid Kaiser Permanente to provide all mental health care for the health-care giant’s Medi-Cal contenders. Now the state is rescinding that agreement, forcing about 7,000 mental health professionals in those two counties to relocate from Kaiser Permanente to the county-run mental health plans.

State officials argue that the two counties are legally required to care for Medi-Cal patients with serious mental illnesses and that the counties’ behavioral health boards would be the ones putting patients at risk if the counties continue to refuse to shift. Medi-Cal patients enrolled in health plans other than Kaiser Permanente receive their specialized mental health care directly from the counties.

“The failure of Sacramento and Solano counties to participate in this process puts Medi-Cal members at risk of losing access to critical Medi-Cal entitlement services,” said Tony Cava, a spokesman for the Department of Health Services. “DHCS will have no choice but to take action if counties continue to refuse to honor their commitments.”

The state is considering sanctions or terminating counties’ contracts, but Cava said that “terminating contracts is not DHCS’s preferred approach.” He declined to elaborate, adding only that the agency will find “solutions to continue coverage” for Kaiser Permanente patients.

He said moving patients to counties will “offer a more consistent and seamless healthcare system by reducing complexity and increasing flexibility.”

Counties currently receive a portion of state sales tax revenue and vehicle license fees to fund specialty mental health care, but under the agreement in Sacramento and Solano, the state paid Kaiser Permanente out of its general fund to service a portion of the insurer’s total Medi-Mental Cal Participant Needs.

As part of the shift, California would stop distributing money from general funds to counties. Instead, counties would get a larger share of existing sales tax and vehicle license fee revenue that was set aside by a 2011 agreement. However, the counties argue that Kaiser Permanente’s specialized mental health patients did not fall under their purview at the time this agreement was made, underscoring their legal argument that the state should cover the cost of their care.

The state is offering Sacramento an additional $11.6 million a year and Solano $7.7 million a year, which would draw additional federal funding. That money would be siphoned off revenue that other counties rely on for behavioral health care.

“The insult to injury is that it’s costing money from other counties,” said Michelle Doty Cabrera, executive director of the County Behavioral Health Directors Association, “and across California we’re seeing greater demand for services, especially post-pandemic.”

Sacramento County wants $36 million more each year to cover a 16% increase in patients, or 4,836 people. Solano County charges nearly $17 million more each year to increase its burden by 50%, or 2,091 patients.

Behavioral health officials say counties are also struggling to hire and retain mental health professionals willing to serve Medi-Cal patients.

“Our system is already bursting at the seams,” said Le Ondra Clark Harvey, CEO of the California Council of Community Behavioral Health Agencies, which represents local mental health providers.

State officials believe both counties have an adequate number of mental health providers, with the small exception of Sacramento County that two to three additional psychiatrists are needed to treat children.

Kaiser Permanente told KHN that it did not ask to remove patients from its care network and that it had informed the state that it wanted to continue serving them. Ultimately, however, it agreed to delegate care to the districts.

“While we had expressed our preference to continue providing specialty care to this vulnerable population,” said spokesman Gerri Ginsburg, “we respect the state’s long-term goals.”

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

Kaiser Health NewsThis article was reprinted from with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health policy research organization not affiliated with Kaiser Permanente.

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