ROOSEVELT INSTITUTE | CAMPUS NETWORK PRESENTS:

EXPANDING MEDICAID TO IMPROVE MENTAL HEALTH CARE

IN NORTH CAROLINAWHITE PAPER BY

EMILY CERCIELLOSENIOR FELLOW FOR HEALTH CARE

UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILLDECEMBER 11, 2014

KEY ARGUMENTS• Medicaid is the single largest payer of mental health

care services in the United States, providing indispensable psychotherapy and psychiatric services to individuals with mental illnesses who might not otherwise receive treatment.

• Mental illness disproportionately affects individuals with lower family incomes, with mental illness affecting 23.3 percent of individuals with family incomes between 100 and 199 percent of the FPL.

• States that have expanded Medicaid have seen improvements to state and local economies through the addition of jobs and decreases in uncompensated care.

• Results from other expansion states show pent up demand for mental health services, significant reductions in uncompensated care, and financial and healthcare relief for vulnerable residents.

• North Carolina should expand Medicaid in 2015 to provide an affordable care option for 190,000 mentally-ill North Carolinians and improve local economies in the process.

• Expansion of the Medicaid program would bring $39.6 billion in federal funds to North Carolina through 2022 and significantly reduce the $300 million annual uncompensated care burden on state hospitals.

Emily Cerciello is the Roosevelt Institute | Campus Network Senior Fellow for Health Care, where she engages students across the country in local, state, and national health policy discourse. As a student at the University of North Carolina at Chapel Hill, Emily has performed research on substance u s e d i s o r d e r s , s t a r t e d a s t u d e n t organization, and served on the Campus Health Services Advisory Board. Her primary policy interests are at the intersection of economics and population health. Emily is an accomplished researcher and public speaker and has previously served in strategy, research, and public affairs roles for managed care, healthcare facilities, and financial services organizations.

For media inquiries, please contact Rachel Go ldfarb at 2 12 .444 .9 130 x 2 13 o r rgoldfarb@rooseveltinstitute.org.

The views and opinions expressed in this paper are those of the author and do not necessarily represent the views of the Roosevelt Institute, its donors, or its directors.

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EXECUTIVE SUMMARYA key provision of the Affordable Care Act (ACA) is the eligibility expansion of Medicaid, a condition originally mandated by the ACA but made optional to states a"er a 2012 Supreme Court decision. Today, 28 states are participating in expansion. The North Carolina legislature has repeatedly declined expanding Medicaid to eligible residents while the state is also experiencing formidable challenges in providing affordable mental health care services. Nevertheless, new and emboldened leadership has the opportunity to expand Medicaid as part of a greater effort to improve mental health care in North Carolina. While systems will need to expand to meet the demand of new patients, North Carolina can be an example for the country for turning the challenge of Medicaid expansion into an asset for improved access to healthcare and job creation.

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Expanding Medicaid to Improve Mental Health Care in North CarolinaBy Emily Cerciello, December 11, 2014

INTRODUCTION

A primary goal of the Patient Protection and Affordable Care Act (ACA) is to considerably reduce the number of uninsured Americans by providing affordable health insurance options through removing the pre-existing condition exclusion and introducing online health insurance marketplaces, among other reforms. A central and necessary provision of the ACA is the expansion of Medicaid, a social insurance program for low-income Americans jointly funded by states and the federal government.1

Under expansion, Medicaid eligibility is broadened to include individuals with incomes up to 138 percent of the federal poverty level (FPL),2 meaning single adults earning up to $16,105 annually and families of four earning up to $32,913 annually are now eligible. Prior to passage of the ACA, individuals eligible for Medicaid included pregnant women, children under age 21, parents or caretakers of dependent children, persons with disabilities, and the elderly. To be eligible, individuals also had to have incomes below a certain threshold - $11,670 annual income for a single adult or $23,850 annual income for a family of four in 2014. Before expansion, individuals not covered by traditional Medicaid that were most likely to need health insurance were low-income, childless, nondisabled adults under age 65. Medicaid expansion removes these restrictive eligibility categories and expands coverage, filling large gaps in our employer-based health insurance system.

In 2012, the Supreme Court upheld the constitutionality of the ACA but in a 7-2 decision deemed unconstitutional the law’s mandate that all states participate in Medicaid expansion, effectively making compliance with the provision optional.3 This decision created a huge fracture in the framework and functioning of the ACA as a comprehensive reform intended to increase health insurance coverage and reduce health care costs for all Americans. As of this date, only 28 states are expanding Medicaid as originally intended by the ACA or in state-specific alternative expansion plans.4 The federal government will cover 100 percent of expansion costs through 2016 and a minimum of 90 percent in all years to follow.5, 6

As the single largest payer of mental health services in the United States, Medicaid plays a key role in enabling low-income individuals to access mental health care.7 In 2012, about 1 in 5, or 43.7 million U.S. adults, experienced a form of mental illness, and 1 in 17, or 13.6 million U.S. adults, experienced a serious mental illness including major depression, schizophrenia, or bipolar disorder.8 Medicaid coverage for mental health services is particularly important, given that nationwide, adults with family incomes less than 100 percent of the FPL have higher rates of

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1 Medicaid Home | Medicaid.gov. (n.d.). Retrieved from h#p://www.medicaid.gov/2 Key Features of the Affordable Care Act By Year | HHS.gov/healthcare. (n.d.). Retrieved from h#p://www.hhs.gov/healthcare/facts/timeline/timeline-text.html3 A Guide to the Supreme Court’s Decision on the ACA’s Medicaid Expansion | The Henry J. Kaiser Family Foundation. (n.d.). Retrieved from h#p://kff.org/health-reform/issue-brief/a-guide-to-the-supreme-courts-decision/4 Status of State Action on the Medicaid Expansion Decision | The Henry J. Kaiser Family Foundation. (n.d.). Retrieved from h#p://kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/5 h#p://www.hhs.gov/healthcare/rights/law/index.html6 95 percent of costs in 2017, 94 percent in 2018, and 93 percent in 2019. From 2020 on, the federal government will cover 90 percent of expansion costs unless the provision is changed or repealed7 Medicaid and CHIP Program Information | Medicaid.gov. (n.d.). Retrieved from h#p://www.medicaid.gov/medicaid-chip-program-information/medicaid-and-chip-program-information.html8 National Institute of Mental Health. (n.d.). NIMH - Statistics - Any Mental Illness (AMI) among adults. Retrieved from h#p://www.nimh.nih.gov/statistics/1ANYDIS_ADULT.shtml

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mental illness (29.5 percent) than adults with family incomes between 100 and 199 percent of the FPL (23.3 percent) and adults with family incomes above 200 percent of the FPL (17 percent).9

In North Carolina, the Medicaid program follows federal standards in covering inpatient, outpatient, and rural mental health services that would otherwise be out of reach for low-income individuals.10 In the past, the North Carolina legislature has repeatedly rejected discussions of Medicaid expansion, citing cost overruns and program inefficiencies. However, the North Carolina Department of Health and Human Services (HHS) recently announced a budget surplus. Expansion of the program would bring $39.6 billion in federal funds to the state through 2022 and significantly reduce the $300 million annual uncompensated care burden on state hospitals.11

Rural hospitals – already hurting in the wake of the 2008 recession – are disproportionately affected by the state's decision to opt out of expansion. In September 2014, the only hospital in the rural eastern North Carolina town of Belhaven was forced to close, prompting Republican Mayor Adam O’Neal to spend two weeks walking 237 miles to Washington, D.C. to demand Medicaid expansion.12 Eighty of North Carolina’s 100 counties are rural, making many areas vulnerable to similar outcomes.13

Data from other states illustrate that Medicaid expansion enrollees have high rates of mental illness, which requires increased capacity. In one of the best examples of successful Medicaid expansion, the state of Colorado saw significant increases in patients seeking mental health care, indicating pent-up demand among the newly eligible Medicaid population. The state built up the mental health workforce by hundreds in order to manage the increase. Additionally, Colorado hospitals are continuing to expand inpatient bed capacity to handle greater demand for inpatient mental and behavioral health services, drawing revenue to hospitals and providers with mental health care specialties.14

This white paper argues that Medicaid expansion is critical to improving access to mental health care services in North Carolina. North Carolina is a useful example because it has one of the largest coverage gaps of all states that have not yet expanded Medicaid, the state’s mental health system is strong and capable of adapting to an influx of new patients, and new legislative leadership – including Senator-elect Thom Tillis – have shown interest in considering expansion of the program.15, 16 Currently, more than 50 percent of individuals with mental illness do not

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9 U.S. Dept. of Health and Human Services. (2012, January). Results from the 2010 National Survey on Drug Use and Health: Mental Health Findings. Retrieved from h#p://www.samhsa.gov/data/nsduh/2k10MH_Findings/2k10MHResults.pdf10 Medicaid Home | Medicaid.gov. (n.d.). Retrieved from h#p://www.medicaid.gov/11 Helms & Pugh. (2014, October 5). North Carolina's $10 billion Medicaid challenge: Pay for other states or take federal money? Retrieved from h#p://www.charlo#eobserver.com/2014/09/02/5145802/north-carolinas-10-billion-medicaid.html#.VBm-3C5dUhQ12 h#p://www.npr.org/blogs/health/2014/08/01/336907606/a-conservative-mayor-fights-to-expand-medicaid-in-north-carolina13 h#p://www.raconline.org/states/north-carolina14 Hoback. (2014, August 6). Medicaid expansion creates explosion in demand for mental health care. Health News Colorado. Retrieved from h#p://www.healthnewscolorado.org/2014/08/06/medicaid-expansion-creates-explosion-in-demand-for-mental-health-care/15 “Coverage gap” describes the gap between non-expanded Medicaid eligibility and eligibility for subsidies on Healthcare.gov. Many Americans – including 320,000 North Carolinians (4th largest in the country) – do not qualify for traditional Medicaid and do not have incomes high enough to qualify for subsidies on the exchange.16 Millman, J. (2014, August 29). 23 states still haven't expanded Medicaid. Which could be next? Retrieved November 20, 2014, from h#p://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/29/23-states-still-havent-expanded-medicaid-which-could-be-next/

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receive treatment because they view costs as prohibitive.17 Estimates indicate that expanding Medicaid could cover 190,000 North Carolinians with mental health conditions.18 Medicaid expansion can improve mental health coverage, provide early detection and access to treatment, and have a profound impact on vulnerable individuals experiencing mental illness in North Carolina.

The paper is structured as follows: the first section  discusses the current structure of Medicaid  as it relates to mental health coverage both nationally and in North Carolina; the second section provides examples of other states’ Medicaid expansion to  demonstrate  impacts on mental health care access and on state and local economies, and this section also highlights the main tenets of the North Carolina expansion debate; and the final section  makes recommendations for Medicaid expansion in North Carolina within the current Medicaid expansion debate in the state.

MEDICAID AND MENTAL HEALTH CARE

The structure of Medicaid and mental health coverageSince its creation in 1965, Medicaid has been an indispensible health insurance program for low-income children and adults, pregnant women, seniors 65 and older, and individuals with disabilities. The program currently provides insurance coverage for a range of health services for 31 million children, 11 million adults, nearly 9 million individuals with disabilities, and 4.6 million low-income dual eligible seniors who are eligible for both Medicare and Medicaid, and finances 40 percent of all births in the United States.19, 20

Medicaid connects low-income Americans to managed care plans directed by the states that cover a wide range of benefits and limit out of pocket costs for beneficiaries. The federal government establishes rules for eligibility, determines which services must be covered, and recommends how those services should be delivered. States must meet these minimum federal requirements in order to receive federal funding, and they have the option to provide additional services or include additional eligibility groups.21

Medicaid provides a safety net for individuals and families during economic downturns, provides a coverage option for individuals caught in generational or systemic poverty, and finances providers and hospitals that serve low-income and uninsured Americans.22

States have a great deal of flexibility in creating state-specific benefit packages that reach broader groups of people or provide additional services under the program.23 North Carolina expands income eligibility for some federally required groups, and also issues traditional Medicaid eligibility to low-income families who qualify for the Work First Family Assistance program, recipients of adoption assistance and foster care, individuals receiving SSI or supplementary SSI payments, aged, blind, or disabled (ABD) individuals in group living arrangements, and certain disabled children age 18 or under who are living at home and who would be eligible for Medicaid if they were in an institution.24

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17 Pearlman, S. (2013). The Patient Protection and Affordable Care Act: Impact on Mental Health Services Demand and Provider Availability. Journal of the American Psychiatric Nurses Association, 19(6), 327-334.18 American Mental Health Counselors Association (AMHCA). (2014, February 26). Dashed hopes, broken promises, more despair: How the lack of state participation in Medicaid expansion will punish Americans with mental illness. Retrieved from h#p://www.amhca.org/assets/content/DashedHopesNorthCarolina1.pdf19 h#p://www.cms.gov/About-CMS/Agency-Information/History/index.html?redirect=/history/20 h#p://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Population/By-Population.html21 h#p://kff.org/medicaid/fact-sheet/the-medicaid-program-at-a-glance-update/22 h#p://kff.org/medicaid/fact-sheet/the-medicaid-program-at-a-glance-update/23 h#p://store.samhsa.gov/shin/content//NMH05-0202/NMH05-0202.pdf24 “SSI” describes Supplemental Security Income for individuals with limited income and financial resources, as provided by the Social Security Adminstration.

Copyright 2014, the Roosevelt Institute. All rights reserved. WWW.ROOSEVELTCAMPUSNETWORK.ORG

Before the passage of the ACA in 2010, mental health and substance abuse services – combined as “behavioral health” – were optional services under the Medicaid program. All states, however, provided mental health services and most states provided limited substance abuse treatment coverage. States had flexibility in designing their Medicaid behavioral health packages and could decide how they were delivered.

Previously, service categories that could provide behavioral health services included:25

Inpatient hospital services; Outpatient hospital services; Federally qualified health center services; Rural health center services; and Physician services.

North Carolina’s current Medicaid program follows the general trend of covering inpatient, outpatient, and rural mental health services that would otherwise be out of reach for low-income Americans.26

Even though the state has not expanded Medicaid, it has expanded current benefits for Medicaid recipients. As of January 2014, mental health and substance use disorder services, including behavioral health treatment, must be provided through ACA-established Essential Health Benefits (EHB) to all new Medicaid enrollees.27 Medicaid coverage must now match the benefits provided in a “typical employer plan” in each state.28

For 2014, North Carolina did not select its own benchmark plan and defaulted to the Department of Health and Human Services (HHS)-selected state small group plan with the largest enrollment as its benchmark. Notably, North Carolina was one of only two states that did not hold public meetings in the EHB benchmark decision-making process.29 A snapshot of the 2014 North Carolina benchmark mental health and substance use benefits is shown below in Table 1.

Table 1. North Carolina EHB Benchmark Plan Benefits 201430

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25 h#p://store.samhsa.gov/shin/content//NMH05-0202/NMH05-0202.pdf26 Medicaid Home | Medicaid.gov. (n.d.). Retrieved from h#p://www.medicaid.gov/27 “Essential Health Benefits” are a set of health service categories that must be covered by insurance plans beginning in 2014 as established by the ACA.28 Benchmark “typical employer plan” can be 1) the largest plan by enrollment in any of the three largest products by enrollment in the state’s small group market, 2) any of the largest three state employee health benefit plans options by enrollment, 3) any of the largest three national Federal Employees Health Benefits Program (FEHBP) plan options by enrollment, or 4) the HMO plan with the largest insured commercial non-Medicaid enrollment in the state.

Benefit Description Exclusions

Mental/Behavioral Health Outpatient Services

Evaluation and diagnosis; Medically necessary biofeedback; Neuropsychological testing; Partial day hospitalization; Intensive therapy services

Marital counseling

Mental/Behavioral Health Inpatient Services

Mental/behavioral health inpatient services Inpatient residential treatment centers; Supervised living

Substance Use Disorder Outpatient Services

Evaluation and diagnosis; Partial day hospitalization; Intensive therapy services

Substance Use Disorder Inpatient Services

Inpatient residential treatment centers; Detoxification

Inpatient residential treatment centers; Supervised living

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Mental illness in North CarolinaA wide body of research shows that mental illness disproportionally affects individuals with low household incomes. Adults with family incomes less than 100 percent of the FPL have higher rates of mental illness (29.5 percent) than adults with family incomes between 100 and 199 percent of the FPL (23.3 percent) and adults with family incomes above 200 percent of the FPL (17 percent).31 The impact of the 2008 recession reached far beyond labor and housing markets – longitudinal studies conducted before, during, and a"er the recession showed that decreases in household income are associated with heightened risk for mental disorders.32

Of the 9.8 million North Carolina residents in 2013, approximately 350,000 adults had a serious mental illness and more than 100,000 children had serious mental health conditions.33 Untreated mental disorders can have deleterious and o"en fatal consequences, including homelessness, violence, and incarceration. In 2011, 1,213 North Carolina residents died by suicide, which is almost always the result of untreated mental illness.34

Approximately 190,000 North Carolinians with mental health conditions could be covered by Medicaid expansion. This represents approximately 30 percent of all uninsured individuals who would be eligible for Medicaid if North Carolina expanded the program.35

Mental health care affordability and accessibility in North CarolinaMental health systems across the country have faced overwhelming challenges including stigma and facility shortages that limit providers’ ability to effectively provide care to patients. But in the last 10 years, there have been concentrated efforts to improve the coordination and delivery of mental health and substance abuse care in North Carolina. Community hospital capacity for behavioral health has increased, crisis support has improved, and new modes of care delivery, including telemedicine, have expanded across the state.36 Additionally, North Carolina was one of the first states to pass mental health parity legislation for individuals with serious mental illnesses.37, 38

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29 h#p://www.commonwealthfund.org/~/media/files/publications/issue-brief/2013/mar/1677_corle#e_implementing_aca_choosing_essential_hlt_benefits_reform_brief.pdf30 h#p://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html#North Carolina31 U.S. Dept. of Health and Human Services. (2012, January). Results from the 2010 National Survey on Drug Use and Health: Mental Health Findings. Retrieved from h#p://www.samhsa.gov/data/nsduh/2k10MH_Findings/2k10MHResults.pdf32 h#p://www.ncbi.nlm.nih.gov/pubmed/2146436633 h#p://naminc.org/nn/misc/NCstats.pdf34 h#p://www.suicidology.org/Portals/14/docs/Resources/FactSheets/2011OverallData.pdf35 h#p://www.amhca.org/assets/content/DashedHopesNorthCarolina1.pdf36 h#p://www.ncmedicaljournal.com/archives/?7330437 www.nami.org/gtsTemplate09.cfm?Section=Grading_the_States_2009&Template=/contentmanagement/contentdisplay.cfm&ContentID=7491238 “Mental health parity” describes equal treatment of and payment for mental health conditions and other physical health conditions. Traditionally, mental health coverage included higher cost sharing and restrictive limits on inpatient or outpatient stays.

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Figure 1. Costs of Treatment for Behavioral Health Disorders

Despite these improvements, North Carolina fails to meet the needs of its low-income, mentally ill population. Notably, the state’s public mental health system reaches only 34 percent of adults with serious mental illnesses and only 27 percent of individuals with any behavioral health disorders including substance abuse.

The exorbitant cost of mental health treatment is a major barrier to care for many patients. Currently, more than 50 percent of individuals with mental illness do not receive treatment because they view costs as prohibitive, and individuals are more likely to pay out-of-pocket costs for physical treatments rather than mental health treatments because they prioritize physical health needs.39 In 2004, the mean cost of a physician office visit related to psychotherapy or mental health counseling in Southern states was $97.40 As illustrated in Figure 1, in 2011, the average cost of a hospital stay for schizophrenia was $7,500; for bipolar disorders was $5,600; for drug-related disorders was $4,900; and for anxiety disorders was $4,500.41 The data show that appropriate treatment is almost always decidedly out of reach for many low-income, uninsured Americans.

MEDICAID EXPANSION

Mental health care improvements post-expansion in other statesIn legislatures across the country, two primary concerns about Medicaid expansion related to mental health care include expansion costs and lack of provider capacity to treat patients. One study estimates that nationwide, approximately 62.5 million Americans will be newly eligible for mental health care benefits across all provisions of

$0! $2,000! $4,000! $6,000! $8,000!

Schizophrenia/other psychotic disorders!

A"ention-deficit disorders!

Average cost of hospital stay for MH!

Bipolar disorders!

Alcohol-related disorders!

Drug-related disorders!

Depression!

Anxiety disorders!

Pregnancy-related disorders!

Adjustment disorders!

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39 Pearlman, S. (2013). The Patient Protection and Affordable Care Act: Impact on Mental Health Services Demand and Provider Availability. Journal of the American Psychiatric Nurses Association, 19(6), 327-334.40 h#p://meps.ahrq.gov/mepsweb/data_files/publications/st157/stat157.pdf41 h#p://www.healthleadersmedia.com/content/270631.pdf

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the ACA, resulting in an 18 percent proportional decrease in supply of mental health care providers. Additionally, the study suggests that high-needs mental health patients will be smaller in number, but much more costly, than the lower-acuity, mildly symptomatic majority of mental health patients.42

North Carolina can relate to discussions taking place in other states. For example, while mental health providers in Illinois advocate expansion for improved access to mental health services among the state’s low-income population, it is unknown whether community mental health centers will need to increase their staffing, and if so, whether enough providers will be drawn to the poorly paid specialty. However, the state notes several benefits to expansion, including the addition of funding for the state’s struggling public mental health system and the addition of patients to existing integrated care models.43

To date, the most successful example of Medicaid expansion for improving mental health care is in the state of Colorado. Colorado was one of the first states to expand Medicaid and made significant efforts to advertise the expansion before enrollment took place. The results were remarkably positive – community mental health centers saw significant increases in patients needing care, indicating pent-up demand among the newly eligible Medicaid population. With foresight, the state built up the mental health workforce by hundreds in order to manage the increase. Additionally, hospitals in Colorado are continuing to expand inpatient bed capacity to handle greater demand for inpatient mental and behavioral health services, drawing significant revenue to hospitals with mental health care specialties.44

Expanding Medicaid improves state and local economiesIn several states, including Colorado, Ohio, Rhode Island, Maryland, and South Carolina, governors are calling for more state funding for mental health services. State-level mental health care funding dropped $4.35 billion between 2009 and 2012 across all states due to budget cuts from the 2008 recession.45 Young adults are disproportionately affected by mental illness, and as a critical portion of the nation's workforce, their treatment has economic importance. Notably, every dollar spent on treatment for depression can generate $7 for the economy as individuals recover and return to work. On top of this, costly hospital admissions can be reduced by 40 percent if individuals are treated in community mental health centers first.46 Medicaid expansion is a key feature of the ACA that can improve mental health access in states experiencing budget crises, as North Carolina is today.

One North Carolina-based report examines the specific impact of Medicaid expansion on the North Carolina economy. According to the analysis, new funds from Medicaid expansion would generate 25,000 jobs by 2016, most of which would be in the private sector. Remarkably, North Carolina would have saved $37.8 million in FY 2014. Additionally, the state could save $120.8 million in FY 2015 and $124.2 million in FY 2016. Offse#ing these savings with estimated state expenditures for newly eligible Medicaid recipients, the state would save a total of $65.4 million between FY 2014 and FY 2021.47

Expanding Medicaid will have a significant impact on North Carolina’s economy. Not only will the state save financially as the federal government pays a significant portion of expanding the program, but local hospitals will

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42 Pearlman, S. (2013). The Patient Protection and Affordable Care Act: Impact on Mental Health Services Demand and Provider Availability. Journal of the American Psychiatric Nurses Association, 19(6), 327-334.43 Olsen. (2013, August 5). ACA's Medicaid expansion potential boon for mental-health patients, providers. The State Journal-Register. Retrieved from h#p://www.sj-r.com/article/20130805/News/30805990944 h#p://www.healthnewscolorado.org/2014/08/06/medicaid-expansion-creates-explosion-in-demand-for-mental-health-care/45 Rolfes. (2013, February 22). Medicaid Expansion to Boost Access to Mental Health Services. PBS NewsHour. Retrieved from h#p://www.pbs.org/newshour/rundown/medicaid-expansion-will-expand-access-to-mental-illness-treatment/46 Rolfes. (2013, February 22). Medicaid Expansion to Boost Access to Mental Health Services. PBS NewsHour. Retrieved from h#p://www.pbs.org/newshour/rundown/medicaid-expansion-will-expand-access-to-mental-illness-treatment/47 h#p://www.nciom.org/wp-content/uploads/2013/01/FULL-REPORT-2-13-2013.pdf

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see significant reductions in the $300 million annual uncompensated care burden that limits hospitals’ ability to expand and improve services.48 As it stands, hospitals receive no payment if a patient enters the emergency room or a physician's office and is unable to pay. Instead, the patient is o"en included in the hospital’s charity care policy or the visit is wri#en off as uncompensated care. For Carolinas HealthCare System, the largest provider organization in North Carolina, charity care and bad debt currently make up approximately 10 percent of the yearly budget, which could be significantly decreased through expansion and additional revenues from the Medicaid program.49

The effect of uncompensated care on rural hospitals is significant. In September 2014, the only hospital in Belhaven, North Carolina was forced to close, prompting Republican Mayor Adam O’Neal to spend two weeks walking 237 miles to Washington, D.C. to demand Medicaid expansion.50 If North Carolina had expanded Medicaid, the hospital could have received increased reimbursement for patient visits instead of having to default to charity or uncompensated care, and thus avoided closure, which was brought on by an inability to operate at a positive margin.

For both adults and children, early identification and treatment of mental illness can keep conditions from worsening, as longer periods of abnormal thoughts and related behaviors have compounding effects and can limit the effectiveness of recovery efforts. In 2007, of the 7.6 million emergency department visits for mental illness in the United States, one in eight patients was uninsured. Uninsured patients are more likely to delay medical care due to prohibitive costs than insured patients, so expansion of the Medicaid program will help individuals get treatment before their situation becomes so drastic as to need emergency room services.51

Newly eligible Medicaid recipients will be able to use primary care doctors for preventive visits instead of relying on the costly emergency department, and employers could see a decrease in health insurance costs as the need for cost-shifting decreases.52 Additionally, Medicaid expansion will offset the $384.5 million in disproportionate share hospital (DSH) payment cuts that North Carolina will experience through 2019. DSH payments are traditionally paid to hospitals that serve a high proportion of Medicaid patients.53

The Medicaid expansion debate in North CarolinaRelated to behavioral health care, the North Carolina Medicaid program announced in 2011 – and switched in 2013 – from a traditional fee-for-service model to a local management entity managed care organizations (LME-MCOs) model. The new LME-MCO model manages the approximately $2 billion for mental health, intellectual and developmental disabilities, and substance abuse that the state sees each year. LMEs were created by the state in 2001, and the MCO model builds on this existing community infrastructure. The MCOs are accountable for the entire continuum of services in each area and must address the special needs of the Medicaid population in an area by providing education and access to primary care services. MCOs allow for budget predictability through capitated, population-based payments instead of individual fee-for-service payments and lessened administrative

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48 Helms & Pugh. (2014, October 5). North Carolina's $10 billion Medicaid challenge: Pay for other states or take federal money? Retrieved from h#p://www.charlo#eobserver.com/2014/09/02/5145802/north-carolinas-10-billion-medicaid.html#.VBm-3C5dUhQ49 Helms, & Pugh. (2014, October 5). North Carolina's $10 billion Medicaid challenge: Pay for other states or take federal money? Retrieved from h#p://www.charlo#eobserver.com/2014/09/02/5145802/north-carolinas-10-billion-medicaid.html#.VBm-3C5dUhQ50 h#p://www.npr.org/blogs/health/2014/08/01/336907606/a-conservative-mayor-fights-to-expand-medicaid-in-north-carolina51 h#p://kff.org/health-reform/fact-sheet/the-uninsured-and-the-difference-health-insurance/52 h#p://www.nciom.org/wp-content/uploads/2013/01/FULL-REPORT-2-13-2013.pdf53 h#p://www.nciom.org/wp-content/uploads/2013/01/FULL-REPORT-2-13-2013.pdf

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burden by only contracting with one MCO instead of many fee-for-service providers.54 The recently consolidated LME-MCO coverage areas are depicted in Figure 2 below.

Figure 2. LME-MCO Structure in North Carolina

The North Carolina legislative leadership has stated that the Medicaid system must be sustainable and have budget predictability before it can be expanded. But the recent announcement of a $63.6 million budget surplus for the state’s Medicaid program for FY 2013-14 by North Carolina DHHS Secretary Dr. Aldona Wos positions Medicaid expansion as a feasible, budget-appropriate solution to expand access to mental health services for North Carolina’s low income population.55

To draw on another state’s experience, Colorado saw an increase in demand for mental health care services and built up the mental health workforce by hundreds in order to manage the increase. In North Carolina, only 11 of 100 counties are designated as being in an official mental health provider shortage, and only seven counties have any unmet need for non-prescribing mental health care providers. Most counties across the state have unmet needs for mental health providers who can prescribe medication, but recent developments like the new MCO model for behavioral health care can impact the distribution of mental health providers by implementing incentives or telepsychiatry initiatives to extend prescribing abilities to rural areas. The North Carolina Commission for Mental Health, Developmental Disabilities, and Substance Abuse Services’ Workforce Development Initiative provides additional recommendations for strengthening the mental health workforce in North Carolina.56

Additionally, Cardinal Innovations Healthcare Solutions – operating the state’s Northwest Central MCO and serving 1.4 million people across 15 counties – shows success in the Medicaid program that can be further improved by the addition of money and patients to the existing MCO model. Between July 2012 and June 2013, Cardinal

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54 h#p://www.ncmedicaljournal.com/wp-content/uploads/2012/05/NCMJ_73306_FINAL1.pdf55 h#p://www.journalnow.com/business/business_news/local/wos-dhhs-will-build-stability-before-expanding-medicaid/article_280e5d9f-14a8-53ec-a006-1fcdb0674a09.html56 h#p://www.ncdhhs.gov/mhddsas/statspublications/reports/workforcedevelopment-4-15-08-initiative.pdf

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Innovations added 900 providers to the network, and the organization will add 80 new jobs to the Charlotte region in the next few years.57 This number would likely increase if thousands of new patients were added through expanded Medicaid eligibility.

Today, North Carolina is easily accommodating individuals seeking treatment for mental illnesses. Systems will need to expand to meet the demand of the influx of patients that Medicaid expansion would create, but the mental health system in North Carolina is strong, locally focused, and able to adapt to the influx. North Carolina can be the example for turning the challenge of Medicaid expansion into an asset for job creation.

North Carolina is poised to succeed by implementing Medicaid expansion in 2015. A Medicaid budget surplus and the adequacy of the mental health workforce provide ample support for expansion of Medicaid as the key policy solution to improving mental health access and outcomes in North Carolina. Senator-elect Thom Tillis recently agreed, “We’re trending in a direction where we should consider potential expansion … I would encourage the state legislature and the governor to consider it.”58

Approximately 190,000 mentally ill North Carolinians would gain health insurance coverage and therefore access to early intervention and treatment for mental illness that would impact their personal, educational, and working lives and prevent destructive consequences for them and for their communities.

CONCLUSION AND RECOMMENDATIONAs the most important source of funding for mental health care at both the national and state level, Medicaid plays a crucial role in the delivery of mental health care services in North Carolina. Expansion of the Medicaid program will provide indispensable psychotherapy and psychiatric services to individuals with mental illnesses who might not otherwise receive treatment.

Results from other expansion states show pent up demand for mental health services, significant reductions in uncompensated care, and financial and healthcare relief for vulnerable residents. North Carolina could save a total of $65.4 million by 2021 and significantly reduce the $300 million annual uncompensated care burden on state hospitals. The state could also add 25,000 jobs by 2016 and provide mental health treatment to thousands of residents so that even more individuals can return to work.

The promise of Medicaid expansion for 190,000 mentally ill North Carolinians is threatened by the state government’s reluctance to seriously consider expansion at the General Assembly level. Expanding Medicaid is a critical step in meeting the mental health care needs of low-income adults and expanding financial opportunities to individuals currently held down by expensive mental health treatment costs. As it stands, North Carolina’s mental health system reaches only 34 percent of adults with serious mental illnesses and only 27 percent of individuals with any behavioral health disorders. Key stakeholders across the state – including the North Carolina Institute of Medicine, hospital systems like Vidant Health, and even a Republican mayor – recommend expanding Medicaid in North Carolina.

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57 h#p://www.bizjournals.com/charlo#e/news/2014/01/07/cardinal-innovations-to-add-charlo#e-service.html?page=all58 h#p://www.charlo#eobserver.com/2014/10/23/5263123/thom-tillis-once-foe-of-medicaid.html#.VGA3fvTF8ht

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The North Carolina Institute of Medicine writes:

Based on North Carolina Division of Medical Assistance’s projections of the number of people who may gain Medicaid coverage and the costs to the state, and the REMI analysis of jobs created, increase in the state’s gross domestic product, and new tax revenues generated as a result of the expansion, the NCIOM recommends that North Carolina expand Medicaid eligibility up to 138 percent FPL.59

Data shows social and economic benefits of expanding Medicaid eligibility to vulnerable residents who are in desperate need of access to mental health and behavioral treatments. Access to early identification and treatment of mental illness can impact individuals, communities, and economies. North Carolina and its 500,000 currently uninsured would-be-Medicaid-eligible residents, and 190,000 currently uninsured would-be eligible residents with mental illnesses, would benefit greatly from expansion of the program and from its positive gains felt across the state.

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59 h#p://www.nciom.org/wp-content/uploads/2013/01/Medicaid-summary-FINAL.pdf

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APPENDIX

Exhibit 1. Pre-ACA Eligibility as Percent of FPL

Children Adults

State Ages 0-1 Ages 1-5 Ages 6-18 Pregnant Women

Parents Other Adults

Alabama 141% 141% 141% 141% 13% 0%

Alaska 203% 203% 203% 200% 129% 0%

Arizona 147% 141% 133% 156% 133% 133%

Arkansas 211% 211% 211% 209% 133% 133%

California 261% 261% 261% 208% 133% 133%

Colorado 142% 142% 142% 195% 133% 133%

Connecticut 196% 196% 196% 258% 196% 133%

Delaware 212% 142% 133% 212% 133% 133%

DC 319% 319% 319% 319% 216% 210%

Florida 206% 140% 133% 191% 30% 0%

Georgia 205% 149% 133% 220% 35% 0%

Hawaii 308% 308% 308% 191% 133% 133%

Idaho 142% 142% 133% 133% 24% N/A

Illinois 142% 142% 142% 208% 133% 133%

Indiana 208% 158% 158% 208% 20% N/A

Iowa 375% 167% 167% 375% 133% 133%

Kansas 166% 149% 133% 166% 33% 0%

Kentucky 195% 159% 159% 195% 133% 133%

Louisiana 212% 212% 212% 133% 19% N/A

Maine 191% 157% 157% 209% 100% N/A

Maryland 317% 317% 317% 259% 133% 133%

Massachuse#s

200% 150% 150% 200% 133% 133%

Michigan 195% 160% 160% 195% 133% 133%

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Children Adults

State Ages 0-1 Ages 1-5 Ages 6-18 Pregnant Women

Parents Other Adults

Minnesota 283% 275% 275% 278% 200% 200%

Mississippi 194% 143% 133% 194% 22% 0%

Missouri 196% 150% 150% 196% 18% N/A

Montana 143% 143% 143% 157% 47% N/A

Nebraska 213% 213% 213% 194% 57% 0%

Nevada 160% 160% 133% 160% 133% 133%

New Hampshire

318% 318% 318% 196% 133% 133%

New Jersey 194% 142% 142% 194% 133% 133%

New Mexico 300% 300% 240% 250% 133% 133%

New York 218% 149% 149% 218% 133% 133%

North Carolina

210% 210% 133% 196% 45% 0%

North Dakota

147% 147% 133% 147% 133% 133%

Ohio 206% 206% 206% 200% 133% 133%

Oklahoma 205% 205% 205% 133% 42% N/A

Oregon 185% 133% 133% 185% 133% 133%

Pennsylvania 215% 157% 133% 215% 33% 0%

Rhode Island 261% 261% 261% 190% 133% 133%

South Carolina

208% 208% 208% 194% 62% 0%

South Dakota

182% 182% 182% 133% 58% 0%

Tennessee 195% 142% 133% 195% 105% 0%

Texas 198% 144% 133% 198% 15% 0%

Utah 139% 139% 133% 139% 51% N/A

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Children Adults

State Ages 0-1 Ages 1-5 Ages 6-18 Pregnant Women

Parents Other Adults

Vermont 312% 312% 312% 208% 133% 133%

Virginia 143% 143% 143% 143% 49% 0%

Washington 210% 210% 210% 193% 133% 133%

West Virginia

158% 141% 133% 158% 133% 133%

Wisconsin 301% 186% 151% 301% 95% 95%

Wyoming 154% 154% 133% 154% 56% 0%

US Average 211% 187% 180% 198% 97% 89%

NC Compared to Avg.

-0.3% 12.3% -26.0% -1.0% -53.7% -100.0%

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Exhibit 2. Minimum Federal Eligibility Requirements

Groups that must be eligible for Medicaid include:

Children under age 6 and pregnant women in families with incomes up to 133% FPL

Children aged 6-19 in families with incomes up to 100% FPL

Low-income families with children that would have qualified for Aid to Families with Dependent Children (AFDC) under the State plan in effect as of July 1996

Children who qualify for foster care and adoption assistance

Recipients of Federal Supplemental Security Income (SSI)

Certain other groups of Medicaid beneficiaries may keep Medicaid for a time even if they cease to qualify for the program

Exhibit 3. North Carolina Medicaid Eligibility

North Carolina expands on the minimum federal requirements to issue traditional Medicaid eligibility to all of the following groups:

Low-income families who qualify for Work First Family Assistance program

Parents/caretakers and children ages 19-21 from families with incomes below a limit established by the state that varies by family size, but is about 31% FPL

Pregnant women and infants in families with incomes up to 185% FPL

Children ages 1-5 in families with incomes up to 133% FPL

Children ages 6-18 in families with incomes up to 100% FPL

Recipients of adoption assistance and foster care

Individuals receiving SSI or supplementary SSI payment

Individuals who meet SSI definition of disability or are over age 65, and have income up to 100% FPL and limited assets

ABD individuals in group living arrangements as defined under SSI

Certain disabled children age 18 or under who are living at home, who would be eligible for Medicaid if they were in an institution

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