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After years of deep cuts, state behavioral health budgets begin a slow recovery

May 23, 2014
by Brian Albright
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Is there light at the end of the tunnel?

In 2009, the budget picture for local mental health agencies was bleak. Budget reductions as high as 25 percent were handed down by state legislatures in the wake of the nation’s worst economic downturn since the Great Depression.

Fast forward five years, and the budgeting and legislative landscape has shifted significantly. A number of factors have improved the budget picture across the country: the passage of the Affordable Care Act (ACA), the mental health parity law, an improving economy, and calls for more support after several high-profile mass shootings drew attention to mental health.

According to data from NAMI, 36 states have raised their behavioral healthcare budgets for 2014, while another eight have maintained their levels of funding, leaving the balance of six states with reductions. Under coverage expansion enabled by ACA, states have brought millions of previously uninsured adults into the system, and many of the new enrollees will access behavioral healthcare services for the first time outside of the charity care model.

Even Texas, which in 2010 was ranked 49th in per capita expenditures on mental health services, recently allocated an unprecedented $259 million increase over two years—the largest increase in the state's history.

However, mental health and substance abuse treatment budgets are hardly making net gains. "Things are a little better for states than they were a year or two ago, but we're starting at negative $4.5 billion," says Ron Manderscheid, executive director of the National Association of County Behavioral Health and Developmental Disability Directors (NACBHDD).

That means service availability in many states is just now returning to pre-recession levels, with a long way to go. "States have found ways to cope and adjust with reduced funding levels, but a lot of that coping has resulted in drastic cuts to services and capacity,” says Mohini Venkatesh, vice president, practice improvement, National Council for Behavioral Health.

State Budgets On the Rise

Some of the national budget rebound is due to the improving economy in most states; overall state budgets that were previously in crisis five years ago are slowly being rebuilt. According to the National Association of State Budget Officers (NASBO), overall state revenues rose 5.7 percent in fiscal 2013, and are expected to rise slightly by 0.8 percent in 2014. However, last year’s ultimate outlays for all 50 states were still below the fiscal 2008 pre-recession peak (adjusted for inflation).

Some states are crawling out of particularly big holes. Between 2009 and 2012, California cut $764.8 million from its mental health budget according to NAMI, while New York cut $204.9 million. During the same timeframe, South Carolina reduced its state general fund mental health budget by 39.3 percent; Alabama cut 36 percent; and Alaska reduced expenditures by 32.6 percent.

That's finally changing. According to NAMI, with 36 states raising budgets and eight remaining flat, that leaves just six states (Alaska, Louisiana, Maine, North Carolina, Nebraska and Wyoming) set to reduce mental health budgets in 2014. But exactly what those budget figures translate to in care delivery varies significantly from state to state.

Texas, for example, previously lagged behind every state except Idaho in mental health spending. Its new, more substantial budget will put the state closer to the national median this year. Roughly $48 million of the increase is directed at eliminating waiting lists for community health centers, and data from the Texas Department of State Health Services indicates that the lists have already been reduced 42 percent.

A large number of Texans with mental health and substance abuse problems live in poverty, and since the state has opted to not expand Medicaid under ACA, those individuals have been acutely affected by lack of coverage and access. The state has some of the strictest Medicaid eligibility requirements in the country. What’s more, ACA rules reduce Disproportionate Share Hospital payments, making access even more challenging within the system overall.

Patient advocacy groups, insurers and some local lawmakers have called for Texas to adopt Medicaid expansion and accept the available federal dollars. A study commissioned by Texas Impact and the Methodist Healthcare Ministries of South Texas estimates that Medicaid expansion could free up as much as $1.2 billion in general revenue dollars over two years that would otherwise be spent on healthcare for lower income patients.

A key issue in Texas is the lack of continuity of care and the lack of program coordination. While there is a safety net in place, many of the helpful initiatives are isolated efforts. Supporters hope Medicaid expansion will streamline programs and simplify the delivery.

Specific Programs

But the increased resources don't necessarily help all mental health consumers. Many states allocated new funds in response to local tragic events such as the shooting that occurred in Newton, Conn., in 2012, but those funds are often targeted at very specific programs. The population at large won’t necessarily benefit.

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