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You have to run faster than the other guy

April 1, 2006
by Monica E. Oss
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We don't have to accept Medicaid cuts as inevitable, but we do have to plan for them

This winter Congress passed a $39.7 billion budget reconciliation bill that will reduce Medicaid spending by almost $5 billion over the next five years and reduce spending another $9 billion through regulatory changes. Of particular concern to behavioral health provider organizations is a provision requiring that states have all current and new Medicaid beneficiaries document their citizenship, regardless of physical or mental condition. In addition, two provisions of the final bill threaten community-based mental health providers:

  • Targeted case management (TCM) provisions are expected to reduce TCM spending by $760 million over the next five years and $2 billion over the next ten years. In addition, the final language casts doubt on who is responsible for paying for case management and TCM services.

  • Cost-sharing requirements in the bill are expected to cut Medicaid by $1.9 billion over the next five years, primarily by reducing utilization through increased cost sharing with Medicaid beneficiaries. These provisions include: (1) authorizing states to increase the existing $3 copayment for services by using the Medical Consumer Price Index, which increases twice as fast as beneficiaries’ incomes; (2) new prescription drug cost sharing; (3) new cost sharing for emergency medical facility use; and (4) requiring community behavioral health providers to collect copayments as a condition of providing care.

At the state level we've seen Medicaid cost-containment strategies that reduce the short-term costs of physical health conditions but, for mental health and addictions, are likely to increase state spending in other areas. Yet fragmented funding of treatment (multiple systems and modalities) makes it difficult to implement possibly cost-effective disease management programs. What we need is not Medicaid “reform” that permits increased service fragmentation with increasingly arbitrary eligibility and benefit limits. This only will exacerbate an already precarious situation in which professionals and provider organizations (along with county governments) are put in the position of “rationing” services.

Instead, we need policy leadership that will integrate fragmented behavioral health treatment resources, support recovery through consumer choice and individual approaches, and focus on the system-wide value of public monies, not just their cost.

Regrettably, Congress is balancing the federal budget with cuts to Medicaid and moving these tough leadership issues to the state level. For the congressional leadership, it's a simple solution to a complex problem—let the states trade federal funding for flexibility and pass along the policy decisions. But what the states are getting may be a Trojan horse. Limiting Medicaid funding—the largest funding source for public mental health and addiction treatment—is going to increase pressure for new funding from state and local governments.

A friend of mine said he was tired of my “doom and gloom” assessment of the current situation. Shouldn't executives in the field accept the new reality—that the federal government's support of Medicaid is going to decrease as states struggle with meeting rising demand—and just get on with it? Well, no and yes.

On a policy level, the answer is no. Those of us representing consumers with behavioral health disorders never should accept bad policy as inevitable. But on the management practices side, the answer is yes. Once the policy battles are fought and over, organizational executives have to accept the situation and develop market and management strategies in response to the changing environment.

So what's an executive to do? Run faster than the other guy.

You probably know the story: Two guys are out in the bush when a bear comes into view. One of them quickly puts on his sneakers. “Are you nuts?” says the other guy. “You'll never be able to outrun a bear.” “I don't need to,” the first guy calls over his shoulder. “I only need to outrun you.”

In turbulent market times (such as those ahead), it is survival—and not excellence—that determines winners. In the behavioral health marketplace, to run faster is to better understand than your competitors the costs of services and make the most of available economies of scale. As in the words of Charles Lee, H.J. Louis Professor of Management at Cornell University's Johnson Graduate School of Management, “No matter how the race is defined, you still have to run faster than the other guy.”

Monica E. Oss, Editor Emeritus of Behavioral Healthcare, is CEO of OPEN MINDS, a research and management consulting firm for the behavioral health and social services field.