Medicaid waiver program wields big impact for LMEs

The North Carolina Department of Health and Human Services is cautiously moving forward with a plan to expand a waiver program that has demonstrated significant success for one Local Management Entity (LME).

The 1915 waiver program, which references a section of the federal Medicaid law, changes how most LMEs are configured and the types of services that they provide. The program is one of two changes being implemented by DHHS to the community mental health system to improve accountability, ensure medical necessity, and increase service use and cost oversight. Although to a lesser extent than the waiver program, the CABHA (Critical Access Behavioral Health Agency) model also has widespread financial and governance implications for counties.

The Association hosted a conference call March 18 for county managers, assistant managers and finance officers with DHHS Assistant Secretary Michael Watson and MH/DD/SAS Division Director Leza Wainwright to enable county officials to learn more about the initiatives.

Piedmont Behavioral Health LME, which is now known as PBH and is made up of Cabarrus, Davidson, Rowan, Stanly and Union counties, has been operating under a 1915 waiver since 2005. Based on its success with service performance and costs, the General Assembly and its Joint Legislative Oversight Commission on Mental Health/Developmental Disabilities/Substance Abuse Services have been pushing expansion of the waiver program.

DHHS sent out a Request for Applications in seeking one or two areas to be included in the waiver model, and four LMEs responded: East Carolina Behavioral Health, Mecklenburg County MH/DD/SAS, Sandhills Center for MH/DD/SAS, and Western Highlands Network. DHHS officials sought LMEs with a minimum of 70,000 Medicaid eligible citizens in their service area – a requirement that six LMEs currently meet. DHHS intends to award one or two 1915 waivers in July, with start-up dates planned for next January.

Plans call for the waiver model to be expanded throughout the entire state over the next several years. This process will reduce the number of LMEs through consolidation to meet the minimum population threshold.

The 1915 waiver allows the LME to waive some of the requirements for Medicaid. It establishes a managed care system for community mental health by combining services for all Medicaid eligibles into a single capitated funding model. Under this model, a qualifying LME would receive a fixed payment rate per Medicaid eligible member per month (pmpm) to pay for oversight, coordination and payment of all Medicaid mental health services in its counties.

New LME responsibilities include authorizing the payment for services, processing and paying claims, conducting care utilization and quality management functions, and developing and overseeing a closed network of service providers.

The capitated rate is based on historically driven service costs, and any increases in Medicaid eligible caseloads would be covered by the "pmpm" rate. Should actual service use and costs fall below this rate, the LME can retain the excess funds for investment in non-Medicaid services. If actual costs exceed the funds generated by the capitated rate, the LME is financially liable for assuring that Medicaid consumers continue to receive Medicaid-eligible services.

One concern that county officials expressed during the conference call is that if an LME is dissolved and its fund balances do not satisfy its total indebtedness, remaining debts are apportioned to its member counties. This transfers financial risk to LMEs and, indirectly, to member counties.

DHHS requires each participating LME to create a risk reserve and to build reserve assets to at least 16 percent of the capitation budget. The department will provide an incentive of 2 percent of capitation each year to the qualifying LMEs to help build their risk reserve, and officials recommend that these LMEs purchase stop loss insurance as well.

LMEs must be fully divested of services, must have been fully accredited for three years, must meet single-stream funding requirements, and must have a letter of support from the full LME board that is assuming the financial responsibility.

The new CABHA provider model is being implemented for frequently used services and for new services that will replace community support services in 2010-11. CABHA requires providers to offer services such as case management and day treatment as core services, plus at least two enhanced services such as intensive in-home and community support teams. A qualifying agency must have a medical director, a clinical director and a quality management/staff training director. CABHA providers must also be nationally accredited for at least three years.

The purpose of the CABHA model is to establish a strong clinical foundation for community mental health services, requiring medical necessity for service utilization. Currently, more than 600 separate providers offer the range of CABHA services, although many offer only one of the enhanced services needed to qualify for CABHA status.

DHHS officials anticipate fewer numbers of qualified providers upon full CABHA implementation next fiscal year but expect service quality to markedly increase. Counties – particularly those at the far ends of the state – have expressed concerns that there may not be a CABHA provider located in every county. DHHS officials concede that this will likely be the case, although they point out that a CABHA can be located in any county and serve every county in its geographical region.

The department is conducting a certification process to identify providers that will qualify for the CABHA status.