Medicare Compliance & Reimbursement

But more cuts likely to follow as states grapple with deficits.

Mentally ill patients already are suffering "dire consequences" from recent Medicaid cuts, and trimming services for this most vulnerable population won't even help state budgets. That's the message the American Psychiatric Association, National Alliance for the Mentally Ill, and National Mental Health Association recently sent to the nation's governors.

Medicaid is the single largest source of financing for mental-health care in the United States, the groups pointed out in a Dec. 3 statement to the National Governors Association. Cutting Medicaid services that limit health care for the mentally ill merely forces many beneficiaries into already overcrowded hospital emergency departments as well as into jails and prisons, thus driving up costs in other areas such as corrections and trauma care, the statement says.

"Many states that have slashed Medicaid are now experiencing the disastrous aftermath," the groups say. For example, "the emergency room at Massachusetts General Hospital saw a 40 percent increase in psychiatric patients from April 2002 to April 2003." One Oregon woman's suicide attempt - after she was notified of cutbacks in psychiatric services, including the closing of mental-health clinics - ended up costing the state 50 times more for an intensive-care stay and rehabilitation than it would have spent to maintain mental-health care, the groups say.

When patients' medications are disrupted - either because of limitations on Medicaid prescriptions or cutbacks in community-based services that facilitate medication compliance - they are highly likely to end up in EDs, with "what I call a kind of psychiatric heart attack," says Sam Muszinsky, APA director of health-care systems and financing.

So far, information on the ED strains is anecdotal, Muszinsky admits, but the anecdotes are many and come from around the country. APA and the American College of Emergency Physicians are collecting hard data that they hope to release in January to document the shifted costs and consequences to trauma care of cutting mental-health services.

Cutting infrastructure - as when Oregon recently closed mental-health clinics - likely costs more in the end, says Muszinsky. Besides leaving the mentally ill population "on the verge of abandonment" by the health system, as clinics and dedicated beds close, "it requires new capital" to open them up again. Such cuts represent "lost capacity without a clear indication of how you get it back."

Up to now in the multi-year state budget crunch, 50 states have reduced or frozen Medicaid provider payments and placed controls on prescription-drug spending, says a new report from the NGA. Thirty-four states have reduced or restricted eligibility, 35 have reduced benefits, and 32 have increased copayments.

In the current fiscal year, states were spared from making some cuts because Congress offered temporary aid in the form of boosted federal matching payments. The absence of such funds for fiscal year 2005, however, "will force another round of difficult decisions in Medicaid," NGA says.