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November 22, 2013 at 3:25 PM

Cold reception for Gov. Jay Inslee’s plan to bid out state mental health system

UPDATE: At right is the Department BH timelineof Social and Health Services’ timeline for opening the mental health system to competitive bidding (click on it to expand). It includes a long window for public comment and an even longer phase-in process. From what I’m hearing from providers, consumers and lawmakers since this original post, the public comment period is going to be rough.

ORIGINAL POST, Nov. 22, 3:25 p.m. – A sharp exchange Thursday between Gov. Jay Inslee’s human services director and the longest-serving state senator was a preview to an upcoming Legislative debate about Inslee’s plan to open Washington’s outpatient mental health system to competitive bidding.

Testifying before a Senate committee, Kevin Quigley, secretary of the Department of Social and Health Services, unveiled Inslee’s plan (here’s a one-pager on the plan) to respond to federal pressure to reconfigure the mental health system beginning in 2016.

DSHS Secretary Kevin Quigley

DSHS Secretary Kevin Quigley

Inslee’s proposal calls for the state, beginning as soon as next April, to open the state’s mental health and substance abuse treatment services to competitive bidding, likely drawing interest from private managed care firms. Bids would be accept by region. One potential model could include physical health care in the bidding as well.

If this sounds dry, think of it this way: Inslee is talking about one of the biggest privatizations of state services ever, with at least $750 million a year in spending and care for 135,000 severely ill people at stake.

And he wants lawmakers to do it this Legislative session.

That’s going to be a tough sell, given the reception Quigley got Thursday.

Quick background: Inslee’s plan responds to a July letter from federal Medicaid administrators, which declared that Washington’s county-based outpatient system, with 13 Regional Support Networks, broke federal contracting law because it was not competitively bid.

Washignton's outpatient mental health system today.

Washington’s outpatient mental health system today.

The letter was a shocker, because Medicaid had approved the same structure for 20 years. Changing it would be a huge deal, and the federal Centers for Medicare and Medicaid Services (CMS) gave no clear rational why they were yanking the state’s chain. At least two other states are in a similar position. A Seattle Times editorial described this “federal bureaucracy at its worst.”

Since then, DSHS has batted back and forth with Medicaid, but Thursday Quigley signaled that Inslee was done fighting. The state was preparing a “corrective action plan” to begin work to bid out the system.

At the hearing before the Senate Human Services and Judiciary committee, Sen. Jim Hargrove, D-Hoquiam, pounced. He and other senators think Inslee wilted under an unwarranted federal demand. Hargrove noted that state Attorney General Bob Ferguson and a Medicaid expert hired by DSHS both questioned the feds legal reasoning.

Committee chair Sen. Steve O’Ban, R-University Place, agreed. “Would you agree with me that the legal position of CMS is weak?” he asked Quigley.

Quigley’s response was unsatisfying to both. He essentially said the state had little to gain by “poking the moose in the eye” because Medicaid gives DSHS about half of its budget. If the state appeals and loses years down the road, Medicaid could “disallow” years of state spending, resulting in hundreds of millions of dollars in required pay-backs, Quigley said. “We’ve moved pretty much to make lemonade out of these lemons,” he said.

And Inslee’s plan, Quigley said, seizes an opportunity. Many states are already moving to integrate mental health, substance abuse treatment and primary health care, which have until now operated as inefficient, stand-alone “silos.”

But what seemed to anger Hargrove the most was Quigley’s assertion that “open competitive procurement” – letting private managed care firms take over – would lower costs and provide better care. Hargrove, a smart and experienced policy wonk on mental health care, made a good point in dressing down Quigley.

State Sen. Jim Hargrove

State Sen. Jim Hargrove

His point: Currently, counties are invested in having a good mental health systems, because counties also pay for law enforcement and health care. Twenty-two of the 39 counties (according to this DSHS handout) have passed a .1 percent local sales tax increase dedicated to mental health, raising an estimated $100 million this year. They’d justifiably get angry if a privately run mental health system, with its eye on the bottom line, failed to provide sufficient care to divert mentally ill people from jail.

“…Private companies profit, and they accumulate profit by not serving people,” said Hargrove. “Where do you think they’re going to end up? In our criminal justice system and in our emergency rooms.”

“…You could see where they’d be some concern here, no matter how great open competitive procurement sounds when you say it on TVW.”

Quigley, clearly flustered, left the hearing brusquely. Later, Hargrove paused in the hall. “Did I shoot the right messenger?” he asked.

This is just the beginning.

Comments | Topics: Jay Inslee, Jim Hargrove, mental health


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