Inslee seeks more health privatization

Effort to meet federal requirement on mental health treatment could spread

Staff writerDecember 15, 2013 

Washington’s experiment with privatizing the oversight of mental-health treatment could expand from Pierce County to other parts of the state.

Under a proposal from Gov. Jay Inslee, insurance companies would be able to compete with county governments for regional mental health contracts. The proposal responds to a warning from the federal government while also advancing Inslee’s agenda of syncing medical care for the mind and the body.

Some $1.2 billion per biennium in mental health treatment for 59,000 people a month goes to local governments everywhere except in Pierce County, where the company OptumHealth took over in 2009.

Federal officials say Washington state must open most of those services to competitive bidding. Pushback from state senators has paused Inslee’s push toward compliance until the feds give more details, but hasn’t changed his goal or his aim to have much of the new system in law by early next year.

Optum expects to seek expansion to other regions of the state under the plan. Whether or not that happens, lessons from the company’s work in Pierce County might come under the microscope as lawmakers weigh their statewide choices.

“I think you find many fans and a few critics” of Optum, said Kevin Quigley, secretary of Social and Health Services under Inslee. “I think objectively you’d have to say that their performance is well above average. I think you’d have to say that they went through a learning curve on how to better deal with the cities and the counties on criminal justice issues, and they’re making progress there as well.”

Criminal justice is a key question in any overhaul because of the problems caused by the relatively small fraction of people with mental illness who commit violence.

If patients don’t receive treatment, they could end up dumped in the laps of counties that manage jails and courts. That’s part of why counties argue they should remain in charge of the system.

Counties also say their elected officials are accountable to citizen complaints, unlike insurance companies.

“The big elephant in the room, obviously, is health care plans are inextricably linked with profit,” said Abby Murphy, a lobbyist for the Washington State Association of Counties.

For at least one agency that treats people with the money passed down from the county middleman, there are worries that the plan could mean cuts to their funding.

Insurance plans take a bigger share of money for overhead expenses than the county-based system, argued Joe Roszak, CEO of Kitsap Mental Health Services in Bremerton.

With a commercial insurer, Roszak said, he hasn’t figured out how his agency would avoid “incurring additional cuts to our funding sources, which means cuts to direct services.” That’s part of why he favors working out the bugs in pilot projects before taking it statewide.

But the president of Molina Healthcare of Washington, one of the insurers interested in bidding for the state’s potential contracts, said his company could help coordinate care in ways that are better for people’s health and cost the state less.

Bela Biro argues that Molina keeps administrative expenses low.

“It’s one of our core values, that we focus on being prudent stewards of public funds,” he said.


Optum’s experience in Pierce County has been a pilot project of sorts.

A statewide crisis of long waits for treatment that are clogging jails and emergency rooms hasn’t missed Pierce.

But Optum says it has expanded services and treated more people, although the number of patients it cites still is less than in the last year the county was in charge.

Most of all, Optum says it has found ways to serve people in the community rather than in a hospital bed. The number of patients Pierce County sends to Western State Hospital, which had already shrunk by the time Optum came on the scene, has stayed low.

Critics have noted that Optum takes a larger cut of money for administration and profit than does the typical government-run network. It stays within what’s allowed by state contracts, taking just a bit less than the state maximum of 10 percent.

Cheri Dolezal, executive director of Optum’s Pierce County operation, said a private company has the benefit of being able to redirect savings to mental health services instead of a general fund. Regardless, she said, the contracting the state wants to do can’t be achieved without companies and counties working together.

“We’ve got to stop battling,” she said. “I think whoever is getting the kind of performance outcomes, manages to get things done, I don’t think there’s a single entity who can do it. It has to be working side-by-side with county government.”

Optum and other insurance companies, from for-profit Molina to nonprofit Community Health Plan of Washington, support the governor’s plan in concept.

“We think that we can help people achieve healthy outcomes if we have more integration,” Dolezal said.

Molina and Community Health, along with three other plans, insure patients in the managed-care program that covers most of Washington’s Medicaid patients. In that capacity they deal mostly with physical health.

Another of the plans is UnitedHealthcare Community Plan, which shares a parent company with Optum. With a foot in both mental and physical health worlds, UnitedHealth Group could be well-positioned to take advantage of the proposed combination of the two.

Dolezal said the company has also built relationships in three other regions of the state as part of the state’s Health Homes program that coordinates care for Medicaid patients with chronic conditions.

The company would likely want to bid for the new contracts in all or parts of those regions: southeast Washington, southwest Washington, and an area that includes Thurston and Kitsap counties and the Olympic Peninsula.

“I think more than likely we would bid for Health Home regions that we already are in,” Dolezal said.


In the long run, Inslee aims to integrate the treatment of both physical and mental ailments covered by Medicaid. In the somewhat shorter term — April 2016 — he would combine mental health treatment with drug and alcohol treatment, no easy task in itself.

Inslee’s plan as outlined by Quigley calls for legislation in the session starting next month that would begin that process while allowing the details of the bidding process to be worked out by a mental health task force created this year as part of a proposal by the late Sen. Mike Carrell of Lakewood.

The group would start work earlier than planned and would expand to include county governments.

Mental health and drug and alcohol treatment are two different systems now.

With addiction, the state pays based on how much treatment is given. With mental health, the state pays based on the number of Medicaid recipients, whether they are treated or not — an incentive to keep more of them healthy and keep costs down. Under the proposal, insurers and counties would bid on both.

Lawmakers and the governor would have to work out when, beyond 2016, those two areas would be merged with the managed care plans covering physical medical treatment.

“The governor has a vision of full integration,” Quigley said. The secretary said it doesn’t make sense to separate mental illness from problems it often coincides with, whether alcohol and drug problems or obesity. Both need to be treated in the same place.

Steps toward integration have been taken. Researchers reported fewer medical admissions and fewer arrests among Pierce and King residents with disabilities who received a mental health and managed-care plan.

“We were able to really show tremendous savings to the state,” said Molly Belozer Firth, director of public policy for Community Health Network of Washington, whose clinics treated the patients.

For a look at the potential future, there’s Roszak’s agency in Kitsap County, which some state leaders point to as a model for combining mental and physical treatment.

Using a federal grant, the agency has added physical examination rooms to its facilities and put its own staff members on site at Harrison HealthPartners. That way, Roszak said, people can get their needs met whether they are in for an appointment with their therapist or their primary care doctor.

“What we’re doing is connecting the head to the rest of the body,” Roszak said.

So when Alicia Anderson, a geriatric mental health specialist, makes home visits to see 67-year-old Evelyn Forrest, she helps the Bremerton resident deal with stress. But she also deals with Forrest’s more physical problems. Diabetes has given her a range of woes, mostly with her feet.

Anderson helps Forrest try to manage her weight.

“She talks to me about portions and carbohydrates and all the things I’m not supposed to be eating,” Forrest said.

After a bad fall, “We went in the bedroom and rearranged it … so I could go into my bedroom with my walker and there was no furniture or anything in the way.”

“She gives me advice on everything. I don’t know what I’d do without her.”


The immediate cause of the push for new contracts has nothing to do with the need to integrate mental and physical care, however. It’s to keep from losing the more than $500 million in federal money that Washington State gets for mental health.

The federal Centers for Medicare and Medicaid Services sent a letter in July telling the state it wasn’t complying with federal procurement procedures because it might be paying more than agencies actually spend.

The letter was a surprise because the state has been going through the county-based mental health agencies for more than 20 years. But some other states received similar letters, and Washington officials suspect the feds are looking more closely at the money now that they are chipping in a bigger share as part of the Affordable Care Act.

The state essentially has two choices to satisfy the federal government.

It can line up its payments with the rules by reimbursing for each medical service, as it does for drug treatment — but that’s seen as wasteful and almost archaic. Or it can sidestep this set of rules by holding a competitive bidding, instead of giving counties first dibs on the contract.

The state’s lawyers weren’t impressed with the legal arguments. An assistant attorney general wrote to the Department of Social and Health Services that the federal rules cited in the letter don’t forbid paying above the agencies’ cost, and that Washington isn’t doing that, anyway.

With that encouragement in hand, a bipartisan set of state senators has been inclined to challenge the federal government’s directive, while House leaders have tended to support going ahead with a plan for compliance.

After talks with lawmakers, Inslee and Quigley agreed to hold off on submitting their solution until the Medicaid agency answers more questions.

Sen. Jim Hargrove, D-Hoquiam, another Senate skeptic, said he’s happy Inslee is moving more cautiously and that the governor’s latest plan emphasizes study by the Carrell task force.

And Hargrove didn’t rule out the Senate taking some kind of initial action on an overhaul in the upcoming session, although the task force won’t have looked at it by then.

But he is worried about losing the role of the counties and the taxes they bring to the table that are dedicated to mental health.

Quigley said there would be a major collaborative effort at “consensus building” before deciding the particulars in the session and beyond.

Jordan Schrader: 360-786-1826 jordan.schrader@

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