The 2021-22 Budget: Behavioral Health: Continuum Infrastructure Funding Proposal

analysis full gutter The 2021-22 Budget: Behavioral Health: Continuum Infrastructure Funding Proposal FEBRUARY 2021 This budget series post provides (1) an reflects our understanding of the proposal as of overview of the Governor’s budget proposal in February 17, 2021. the Department of Health Care Services (DHCS) This budget post is one in a series of posts that to provide $750 million General Fund—on a we are releasing on major behavioral health-related one-time basis—in competitive grants to counties proposals. In separate posts, we analyze the to acquire or renovate facilities for community Governor’s proposals to (1) provide incentive behavioral health services, (2) an assessment of the payments through Medi-Cal managed care for Governor’s proposal, and (3) key takeaways from student behavioral health and (2) establish an our assessment of the proposal that raise issues additional demonstration project in which a select for Legislative consideration. We understand the number of counties would assume responsibility for administration’s proposed budget bill language treating felony Incompetent-to-Stand-Trial patients. for this proposal is forthcoming. This analysis Background County Behavioral Health Facilities the Mental Health Services Fund (MHSF)—funded through a 1 percent tax on incomes over $1 million, In California, Public Community Behavioral and (3) federal funding accessed through Medi-Cal Health Services Primarily Are Funded and (California’s state Medicaid program). Although Delivered Through Counties. Counties play a each of these funding sources has its own set major role in the funding and delivery of public of objectives and rules dictating how funds can behavioral health services. In particular, counties be spent, there is sufficient overlap in purpose generally are responsible for arranging and paying between these funding sources for counties to use for community behavioral health services for them flexibly to meet their community behavioral low-income individuals with the highest service health service obligations. Notably, funding that needs. Community behavioral health services counties receive from the MHSF is required to be comprise publicly funded outpatient and inpatient spent according to certain parameters, including mental health and substance use disorder (1) direct services and (2) prevention and early treatment and medications provided primarily in intervention activities. Up to 20 percent of the community settings. amount counties receive from the MHSF for direct Counties Can Use a Variety of Funding services can be used on capital (including facility Sources for Community Behavioral Health acquisition and renovation), technology, workforce Facilities. Counties rely on a variety of major, development, or to build reserve funding. However, dedicated, ongoing fund sources to finance their the amount within this allowance (and of counties’ community behavioral health activities including overall behavioral health funding) that counties facilities. These sources include (1) dedicated spend on acquiring or renovating community vehicle license fee and sales tax revenue streams behavioral health facilities is unknown. known as “realignment” funds, (2) revenues from 2021-22 LAO Budget Series 1 analysis full gutter State Grant Programs for County Behavioral behavioral health infrastructure (including Health Facility Acquisition. In recent years, the facility acquisition) to support efforts to divert state created limited-term grant programs for individuals from incarceration. The program the acquisition of infrastructure for community also was administered by CHFFA. All available behavioral health facilities by counties. We describe grant funds under this program have been these grant programs, some of which have disbursed to counties. expended all available funds and some of which still • No Place Like Home (NPLH) Program. have funds available, below. In November 2018, voters approved Proposition 2, authorizing the sale of up to • Creation of Mental Health Wellness Act of $2 billion of revenue bonds (and the use 2013 Grant Program. Chapter 34 of 2013 of a portion of revenues from the MHSF to (SB 82, Committee on Budget and Fiscal repay the bonds) for the NPLH program. The Review) provided $142.5 million from the program funds permanent supportive housing General Fund on a one-time basis to provide for individuals experiencing homelessness grants to counties to acquire facilities for who also struggle with mental illness. Under community mental health services. This this program, counties applying for funds grant program was administered by the must commit to provide mental health California Health Facilities Financing Authority services and help coordinate access to other (CHFFA). Under the program, counties community-based supportive services for could use the vast majority of this funding permanent supportive housing residents. This to establish mental health crisis facilities, program is administered by the Department which are intended for short-term treatment of Housing and Community Development as while an individual is experiencing a mental a competitive grant program for counties. health crisis. Of the total made available, About $1.4 billion has been made available $136.5 million in grant funds were awarded to to counties through NPLH so far, and most of counties. this amount has been awarded. • Later Augmentation of 2013 Grant Program for Children- and Youth-Related Facility State Capacity for Behavioral Health Acquisition. The Investment in Mental Health Crisis Services Wellness Act of 2013 Grant Program was amended in 2016-17 to include additional While a comprehensive assessment of overall funding and a specific focus on acquiring behavioral health service capacity statewide is facilities for youth mental health crisis not available currently, data do indicate that the facilities. (A portion of the funds that were not supply of inpatient beds for severe mental health awarded to counties under the first iteration crises is not meeting the state’s needs. In addition, of the grant program was redirected to this the amount of community behavioral health crisis purpose.) In total, $24.9 million was made services needed may grow in the future. We available for acquiring community mental describe these two points below. health facilities under this iteration of the grant Number of Psychiatric Beds Statewide Has program. All of this funding is still available. Not Kept Pace With Population Growth and • Community Services Infrastructure Grant Demand. The most commonly cited figure for Program. Chapter 33 of 2016 (SB 843, the appropriate number of inpatient psychiatric Committee on Budget and Fiscal Review) beds per population comes from the Treatment established the Community Services Advocacy Center, which convened a panel of Infrastructure Grant Program, providing leading experts who concluded that 50 beds $65.8 million General Fund one-time as per 100,000 individuals is the ideal bed capacity part of the 2017-18 budget. This program to serve demand. California historically has not made grants available to counties for met this standard, and notably was performing 2021-22 LAO Budget Series 2 analysis full gutter worse on this metric in 2017 (the Figure 1 most recent year for which data Number of Psychiatric Beds Statewide are available) than it was in 1995. Has Not Kept Pace With Population Growtha Figure 1 illustrates California’s historical performance on this metric. Number of California Psychiatric Beds per 100,000 Individuals, 1995 to 2017 Medi-Cal Mental Health Crisis Service Hours Projected 35 to Continue Increasing. When 30 an individual is experiencing a severe mental health crisis, a Crisis 25 Stabilization Unit (CSU) can be a 20 valuable setting in which to provide treatment. CSUs generally are 15 small inpatient facilities for people experiencing a severe mental health 10 crisis whose needs cannot be 5 met safely in residential settings. Counties provide CSU services as part of their Medi-Cal responsibilities. 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Recent DHCS projections (based on a Panel of leading psychiatric experts concluded that 50 beds per 100,000 individuals is ideal. historical utilization trends) expect mental health crisis stabilization service hours in the Medi-Cal program to be 20 percent above their 2015-16 level by 2021-22. Figure 2 Figure 2 illustrates this projected growth in crisis stabilization service Amount of Crisis Stabilization Service Hours in Medi-Cal Projected to Continue Increasing hours provided in the Medi-Cal program. Number of Service Hours Provided (In Thousands) CSUs Can Provide Alternative 1,600 to Psychiatric Beds... Community behavioral health facilities (such as 1,400 CSUs) can provide an alternative to inpatient psychiatric stays. For 1,200 example, individuals experiencing a 1,000 severe mental health crisis can be admitted to a CSU to be stabilized to 800 avoid hospitalization. …But Number of CSU Beds 600 Per Population Currently Is Low. 400 Given that the number of inpatient psychiatric beds per population in 200 California is very low, an expansion of CSU capacity can help absorb the demand for intensive behavioral 2015-16 2016-17 2017-18 2018-19 2019-20a 2020-21a 2021-22a health services. However, the state currently has just 1 CSU bed per a Department of Health Care Services estimate/projection. 100,000 individuals. 2021-22 LAO Budget Series 3 analysis full gutter Governor’s Proposal $750 Million General Fund One Time for potential facilities and commit to operating potential Counties to Acquire or Renovate Behavioral facilities for a period of 30 years. Health Facilities. The Governor’s budget proposes Other Related Governor’s Budget Proposals. $750 million General Fund on a one-time basis Below, we describe the interaction between the (available for three years) to provide competitive behavioral health continuum infrastructure funding grants to counties to acquire or renovate facilities proposal and two other major items from the for community behavioral health service delivery. Governor’s budget. The administration intends for this proposal to • CalAIM SMI/SED Demonstration help build out a comprehensive continuum of care Opportunity Commitment. The Governor’s for individuals with varying levels of behavioral budget re-introduces the California health needs, and envisions that this proposal Advancing and Innovating Medi-Cal (CalAIM) will complement related state priorities such proposal, a far-reaching set of reforms to as reducing homelessness. This grant program expand, transform, and streamline Medi-Cal would be administered through DHCS. The service delivery and financing. The CalAIM administration estimates that this proposal will add proposal includes a commitment from the at least 5,000 beds for behavioral health treatment administration to pursue a federal waiver statewide. opportunity—known as the SMI/SED Funding Could Be Used on a Variety of demonstration opportunity—to potentially Facility Types. Under the Governor’s proposal, receive federal reimbursement for services counties would be able to use grant funds on provided to individuals with Severe Mental a variety of community behavioral health facility Illness (SMI) and/or Severe Emotional types to treat individuals with varying levels of Disturbance (SED) that are normally not behavioral health needs. Funds could be used on eligible for federal funding. In order to gain (1) short-term treatment beds such as those found approval from the federal government for in CSUs, (2) residential treatment facilities that this waiver opportunity, the state will need typically last for a few months, or (3) longer-term to build out necessary behavioral health facilities such as permanent supportive housing for infrastructure. While the behavioral health individuals with behavioral health needs. Notably, continuum infrastructure funding proposal funding from this proposal could be used for is not explicitly required to gain approval for both mental health and substance use disorder this waiver demonstration opportunity under treatment facilities. (This is in contrast to several CalAIM, the administration has indicated that of the existing and prior state grant programs the proposal may be seen as complementary discussed earlier, which focused on mental health to the commitment to pursue the SMI/SED facilities specifically.) demonstration opportunity. (The administration Counties Would Be Required to Provide believes this proposal will help the state build Matching Funds. Under this proposal, counties out the necessary infrastructure to gain waiver would be required to provide matching funds—in approval from the federal government for this the amount of 25 percent of grant funds—in order demonstration opportunity.) Please see our to receive grant funding. This match can take a budget post, The 2021-22 Budget: CalAIM: variety of forms, including in-kind contributions The Overarching Issues, for a more detailed (such as land), philanthropic donations, and other description of this component of the CalAIM funding sources of the county’s choosing (such as proposal. county funds). In addition, in order to receive funds, • Efforts to Address Homelessness. The counties would have to identify an ongoing funding Governor’s budget includes a package of amount to support costs related to operating proposals intended and designed to address 2021-22 LAO Budget Series 4 analysis full gutter the state’s homelessness problem. The can be thought of as one component of the budget also includes a number of proposals in state’s broader efforts in this area. Please see various other policy areas that can be viewed our budget handout, The 2021-22 Budget: as having some overlap with efforts directly Analysis of Housing and Homelessness addressing the state’s homelessness issues. Proposals, for a description of the various The administration has indicated that the Governor’s budget efforts to reduce behavioral health continuum funding proposal homelessness. Assessment and Issues for Legislative Consideration Further Specifics of the Proposal Needed Legislature’s ability to effectively oversee the to Fully Assess Its Merits. Further details are program and hold local governments accountable necessary to fully evaluate this proposal. These would be significantly constrained. details would include specifics about (1) the Available Data Indicate Expanding Capacity structure of the grant program (for example, what for Behavioral Health Services Likely Has Merit. specific milestones counties will have to meet to As discussed earlier, the administration projects receive disbursement of grant awards), (2) how growth in short-term mental health crisis services funds available to counties through the grant in the Medi-Cal program. In addition, the number program will be targeted to regions of the state of inpatient psychiatric beds available statewide that experience more substantial shortages of relative to population indicates that the supply of behavioral health beds, and (3) what oversight these beds in California likely is not meeting the and evaluation activities DHCS will conduct for the state’s needs. The number of facilities that can grant program. Our understanding is that budget provide short-term mental health crisis services as bill language is forthcoming, however, trailer bill an alternative to inpatient psychiatric beds also is language will not be proposed. low. Together, these factors demonstrate that an Lack of Implementing Legislation Raises expansion of capacity for community behavioral Concerns and Questions. While this proposal health services (through securing additional likely has merit, budget bill language is insufficient facilities) likely is warranted. for establishing a new program of this magnitude. Proposal Would Be Significant One-Time Prior grant programs to provide funding to counties Support. Most funding to counties for community for behavioral health facilities—which also were behavioral health services is provided on an developed through the budget process—included ongoing basis through dedicated funding streams. trailer bill language to specify legislative intent As noted above, however, the state recently made and the terms of the programs. Moreover, recent efforts to expand facility capacity by providing one-time allocations for homelessness grants multiple one-time grant programs. Given the state’s to local governments like the Homelessness significant one-time windfall, using those resources Emergency Aid Program; Homeless Housing, for a one-time grant program for behavioral health Assistance, and Prevention Program; and Homekey facilities likely is a good investment. If, however, the all included trailer bill language to govern those Legislature expects to continue this approach for allocations. Typically, budget bill language has supporting community behavioral health services much less specificity than a trailer bill language. We in the future, setting clear goals and metrics will suggest the Legislature adopt trailer bill language be important to ensure a strategic allocation of to govern the implementation of this program available one-time resources to address underlying and provide more opportunities for oversight— challenges. like through reporting to the Legislature on grant allocations. Without authorizing legislation, the 2021-22 LAO Budget Series 5 analysis full gutter Proposal Provides Funding for Several effectively, which led to significant delays Facility Types Also Supported by Other Funds. in disbursement of grant funds. The grant Although the specific amount counties spend to program later was adjusted to allow counties acquire community behavioral health facilities is to designate a third party—usually a nonprofit unknown, in concept, counties could use a portion or corporation—to directly apply for and of the ongoing funding they receive for community receive grant funds on counties’ behalf. behavioral health services to fund similar activities This led to more success in getting funds as this proposed grant program. In concept, this disbursed. Under the behavioral health proposal could free up county funds—that would continuum infrastructure funding proposal, otherwise be spent on acquiring facilities—to counties would be allowed to contract with expand county behavioral health service capacity. a nonprofit provider to operate potential In addition, while the list of community behavioral facilities, but the extent to which these entities health facility types this proposal would fund do will be involved in the application process not perfectly overlap with the facility types that can or receive grant funds directly is unclear. be funded through existing state grant programs, Including this third-party component into the there are some commonalities. Specifically, this behavioral health continuum infrastructure proposal makes grant funding available for (1) crisis funding proposal as was ultimately added stabilization and crisis residential facilities, which to the 2013 grant program could help can also be funded through the augmentation avoid the significant delays in getting funds for children and youth made to the Investment disbursed to counties experienced by in Mental Health Wellness Act of 2013 Grant existing and prior programs. If this option is Program, and (2) permanent supportive housing not built into the proposal, then very robust for individuals with mental health needs, which technical assistance would be needed to can also be funded through the NPLH program. help counties—especially small and rural These commonalities across grant programs create ones—navigate grant program application opportunities to apply lessons learned, which we processes and requirements. Given this lesson describe below. learned, the Legislature may wish to consider which entity—counties versus nonprofits or Overlap With State Grant Programs Provides corporations—would be most appropriate to Opportunity to Apply Lessons Learned. There be responsible for directly applying for and are several key lessons learned from challenges receiving grant funds. experienced in prior grant programs. Our review finds that counties have experienced difficulty • Counties also have experienced challenges meeting program requirements for state facility related to local opposition of the siting of grant programs, which has led to (1) delays in funds community behavioral health facilities. The disbursement, (2) forfeiture of grant funds in cases Legislature may wish to ask the administration where counties determined that securing facilities what the state-level strategy for navigating was no longer feasible, and (3) reduced interest in local opposition would be. Elements of this applying for facility grant funds. Some key lessons strategy could include (1) a requirement that learned include: counties demonstrate community engagement related to their grant-funded activities, • Under the Investment in Mental Health or (2) exploring ways to streamline local Wellness Act of 2013 grant program, counties approval processes so as not to inhibit the originally were intended to be the sole entity establishment of community behavioral health to receive grant funds directly for acquiring facilities. or renovating facilities. However, counties • Under the funding augmentation for generally did not have sufficient technical children- and youth-related facility acquisition expertise in acquiring health facilities to provided to the Investment in Mental Health proceed with grant program requirements Wellness Act of 2013 grant program, there 2021-22 LAO Budget Series 6 analysis full gutter has been reduced demand among counties have significant behavioral health needs, these for the program due to accelerated time lines populations do not fully overlap. Accordingly, how for putting together application materials. The funding for this proposal would be targeted for Legislature may wish to ask the administration individuals experiencing homelessness is unclear. (1) how long counties would have to submit Funding provided under the NPLH program is their applications for grant funding, and specifically earmarked for individuals struggling with (2) how the administration would work with mental illness who also experience homelessness. counties to ensure they are able to meet any Without a similar targeting of funds, whether this deadlines outlined under the grant program. proposal would address the state’s homelessness issues directly is uncertain. The Legislature may Proposal Could Address Some Concerns wish to use the budget process to inquire about About CalAIM SMI/SED Demonstration overlap and coordination with the administration’s Opportunity. Historically, the state has favored other budget proposals related to homelessness. placement in community settings for mental health Counties’ Capacity to Fund Ongoing Costs treatment over placement in institutional settings, Related to Maintenance and Services Unclear. in keeping with the principle of providing mental Funding for this proposal is intended to be provided health care in the least restrictive setting possible. on a one-time basis. Accordingly, counties One of the requirements for the state to obtain would be responsible for funding (1) the ongoing approval for the CalAIM SMI/SED demonstration costs associated with maintenance of acquired opportunity would be to demonstrate to the behavioral health facilities and (2) the ongoing federal government that the state is committed to costs to provide services in the acquired facilities. maintaining support for, and potentially enhancing, Although this proposal would require that counties community behavioral health treatment service identify ongoing funding to cover these costs (and capacity. This requirement is meant to ensure commit to providing ongoing funding for 30 years), that additional federal funding provided for mental counties’ capacity to increase their funding levels to health services rendered in institutional settings pay for such new ongoing costs without displacing does not incentivize institutional placement existing activities is unclear. beyond what is absolutely necessary. The activities Further Details on Proposed County Match funded by this proposal—acquisition of additional Requirement Needed. The administration has behavioral health facilities—could be considered indicated that counties will be required to provide by the federal government as evidence of this a 25 percent match in order to receive grant funds commitment and help contribute to the state’s under this proposal. (In contrast to other state grant application for this demonstration opportunity. programs for behavioral health facilities which did Given the interaction between this proposal and the not include a county match requirement—beyond SMI/SED demonstration opportunity under CalAIM, the NPLH program’s requirement that counties the Legislature may wish to weigh the increased commit to providing ongoing support for residents community behavioral health service capacity in permanent supportive housing.) While a local that this grant program could provide against match requirement can help ensure that counties any concerns that it may have about unintended demonstrate a commitment to the activities of this consequences from the state gaining approval for grant program, how the 25 percent match was the SMI/SED demonstration opportunity. determined is unclear. Given that this proposed How Proposal Would Be Targeted at match requirement may affect county demand to Individuals Experiencing Homelessness Is apply for grant funding under this proposal, the Unclear. This proposal is specifically intended Legislature may wish to seek further details from to increase counties’ capacity to provide the administration about how the county match behavioral health services. While there are many requirement was determined and whether counties individuals experiencing homelessness who also have the capacity to meet it. 2021-22 LAO Budget Series 7 analysis full gutter LAO Publications This report was prepared by Corey Hashida, and reviewed by Mark C. Newton and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2021-22 LAO Budget Series 8