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Bruce Saltzer

Executive Director, Association of Community Human Service Agencies

Why it is Critical to Preserve California’s County-Operated Mental Health Carve Out of Specialty Mental Health Services

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In anticipation of the need for California to renew its 1915(b) Freedom of Choice waiver, which sanctions the State’s carved out specialty mental health managed care program, the Association of Community Human Service Agencies recently developed a paper to articulate the critical reasons why the State’s county operated mental health carve out for this specialty population must be preserved. In a mental health “carve out,” mental health services are delivered by a separate set of qualified providers who provide mental health benefits that are “carved out” from the basic set of benefits provided by a health insurance plan. In California, these carved out mental health services for the specialty mental health population have been and continue to be county-operated, as opposed to being operated by a for profit behavioral health managed care company as in some other parts of the country.

Underpinnings of the Carve Out
According to the California Department of Health Care Services (DHCS), research has shown that “the needs of persons with mental illness are not always paid adequate attention to in an all-inclusive…managed care system.” Furthermore, “the selection of county mental health departments to be the single managed care plan for consolidated specialty mental health was a natural outgrowth of the extensive experience counties have had in serving the mental health needs of communities.”¹ The Los Angeles County Mental Health Network of Care (Network) serves as one example of the specific advantages county mental health departments are currently leveraging. These advantages include:

• A comprehensive continuum of mental health services
• High quality, low cost care for individuals with complex needs
• Behavioral health services integrated with primary care
• Prevention and early-intervention services, delivered through an array of evidence-based practices
• Culturally competent services delivered by a well-trained, experienced, multi-lingual workforce
• Community-based services rooted in integrated systems of care for children and the psychosocial rehabilitation model of care for adults

These Network characteristics and advantages cannot be replicated and would be lost without the current county operated mental health carve out, as primary healthcare systems and private managed care companies simply do not deliver services in this way. Moreover, California’s counties have been able to reinvest their savings from managing this high needs population back into the mental health service delivery system, rather than having these savings siphoned off as profits.

Proven Effectiveness
The advantages of California’s county operated, carved out mental health system have led to impressive outcomes. During FY 2012-2013, LA County’s Full Service Partnership programs were able to deliver a 35% reduction in the number of children psychiatrically hospitalized and a 40% reduction in the number of days children were psychiatrically hospitalized. For transition age youth, there was a 60% decrease in the number of youth sent to Juvenile Hall, and a 59% decrease in the number of days of incarceration for these youth. For adults, there was a 50% decrease in the number of days incarcerated and a 71% decrease in the number of days homeless.² These figures indicate that the cost effective, comprehensive, community-based services highlighted above have proven extremely effective in reducing costly inpatient and emergency services.

Better Ways to Integrate Care Than Single Payment Method
While some may try to argue that a carved-out mental health system managed by counties is not ideal for providing integrated physical and mental health care, it is important to recognize that there are better ways to integrate care besides a single method of payment in a carved in system, which would eliminate the significant benefits of a carved out specialty mental health system. Even with the mental health carve out, integrated care can occur through the development of integrated service delivery models.

Key Question: Who Manages Care and How?
Given the lack of unlimited public resources, we agree we must ensure that our limited public funds are utilized most cost effectively to maximize resources in support of clients that rely on the public safety net. The real question is not whether care should be managed, but rather who should manage that care and how it should be managed. Ample evidence suggests that California’s current carved out specialty mental health managed care program has been an extremely effective model for managing that care, while providing quality services to its clients, and therefore deserves to be preserved.


1. “MCMHP Consolidation and Managed Care,” California Department of Health Care Services, DHCS.CA.GOV Website, September 15, 2014.
2. Mental Health Services Act Three Year Program & Expenditure Plan Fiscal Years 2014-15 Through 2016-17, Los Angeles County Department of Mental Health, July 15, 2014.

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