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Towards Better Behavioral Health for Children, Youth and their Families
Financing that Supports Knowledge

Author: Janice L. Cooper
Publication Date: February 2008

Executive Summary

The money trail in children’s behavioral health leads to strange and unexpected places. In a time of more and more information about effective practice and historically high levels of child behavioral health funding, it leads to community-level service shortages and poor quality combined with inadequate mechanisms for accountability. It leads to fiscal policy that is out of sync with the knowledge base on effective practices, with opportune times to intervene and with strategies that lead to improved mental health for children and youth. On occasion it leads to pockets of service excellence. Following the money in children’s behavioral health also shows that opportunities abound for improving service quality-informed fiscal policy.

This working paper provides a broad overview of funding sources (and their policy roots) that underwrite children’s behavioral health services, illuminating the flaws and prospects of various policy choices. It aims to stimulate debate that will bring about changes that put financing in the service of better behavioral health, social functioning and educational well-being for children and youth with or at risk for mental health and substance abuse problems and their families.

While the focus is on public funding for mental health and substance abuse services within the behavioral health arena, attention is also paid to related funding in education, child welfare and juvenile justice. However, this working paper does not represent a comprehensive review of funding in those areas.

Data for this working paper comes from multiple sources, including telephone and face-to-face interviews with key stakeholders, review of the literature and policy documents as well as preliminary data from Unclaimed Children Revisited: Survey of State Children’s Mental Health Directors.

Multiple sources fund children’s behavioral health.

Funding for children’s behavioral health services come from a wide range of sources and represent a substantial increase since 1982, when Knitzer revealed the failures of public financing to support a coherent service delivery strategy despite obligations under the law. For example, at least $14 billion was directed towards funding services to address the behavioral health needs of children and youth in 2001. While current funding is relatively small compared to overall behavioral health expenditures and even miniscule when seen in the context of total health care spending, it still represents historic levels. Yet, it fails to address current needs of identified children and youth and those at risk for mental health problems.

Children and youth with behavioral health problems and their families, as well as those at risk for behavioral health problems experience funding dedicated towards children’s behavioral services differently depending on:

  • the state they live in or in which they access services;
  • the type of services they access; and
  • the funding sources.

Despite overwhelming evidence supporting prevention and early intervention services, funding is heavily focused towards deep-end treatment like residential and intensive services. Moreover, state behavioral health authorities overwhelmingly support adult services over children’s services, by a margin of more than three to one nationally.

The primary public funding sources for behavioral health services for children have increased access, and out-of-pocket costs for families have decreased, especially for the most troubled children and youth. Nonetheless, enormous service gaps remain. These are largely driven by the financing streams and their underlying policies. Medicaid’s structural deficiencies, such as a diagnosis-dependent public payment system and a medical-model driven service delivery system, dominate the fiscal picture. These are compounded by recent efforts to further constrict the range of services that public financing will support. They also serve to significantly undermine efforts to address the gulf between the needs of children, youth and their families and improved behavioral health.

The following elements typify the fiscal policy framework in children’s behavioral health services:

  • over-reliance on residential treatment compared to community-based, family-guided care based on prevention, early intervention and treatment strategies;
  • lack of access to, or the availability of, community-based treatment alternatives compounded by the ease of finding and funding immediate residential placement, and the urgency of the public safety concerns for the most troubled children and youth;
  • fiscal practices, particularly through Medicaid, are inconsistent with the knowledge base about effective children’s behavioral health services, and sometimes make it impossible to use that knowledge base, for example, some components of evidence-based models are ineligible for Medicaid reimbursement;
  • insensitivity to prevention and early intervention and the supporting knowledge base, for instance, largely diagnosis driven, Medicaid does not reimburse for many prevention-related interventions;
  • limited incentives to plan strategically and to support leadership informed by children’s behavioral health knowledge at the state level;
  • state-based service inequities driven by variation in the use of available Medicaid provisions;
  • fiscal policies that are often out of sync with the developmental needs of children and youth;
  • poor information technology that undermines accountability and the development of a quality-based system;
  • inadequate alignment of fiscal policy with quality initiatives; and
  • missed opportunities to seize the initiative at the federal level to embed best fiscal practices

There are opportunities for reform in the context of mounting evidence about effective practices. Three potential policy levers for change include: support for family choice in treatment decisions, creation of opportunities for family and youth empowerment in all aspects of care delivery and the national groundswell to implement a quality agenda in health care.

This working paper highlights state and local innovation in finance policy. These initiatives encompass broad fiscal reforms in states such as New Mexico, California, New York, Minnesota, Oregon, Arizona and Vermont. Also profiled are specific targeted interventions that focus on outcomes, reducing harmful and ineffective practices (for example in Kansas, Virginia, Alaska and West Virginia) and creating locally-based behavioral health investments in states and communities, including Michigan, Colorado, Florida, Missouri and Vermont.

These and other initiatives only scratch the surface of the vast need for services. They cannot flourish and attain the capacity required without a supportive federal fiscal environment. Strong federal policy action is therefore urgently needed. NCCP recommends the following:

  1. Attend to the lack of capacity at the community level;
  2. Significantly raise the quality of care delivered in community-based and other settings for children, youth and their families;
  3. Instill accountability for public financing of behavioral health; and
  4. Legislate a new national paradigm to guide fiscal policy for children’s behavioral health.