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Clawback looms over mental health redesign

Waterloo-Cedar Falls Courier (IA) - 3/9/2014

March 09--WATERLOO| State lawmakers call it the "clawback." They say it has the potential to significantly reduce mental health services across Iowa.

Also referred to as "Medicaid offset," the clawback is the latest snag in a convoluted web of funding strategies for mental health redesign, an equally complicated reform of how mental health and disabilities services are delivered in Iowa.

"The clawback is all about taking money out of the system," said Democratic Sen. Joe Bolkcom of Johnson County. "I'm concerned it is going to undermine the stability of an already fragile mental health system."

Though it has yet to be fully activated, the clawback will funnel millions of dollars from a mental health system that has been historically underfunded back into the state's coffers. Experts believe the clawback will result in significant cuts to mental health services and a regression to the stagnant system in place before the redesign.

Gov. Terry Branstad sees the clawback as an opportunity for property tax relief. His critics see it as a threat to a fledgling system that has taken the better part of three years to build.

All the clamor revolves around a single, central question: What is the future of mental health services in Iowa going to look like?

Neither the governor nor state lawmakers can begin to answer that question until they start talking about the mental health redesign law as a whole. So far this year those conversations haven't happened, not in the Senate at least.

"The silence on this issue in the Legislature is deafening," said Republican Sen. David Johnson of Ocheyedan in Osceola County.

Both Johnson and Bolkcom serve on the Mental Health and Disability Services Redesign Fiscal Viability Study Committee. The Legislature has relied on regular meetings of such interim committees for updates on the status of the state's massive mental health reform package since its passage in 2012.

According to Johnson, the fiscal viability committee hasn't met since the legislative session began Jan. 13.

With only weeks left until the session adjourns in April, Johnson is worried the mental health redesign has fallen to the wayside.

"It leaves me at a loss for what's going on," Johnson said. "I would call it poor management of the issue. And it's an important issue."

The redesign

To understand what the clawback is and why it's important requires a crash-course on the history of the mental health redesign law.

The redesign is Iowa's answer to a stagnant mental health delivery system created in the 1990s. Under the old system, each of the state's 99 counties was responsible for providing mental health services for residents in need.

State mental health experts say it was an inherently flawed concept marred by inequality; depending on population and finances, some counties were unable to provide any mental health services.

The old system's death rattle was sounded in the spring of 2012 when the state passed the mental health redesign law. It was meant to lift much of the financial burden from individual counties and create a standardized level of mental health services across the state.

The redesign reorganized the state's 99 counties into 14 regions. The law requires each of these regions to provide a standardized package of core mental health services. The goal is for each region to someday be financially sound enough to expand services.

But providing even the core services has proven financially difficult for some regions, prompting the Legislature to consider strategies to help struggling counties adjust.

The clawback looms large over those funding strategies, and in the eyes of some Democratic lawmakers, threatens to derail them.

"Basic core services are in danger," Bolkcom said. "The clawback is going to prevent us from putting that system together."

$47.28 and equalization

The Legislature has allowed counties to issue a mental health tax levy of $47.28 per person. Though it is viewed as an imperfect solution to the funding problems associated with redesign, mental health experts like Bob Lincoln in Black Hawk County see the $47.28 standard as a step in the right direction.

Lincoln is the administrator for the County Social Services mental health region in Northeast Iowa. Based in Waterloo, the 22-county region created in the early 2000s is the oldest and largest in terms of area. It is also credited by state lawmakers and Branstad as the inspiration for the statewide regional system.

"In some ways it's more important to know what funding we will receive," Lincoln said. "We came out of a system that was very hard from year to year to predict what funding was available. ... It's hard to start programs even when you have money if you don't know if you're going have the money next year."

The $47.28 levy has the potential to provide the kind of consistency mental health administrators like Lincoln are looking for.

Counties collecting more than $47.28 per person are required to lower their tax rates to meet the new standard. Rather than being required to raise taxes, counties below the $47.28 per person levy were allocated a portion of a $29.8 million equalization fund provided by the state starting July 1, 2013.

Of Iowa's 99 counties, 54 received support from the equalization fund, and 45 were required to lower their levies. Equalization payments ranged from as much as $6.2 million for Polk County to as low as $597 in Keokuk County, according to the Iowa Department of Human Services.

But the already tenuous confidence instilled in mental health experts by this new funding structure is being shaken by two things: an expiration date and the clawback.

The equalization funds associated with the $47.28 levy are only in law until June 30, 2015, according to a report made by the fiscal viability committee last December. Unless equalization dollars are re-approved or made permanent during this legislative session, the counties will revert back to a pre-redesign funding formula that Lincoln has called "unpredictable."

Furthermore, if the counties save any money between now and then as a result of the $47.28 standard, the redesign law requires them to give most of it back to the state.

The clawback

If there's a rabbit hole somewhere in the tangled galaxy of mental health redesign, it's at the crux of property taxes and health insurance reform.

At the bottom of the rabbit hole is the clawback.

"First of all, I don't know where the term 'clawback' came from," said Chris Hoffman, director of Pathways Behavioral Services in Waterloo, who also serves on the governor's Mental Health and Disabilities Services Commission. "I don't like the term, but it's very descriptive."

Starting on Jan. 1 this year, some Iowa citizens gained eligibility for coverage under the Affordable Care Act and the Iowa Health and Wellness Plan, Branstad's alternative to Medicaid expansion. Assuming Iowa's citizens take advantage of these health insurance options, some of the financial burden will eventually be removed from county mental health organizations. Individuals who used to rely on the counties to pay for mental health services will now be paid for by the ACA or the IHWP. The counties will save money.

This is where the clawing back begins.

If counties save money because of health insurance reform, the state will get 80 percent of it.

The clawback, or Medicaid offset, works one of two ways, depending on which county you're talking about. According to DHS, if a county received an equalization payment, starting in January 2015, any saved money associated with health insurance reform will be taken out of that equalization payment and sent back to the state. The state will effectively be giving the counties money only to take it back later.

If a county had to lower its property tax levy to meet the new $47.28 standard and still saves money, the clawback will come in the form of a property tax reduction. For example, if a county saves $1 million in a given fiscal year from health insurance reform, it will have to lower its levy even further to account for the whole $1 million.

The clawback is actually a compromise, according to Bill Peterson, executive director of the Iowa State Association of Counties, a nonprofit group that represents Iowa's 99 counties. It is meant to balance the governor's desire to pay for the Iowa Health and Wellness Plan and the Legislature's desire to fund the mental health redesign.

DHS must decide how much money each county will have to pay back between Jan. 1 and June 30 of this year.

"The trouble is, how do you accurately figure that out?" Hoffman said. "I haven't seen a clear description for how that's going to be measured."

Hoffman hasn't seen a clear description because none exists. The state is already two months into DHS six-month "offset" calculation period, and still no methodology has been laid out.

Data for health insurance related savings remains incomplete, and estimates of how many counties still need state assistance are contradictory. ISAC says there are 11, DHS says there are only five.

The result is confusion. How much is the state going to claw back? Will there be annual adjustments based on inflation? How can the regions expand beyond the core services if they're bleeding dollars?

According to Hoffman, it's too soon to know.

"We're counting savings before the savings have arrived," Bolkcom said. "We're in danger of this whole system unraveling."

Voices

"We are not as a society paying attention to the seriousness of mental health. Period," said Democratic Rep. Bob Kressig. "To come up with a plan to redesign mental health and then come up with another plan to prevent it from working by taking these clawback dollars is a joke."

Lawmakers like Kressig have joined their voices with mental health experts and county officials across Iowa in opposition to the clawback.

The ISAC is against the clawback. The Urban County Coalition, a lobbying group with Black Hawk, Johnson, Linn, and Scott counties as its members, is against the clawback. Mental health experts all over Iowa, like Tom Eachus, director of the Black Hawk Grundy Mental Health Center, are against the clawback.

"If that money goes back to the state, I can tell you there's no money coming back to the service providers to take care of people," Eachus said.

Lynn Ferrell has been working as the mental health administrator in Polk County for 30 years.

"Every (mental health) redesign I have seen in my time that involved state funding has failed because the state didn't live up to its commitments," he said.

Despite the opposition, Branstad continues to see the clawback as a positive thing.

"At least 80 percent of (the money) would go directly to property tax relief for the citizens," Branstad said. "And we think this is the fair thing to do. We're relieving this burden from the county, and we think it should be passed on to the property tax payers."

According to DHS, any equalization dollars taken back by the state will be placed in the Property Tax Relief Fund, "subject to appropriations by the General Assembly." Any counties that save money without getting equalization dollars will have to lower their levies. Property tax relief all around.

Jack Hatch, who is running against Branstad in the 2016 gubernatorial election, doesn't see it that way.

"The way it's presented as property tax relief, it's hard not to be in favor of the clawback," Hatch said. "But it could do just the opposite. Counties could raise property taxes to meet services."

The mental health redesign law requires that counties pay for core services "regardless of funding source." It's unclear whether counties would be allowed to raise taxes for mental health services under the law, but Hatch isn't alone in thinking it's a possibility.

Lincoln, the administrator of County Social Services, thinks the clawback runs counter to the intent of the mental health redesign.

"It's just introducing more complexity into an already complex funding formula," Lincoln said. "It going to unravel one of the best things of the redesign, which is to come to an equitable formula for mental health funding across the state."

Counties in regions like Lincoln's have already started to pool their funds for mental health services. The clawback, in Lincoln's eyes, will require the regions to "unravel" themselves one county at a time for the purpose of identifying funds to send back to the state.

The result, Lincoln fears, would be something that mirrors the old system, where every county fends for itself, property tax levies are all over the board and funding is inconsistent from year to year.

"Even without the clawback it's hard to predict what out our funding is going to be for next year," he said. "So when you don't have confidence in the system, there's a tendency to not invest in that system."

The County Social Services region currently provides higher levels of mental health services than the redesign requires, including services for people with developmental disabilities and brain injuries. If the clawback is enacted, those services may need to be significantly cut back.

Eachus thinks many counties are already having a hard time paying for just core services. Mental health administrators all over Iowa agree.

Delaware County -- part of the East Central Region -- is one of the 45 counties that had to lower its property tax levy to the $47.28 standard. According to Peggy Petlon, Delaware County's mental health administrator, there's a waiting list for services, and she's already had to trim back on outpatient mental health services like therapy sessions and psychiatric visits. She thinks the new regional system has the potential to make things better, but the clawback will only worsen funding issues.

"Our region is trying to improve what we have, but without funding it's hard to say how it's going to impact us," Petlon said.

Ken Hyndman administers mental health services in Des Moines County, a member of the Southwest Iowa Link region. His region is hoping to begin providing jail diversion and crisis services, but it can only do that if it has a reliable source of funding.

"The problem with mental health for years has been funding," Hyndman said. "And now they want to take back 80 percent of what they see as savings. ... It's just setting us up to fail in the new regions."

Ferrell of Polk County agrees.

"We've got a golden opportunity to improve services, and the next thing we're going to do is take away a pot of money that could have been used for that," Farrell said. "It's money that's already in the system. To take it out only to have to fight for it again makes no sense."

What happens next?

Before it adjourned last year, the fiscal viability committee released a list of 26 recommendations related to the mental health redesign.

Included on that list were recommendations to switch to a regional funding formula and delay the activation of the clawback by at least one year.

"Let's leave the money in the system," said Peterson of the ISAC, "until we have a better understanding of what the significant changes to the system will be for people in need of services for mental health."

Peterson and state lawmakers like Hatch think delaying the clawback would at least allow the counties time get on their feet in the new regional system while DHS figures out how to calculate clawback amounts.

Some people, like Hoffman with Pathways, would like to see the clawback eliminated entirely.

DHS Director Charles Palmer has until Oct. 15 to certify the first clawback calculation, which will then be passed on to the Legislature and eventually the governor for approval.

In the mean time, various Democratic state lawmakers continue to insist they will vote against any mental health measure with the word clawback attached to it.

Until a decision is made, mental health providers like Lincoln and Eachus will simply have to wait and see what happens.

"Let's see if we can actually get something done with mental health redesign," Eachus urged lawmakers at a recent legislative forum in Cedar Falls, "because right now all we've done is talk about it."

Courier reporter Christinia Crippes contributed to this story.

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