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How North Carolina got the math wrong on mental health

 Broughton Hospital, one of North Carolina’s three state psychiatric hospitals.
Dana Miller Ervin
Broughton Hospital, one of North Carolina’s three state psychiatric hospitals.

For the past three weeks, WFAE’s "Fractured" series has reported on the struggles of inmates living with mental illness. Many wait a year or more for a state hospital bed just so they can get well enough to go to court. Others cycle in and out of jail serving what lawyers describe as a “life sentence on the installment plan.”

But it isn’t just inmates who wait. On average, North Carolinians who go to an emergency room in crisis wait 16 days for a state psychiatric hospital bed.

Overall, the state ranks 39th in the country for access to treatment, according to Mental Health America, a national advocacy group.

Some of the problems started two decades ago, when lawmakers overhauled North Carolina’s mental health care. They cut state hospital beds but failed to adequately fund community care.

That should start to change. In March, after almost a decade of stalling, North Carolina’s General Assembly voted to expand the Medicaid program. That will help an estimated 600,000 uninsured North Carolinians and bring more than $11 billion of federal money into the state in the first year. But the legislature and the governor have yet to agree on a plan to build out the state’s mental health system.

 Bebe Smith, longtime social worker and therapist.
Dana Miller Ervin
Bebe Smith, longtime social worker and therapist.

That worries Bebe Smith, a social worker and therapist who has practiced in North Carolina for three decades. For her, social work is a calling. Growing up as a pastor’s daughter, she felt those living with severe mental illness were often treated as “less than fully human.” One of her first jobs in social work was at Durham’s mental health center, helping struggling clients stay off the streets.

She said it was “like pulling together all the details of someone’s life. 'So, do you have a safe place to live? Do you have income? Are you able to work?' All those practical issues of living in the community for someone who has a hard time navigating just life.”

But that was 30 years ago, when county-based case managers like Smith would meet clients where they lived. And Smith said people generally knew they could go to county mental health centers for help — even if they didn’t have insurance.

The system had its problems. But the county-based centers “had a pharmacist on site. There were psychiatrists, nurses who might administer injections or do other things,” Smith said. “So it was kind of like an all-in-one-stop where people can go to get their mental health care.”

North Carolina overhauled its mental health system

That was before the state started to revamp mental health care two decades ago, an overhaul that ended up replacing county-run mental health centers with harder-to-find private providers and eliminating case managers like Smith.

There were good intentions behind the changes. Lawmakers wanted to move people who lived in state psychiatric hospitals into the community, where they could be less isolated. But some people fell through the cracks, Smith said.

“Some people ended up losing housing,” Smith said. “Some people did end up in jail. People would get lost to follow-up so we didn’t know what happened to them.”

There were also some good financial reasons to overhaul the system. By 2000, North Carolina’s mental health system was in deep trouble. Some county-run centers couldn’t make ends meet.

The state owed money too. It was behind on payments to the federal government for its share of Medicaid spending. And it faced an estimated $250 million repair bill for the state’s dilapidated psychiatric hospitals.

Dr. Marvin S. Swartz, a psychiatrist at Duke University
Dana Miller Ervin
Dr. Marvin S. Swartz, a psychiatrist at Duke University.

A lot of patients living with serious mental illnesses had become permanent residents of those expensive-to-run hospitals.

“The promise of mental health reform is that we could serve people in the communities where they live. And that’s a philosophy that I embraced totally,” she said.

It was part of a nationwide movement called “deinstitutionalization.” It was a priority forPresident John F. Kennedy as far back as the early 1960s. Then in 1999, the Supreme Court ruled that those living with mental illness are entitled to live outside hospitals when they can. By then, many states had been moving longterm patients into the community, said Duke University’s Dr. Marvin S. Swartz.

“It wasn't that North Carolina was unique,” Swartz said, “it just was we got to the game later and overshot, overestimating our ability to create the community services we needed to create this ecosystem where people weren’t totally dependent on beds.”

The math was wrong

In the last 20 years, even as North Carolina has grown by 2 million people, the state has cut the number of state psychiatric beds by almost half. There were 1,572 beds in 2000. Today, there are 894 — and only two-thirds of those are operating due to staff shortages, the state health department said. By 2016, the Treatment Advocacy Center reported that North Carolina was tied for 39th out of 50 states in beds per population.

And many of those patients who left hospitals for community care lacked the skills to find the housing, food and medical care they’d always received, Swartz said. Many ended up on the streets. Nationally, the decline in hospitalizations was associated with a rise in incarcerations.

“When we deinstitutionalized people we set them on this cruel scavenger hunt to pull together these things that were no longer organized by the roof of the state hospital,” Swartz said.

At the same time that North Carolina was cutting beds, it was also revamping outpatient care. Private providers, paid by state and federal funds, were supposed to replace county mental health centers. But many of the new start-ups failed to make money and folded. In the early 2000s, the legislature put $47.5 million in a mental health trust fund to help the new providers. But then-Gov. Mike Easley used $38 million of that to balance the budget during a financial crisis.

By 2008, Easley admitted the newly-privatized system wasn’t working. A Raleigh News & Observer series reported that private providers were more focused on giving services that increased their bottom lines — instead of getting treatment to the sickest. It found at least $400 million was wasted.

Then there was another problem. The newly privatized system was increasingly reliant onMedicaid, the federal program for the poor and disabled. That meant those without Medicaid had a tough time getting care. That included many newly-deinstitutionalized hospital patients, Swartz said.

“One of the great miscalculations of mental health reform in North Carolina is the belief that most of the folks they were trying to get out of the state hospital were Medicaid eligible,” Swartz said. “And it turned out the math was wrong.”

The math was wrong because those without Medicaid couldn’t afford the help they needed. And, Swartz said, it stayed wrong because North Carolina refused to expand Medicaid for almost a decade.

Rob Robinson, CEO of Alliance Health, one of the companies that coordinates mental health care for those living with serious mental illness, presents at a town hall
Dana Miller Ervin
Rob Robinson, CEO of Alliance Health, one of the companies that coordinate mental health care for those living with serious mental illness, presents at a town hall.

Rob Robinson agreed. He’s the CEO of Alliance Health, one of the managed-care companies that coordinate mental health care for those living with serious mental illness. Most of his clients don’t qualify for Medicaid. Their care is paid for with state funds. And there just isn’t enough, so Robinson can’t provide all the services they need.

“We have $150 million to serve the uninsured,” Robinson explained. “And we have over a billion dollars to serve Medicaid. So there’s a huge disparity between folks with Medicaid and those without.”

Robinson said a lot of good things came out of the overhaul. Like newly created Assertive Community Treatment teams, which aim to help clients living with serious mental illnesses stay in their homes. Doctors, nurses and social workers make house calls to help them stay on medication, find housing, get benefits, even find employment.

But Robinson has a harder time providing those to his clients who don’t have Medicaid. And that has real-world consequences.

“They just don’t get the benefit of a more robust package they have in Medicaid,” Robinson said. “And these folks, because of that, often end up sitting in emergency departments or are homeless or end up in jail for services.”

Medicaid expansion passes

The North Carolina legislature voted to expand Medicaid on March 23. The changes won’t go into effect, however, until the state enacts a budget. Legislative leaders hope that will happen before the end of June.

Passage came almost a decade after The Affordable Care Act, also known as Obamacare, made expansion possible. It’s been the subject of bitter battles between the North Carolina governor and the legislature. In 2013, the legislature passed a bill preventing the governor from expanding Medicaid through an executive order. In 2019, the disagreement was one of the reasons North Carolina couldn’t adopt a new budget.

Gov. Roy Cooper told those who attended the bill’s signing ceremony that half of the state’s estimated 1.2 million uninsured will now have coverage.

“When this law takes effect, it will make health care accessible to more than 600,000 North Carolinians,” Cooper said, “many of them in the grips of mental illness or substance abuse who need health care, not handcuffs.”

The math will now improve for many living with mental illness. The math is also pretty good for the state, too. The expansion will be paid for almost entirely with federal funds. Uncle Sam will pay 90% of the tab for the new enrollees. The state’s hospitals will pitch in the remaining 10%, but they’ll be getting new federal money to cover some or all of that. If expansion starts to cost the state anything, North Carolina’s law says the state can discontinue the program.

North Carolina will also rake in a $1.8 billion signing bonus just for expanding. That’s thanks to the American Rescue Plan, a sweetener the U.S. Congress put into the COVID-19 relief legislation to induce the remaining non-expansion states to sign on.

Swartz said the state is benefiting from its almost decadelong refusal to expand. “They're not only getting it at no cost, they're getting a bonus for their recalcitrance.”

No matter who’s paying, expansion will make a huge difference for the uninsured, Robinson said. “It’s definitely a game-changer for us and our clients.”

Still waiting on the math

But Robinson said he’s waiting to see how much of a game-changer it will be. He’s worried the legislature will now cut its funding for the uninsured and underinsured. He said there will still be a lot of uncovered needs among children with complex behavioral health problems.

He’s also waiting to see how North Carolina decides to spend that $1.8 billion signing bonus.

Cooper and some powerful state Republican lawmakers want to spend $1 billion of that bonus to shore up the state’s chronically underfunded mental health system. Cooper published a plan to spend the money over three years, building a crisis support network so those living with acute mental health problems would be less likely to end up in hospitals and jails, and funding more outpatient care and services for kids. It would also fund programs to help newly released inmates transition to the community among other things.

The largest chunk of money, $225 million, would go to increase Medicaid reimbursement rates for mental health providers.

Robinson said it's a comprehensive plan to improve mental health. “That’s the only way you’re going to get out of this hole. There is not a magic bullet.”

Raising those Medicaid reimbursement rates for behavioral health care providers is critical, he said. They haven’t been increased in a decade. A recent study in the policy journal, Health Affairs, found North Carolina ranks 32nd out of 50 states for Medicaid coverage of mental health. For example, reimbursement for a 50-minute session of psychotherapy is $62.15 to $67.85.

Many mental health providers simply won’t take Medicaid patients because the rates are too low. Those low rates are also one of the reasons for North Carolina’s shortage of mental health workers, Robinson said. North Carolina’s mental health workforce is sufficient to meet only 13% of the state’s needs, according to calculations performed by KFF. There’s a national shortage of mental health care providers, but on average, KFF found that North Carolina’s shortage is twice as bad as the rest of the country.

“The unfortunate reality is we are in a crisis in the state,” Robinson said. “Providers and clinicians are just not interested in getting into the field. There's clinicians that are leaving the field. One of the big reasons is rates.”

Rep. Donny Lambeth, R-Forsyth, agrees. The Winston-Salem Republican is a senior chairman of the House Appropriations Committee. Two weeks ago, he filed a bill to spend $1 billion of the signing bonus on mental health care.

WFAE caught up with Lambeth by phone two days later. Lambeth has pushed for Medicaid expansion for years. Now that it’s passed, he’s looking back.

“I had my hands full in other sessions,” he said. “I was letting things go with mental health, and I sort of regret it. We should have been dealing with some of the mental health challenges before now.”

The House’s priorities for the money are remarkably similar to the governor’s proposal. North Carolina Department of Health and Human Services and the House had been discussing the package for weeks, Lambeth said, and the administration took some of its ideas.

The bill, which Lambeth said will be part of the House budget, will fund new crisis intervention services and programs to keep those living with mental health problems out of jails. And, like the governor’s proposal, it would spend $225 million to raise Medicaid reimbursement rates for three years.

Right now, Lambeth said, some hospitals can’t operate mental health beds because rates are so low. Providers need to be able to recover their cost, and nurses and staff need an incentive to get back into the mental health workforce.

But it’s not a done deal. That $225 million for increased rates will run out after a few years. Then North Carolina legislators will have to come up with more money to continue to pay those higher rates. Convincing the Senate to use state funds to sustain higher rates could be difficult.

“So that’s going to be a bit of a challenge,” Lambeth said. “And so we’ll have some discussions in conference with the Senate on, ‘Are there any other ways that we can fund that portion?’”

Lambeth said he’s very optimistic the House and Senate will come to a deal on this, as well as the other elements of the $1 billion plan to build out the mental health system.

But after watching a decade’s worth of bitter battles over expansion and reluctance to spend state money, Rob Robinson said he’s still waiting to see if the plans become a reality.

Mona Dougani contributed to this story.

This story is part of a collaboration with WFAE through FRONTLINE’s Local Journalism Initiative, which is funded by the John S. and James L. Knight Foundation and the Corporation for Public Broadcasting. 

Dana Miller Ervin is a reporter at WFAE, examining the U.S. health care system.