Medi-Cal expansion sends Sacramento County's psychiatric bill soaring

What’s good for the patient is proving costly to the county—and reawakening a debate about Sacramento’s approach to psychiatric care.

While President Barack Obama’s Affordable Care Act expanded access to government-run health care, legislative wrinkles that predate the law’s enactment mean there are certain things that Medicaid and its state iterations, like Medi-Cal, can’t pay for. It’s in this gap that individual counties like Sacramento are finding themselves stuck with growing psychiatric bills.

Last month, county supervisors redirected more than $3.5 million to cover an enlarged bill for inpatient hospitalizations, on top of an additional $122,000 approved back in September.

Under its current contract with three large psychiatric facilities—Heritage Oaks and Sierra Vista hospitals and Sutter Center for Psychiatry—Sacramento County, not Medi-Cal, pays $950 for each day that an insured patient takes up a bed, while the hospitals eat the cost of putting up the uninsured. While a rise in demand is driving some of the increase, most of it is coming from old patients with new insurance.

“As a result of the Affordable Care Act and its implementation, one of the sort of unintended consequences was essentially a windfall for these three hospitals,” county executive Brad Hudson explained at last month’s board of supervisors meeting. “They’re getting paid for patients that just several months ago they didn’t get paid for.”

Here’s how that works: The transition of indigent people to Medi-Cal means they’re no longer eligible for hospitals’ no-charge “charity care” policies. But because of federal legislation passed in the 1980s to de-incentivize warehousing people in state hospitals, Medi-Cal and other Medicaid programs cannot reimburse facilities of more than 16 beds, meaning California counties have to pick up the tab for hospitalizing severely mentally ill adults on Medi-Cal.

According to the National Institute of Mental Health, this has turned out to be a discriminatory policy that has, thus far, gone unaddressed. Under Obamacare, there are many more of these Medi-Cal recipients.

Based on current projections, county officials think they may have to pay the hospitals between $10 million and $15 million more than the $5.6 million originally budgeted this fiscal year, which ends in July.

Those projections may not hold, as they’re based on August 2014 invoices, which saw a big leap from the month before. But the county Department of Health & Human Services is already broke with six months left on the contract.

“We’re out of money to pay the psychiatric bills,” Health & Human Services director Sherri Heller acknowledged during a supervisors meeting on December 9.

Heller said negotiations were proceeding in “good faith” to amend the county’s contract with the hospitals to accommodate the new normal, which is why she only requested enough additional funds to get through the end of January.

But mental-health activists like Susan Gallagher claimed the county was merely propping up its “fail-first system.”

“The existing outpatient system in Sacramento has been burgeoning for years without any relief,” said Gallagher, executive director of Mental Health America of Northern California.

She said local Medi-Cal recipients languish an average of six to eight weeks waiting for their first therapy appointment and can’t access inpatient services without first going to the emergency room. According to John Boyd, CEO of the 73-bed Sutter Center for Psychiatry, that translates into more than 17,000 ER visits by people who need crisis stabilization, not hospitalization. “We are hospitalizing people that … don’t need hospitalization,” he told supervisors.

Boyd and Gallagher urged elected officials to shift resources toward crisis stabilization, as other California counties have successfully done, and create more regional psychiatric health facilities of 16 beds or less, which are Medi-Cal reimbursable.

But Boyd remained skeptical. “The dialogue with the county, historically, has been very insignificant,” he said.