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LOSSES page 3

"I'm not sure [the shift to man-
aged care] means there will be
better delivery of service. I think
the major cost of human services
is direct staffing costs, and those
are already at pitifully low wage
levels. So, to be squeezing it
there, I don't see that we're going
to be delivering a quality of ser-
vice that would be to the stan-
dards of our community," said
JARC Executive Director Joyce
Keller.
For the past three years, the
state has intensified its efforts to
shift Medicaid beneficiaries into
managed care organizations like
HMOs, but the momentum has
grown even more as the federal
government considers capping
annual Medicaid spending in-
creases to 4.5 percent.
About half of the state's ap-
proximately 800,000 Medicaid
beneficiaries are already in fee-
capped programs like HMOs and
most are in physician-sponsored
plans (PSP), but because of dou-
ble-digit increases in the cost of
Medicaid, the state "has under-
taken an aggressive strategy" to
move many more Medicaid
clients into managed care sys-
tems, said Robert Smedes, di-
rector of the Michigan Medicaid
office in the Department of Com-
munity Health.
Michigan spends roughly
$600,000 for mental health ser-
vices. Its total Medicaid budget
is $4 billion — over half of it from
the federal government.
The shift into managed care
plans has saved the state about
10 percent in Medicaid costs
since 1981, according to Mr.
Smede's office.
Under the state's transition
plan for managed care, as of next
year, funding could shift away
from county community mental
health (CMH) agencies — the
main funding conduit for state
and federal Medicaid dollars to
providers like JARC and Kadi-
ma — to private companies that
bid on contracts to serve the de-
velopmentally disabled and the
mentally ill.
Kadima is a Jewish nonprof-
it agency that serves the men
tally ill.
"We have a great variety of
performance from one county to
another, but in 1998, we will corn-
petitively select managed care or-
ganizations to deliver those
services on a regional basis.
Were not trying to limit the num-
ber of people who will be suc-
cessful bidders. I expect the
number of managed care orga-
nizations to increase, not de-
crease," Mr. Smedes said.
The scenario is something of a
nightmare at JARC, where offi-
cials envision a free-for-all mar-
ketplace, with state dollars up for
grabs to the lowest bidders.
"There is total anxiety out
there because nobody knows who
the big master is," said Gilda Ja-
cobs, co-director of development

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at JARC who, as an Oakland
County commissioner, is involved
on the county level with issues
related to the community men-
tal health board. She said JARC
is worried about another cross-
current that could further insu-
late the CMH agency: The
county's move to give it more in-
dependence.
Medicaid spending is likely to
decrease, too, further squeezing
agencies like JARC, which oper-
ates 16 group homes and four in-
dependent living programs and
provides counseling and guidance
services for the developmentally
disabled. Most of its clients re-
ceive Medicaid benefits.
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Gilda Jacobs: JARC's co-director of
development.

are under contract with the Ma-
comb Oakland Regional Center
(MORC), which provides inter-
mediate services like case man-
agement and various therapies
to the developmental disabled.
Another two homes contract with
the county's CMH agency. The
remaining are privately funded:
"Even assuming the funding
system continues through com-
munity mental health agencies,
there is certainly every indica-
tion the increases in Medicaid
funding for mental health pro-
grams over the next several years
will be at a lower rate of increase
than they have been historical-
ly. The net effect is there would
be less funding available through
Medicaid for mental health ser-
vices, including developmental-
ly disabled services," said Bob
Stein, executive vice president of
the Michigan Residential Care
Association, an advocacy organi-
zation for nonprofit residen-
tial/vocational service providers
like JARC.
"Our largest concern is really
advocating with the Department
of Community Health and the
Michigan Legislature to assure
that under this transition to
managed care, the total amount
of funding for residential ser-
vices/vocational services pro-
grams is sufficient to meet the
LOSSES page 28

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