ROOSEVELT INSTITUTE | CAMPUS NETWORK PRESENTS:

EXPANDING MEDICAID TO
IMPROVE MENTAL HEALTH CARE
IN NORTH CAROLINA
WHITE PAPER BY
EMILY CERCIELLO
SENIOR FELLOW FOR HEALTH CARE
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL
DECEMBER 11, 2014

EXECUTIVE SUMMARY
A key provision of the Aordable Care Act (ACA) is the eligibility expansion of Medicaid, a condition originally
mandated by the ACA but made optional to states a"er a 2012 Supreme Court decision. Today, 28 states are
participating in expansion. The North Carolina legislature has repeatedly declined expanding Medicaid to eligible
residents while the state is also experiencing formidable challenges in providing aordable mental health care
services. Nevertheless, new and emboldened leadership has the opportunity to expand Medicaid as part of a
greater eort to improve mental health care in North Carolina. While systems will need to expand to meet the
demand of new patients, North Carolina can be an example for the country for turning the challenge of Medicaid
expansion into an asset for improved access to healthcare and job creation.

Emily Cerciello is the Roosevelt Institute |

Campus Network Senior Fellow for Health
Care, where she engages students across
the country in local, state, and national
health policy discourse. As a student at the
University of North Carolina at Chapel Hill,
Emily has performed research on substance
use disorders, started a student
organization, and served on the Campus
Health Services Advisory Board. Her primary
policy interests are at the intersection of
economics and population health. Emily is an
accomplished researcher and public speaker
and has previously served in strategy,
research, and public aairs roles for
managed care, healthcare facilities, and
financial services organizations.
For media inquiries, please contact Rachel
Goldfarb at 212.444.9130 x 213 or
[email protected].
The views and opinions expressed in this
paper are those of the author and do not
necessarily represent the views of the
Roosevelt Institute, its donors, or its directors.

KEY ARGUMENTS
Medicaid is the single largest payer of mental health
care services in the United States, providing
indispensable psychotherapy and psychiatric services
to individuals with mental illnesses who might not
otherwise receive treatment.
Mental illness disproportionately aects individuals
with lower family incomes, with mental illness aecting
23.3 percent of individuals with family incomes
between 100 and 199 percent of the FPL.
States that have expanded Medicaid have seen
improvements to state and local economies through
the addition of jobs and decreases in uncompensated
care.
Results from other expansion states show pent up
demand for mental health services, significant
reductions in uncompensated care, and financial and
healthcare relief for vulnerable residents.
North Carolina should expand Medicaid in 2015 to
provide an aordable care option for 190,000
mentally-ill North Carolinians and improve local
economies in the process.
Expansion of the Medicaid program would bring $39.6
billion in federal funds to North Carolina through 2022
and significantly reduce the $300 million annual
uncompensated care burden on state hospitals.

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Expanding Medicaid to Improve Mental Health Care in North Carolina

By Emily Cerciello, December 11, 2014
INTRODUCTION
A primary goal of the Patient Protection and Affordable Care Act (ACA) is to considerably reduce the number of
uninsured Americans by providing affordable health insurance options through removing the pre-existing condition
exclusion and introducing online health insurance marketplaces, among other reforms. A central and necessary
provision of the ACA is the expansion of Medicaid, a social insurance program for low-income Americans jointly
funded by states and the federal government.1
Under expansion, Medicaid eligibility is broadened to include individuals with incomes up to 138 percent of the
federal poverty level (FPL),2 meaning single adults earning up to $16,105 annually and families of four earning up to
$32,913 annually are now eligible. Prior to passage of the ACA, individuals eligible for Medicaid included pregnant
women, children under age 21, parents or caretakers of dependent children, persons with disabilities, and the
elderly. To be eligible, individuals also had to have incomes below a certain threshold - $11,670 annual income for
a single adult or $23,850 annual income for a family of four in 2014. Before expansion, individuals not covered by
traditional Medicaid that were most likely to need health insurance were low-income, childless, nondisabled
adults under age 65. Medicaid expansion removes these restrictive eligibility categories and expands coverage,
filling large gaps in our employer-based health insurance system.
In 2012, the Supreme Court upheld the constitutionality of the ACA but in a 7-2 decision deemed unconstitutional
the laws mandate that all states participate in Medicaid expansion, effectively making compliance with the
provision optional.3 This decision created a huge fracture in the framework and functioning of the ACA as a
comprehensive reform intended to increase health insurance coverage and reduce health care costs for all
Americans. As of this date, only 28 states are expanding Medicaid as originally intended by the ACA or in statespecific alternative expansion plans.4 The federal government will cover 100 percent of expansion costs through
2016 and a minimum of 90 percent in all years to follow.5, 6
As the single largest payer of mental health services in the United States, Medicaid plays a key role in enabling
low-income individuals to access mental health care.7 In 2012, about 1 in 5, or 43.7 million U.S. adults, experienced a
form of mental illness, and 1 in 17, or 13.6 million U.S. adults, experienced a serious mental illness including major
depression, schizophrenia, or bipolar disorder.8 Medicaid coverage for mental health services is particularly
important, given that nationwide, adults with family incomes less than 100 percent of the FPL have higher rates of
1

Medicaid Home | Medicaid.gov. (n.d.). Retrieved from h#p://www.medicaid.gov/

Key Features of the Aordable Care Act By Year | HHS.gov/healthcare. (n.d.). Retrieved from h#p://www.hhs.gov/
healthcare/facts/timeline/timeline-text.html
3 A Guide to the Supreme Courts Decision on the ACAs Medicaid Expansion | The Henry J. Kaiser Family Foundation. (n.d.).
Retrieved from h#p://k.org/health-reform/issue-brief/a-guide-to-the-supreme-courts-decision/
4 Status of State Action on the Medicaid Expansion Decision | The Henry J. Kaiser Family Foundation. (n.d.). Retrieved from
h#p://k.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-aordable-care-act/
5 h#p://www.hhs.gov/healthcare/rights/law/index.html
6 95 percent of costs in 2017, 94 percent in 2018, and 93 percent in 2019. From 2020 on, the federal government will cover 90
percent of expansion costs unless the provision is changed or repealed
7 Medicaid and CHIP Program Information | Medicaid.gov. (n.d.). Retrieved from h#p://www.medicaid.gov/medicaid-chipprogram-information/medicaid-and-chip-program-information.html
8 National Institute of Mental Health. (n.d.). NIMH - Statistics - Any Mental Illness (AMI) among adults. Retrieved from h#p://
www.nimh.nih.gov/statistics/1ANYDIS_ADULT.shtml
2

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mental illness (29.5 percent) than adults with family incomes between 100 and 199 percent of the FPL (23.3 percent)
and adults with family incomes above 200 percent of the FPL (17 percent).9
In North Carolina, the Medicaid program follows federal standards in covering inpatient, outpatient, and rural
mental health services that would otherwise be out of reach for low-income individuals.10 In the past, the North
Carolina legislature has repeatedly rejected discussions of Medicaid expansion, citing cost overruns and program
inefficiencies. However, the North Carolina Department of Health and Human Services (HHS) recently announced
a budget surplus. Expansion of the program would bring $39.6 billion in federal funds to the state through 2022 and
significantly reduce the $300 million annual uncompensated care burden on state hospitals.11
Rural hospitals already hurting in the wake of the 2008 recession are disproportionately affected by the state's
decision to opt out of expansion. In September 2014, the only hospital in the rural eastern North Carolina town of
Belhaven was forced to close, prompting Republican Mayor Adam ONeal to spend two weeks walking 237 miles to
Washington, D.C. to demand Medicaid expansion.12 Eighty of North Carolinas 100 counties are rural, making many
areas vulnerable to similar outcomes.13
Data from other states illustrate that Medicaid expansion enrollees have high rates of mental illness, which requires
increased capacity. In one of the best examples of successful Medicaid expansion, the state of Colorado saw
significant increases in patients seeking mental health care, indicating pent-up demand among the newly eligible
Medicaid population. The state built up the mental health workforce by hundreds in order to manage the increase.
Additionally, Colorado hospitals are continuing to expand inpatient bed capacity to handle greater demand for
inpatient mental and behavioral health services, drawing revenue to hospitals and providers with mental health
care specialties.14
This white paper argues that Medicaid expansion is critical to improving access to mental health care services in
North Carolina. North Carolina is a useful example because it has one of the largest coverage gaps of all states that
have not yet expanded Medicaid, the states mental health system is strong and capable of adapting to an influx of
new patients, and new legislative leadership including Senator-elect Thom Tillis have shown interest in
considering expansion of the program.15, 16 Currently, more than 50 percent of individuals with mental illness do not

U.S. Dept. of Health and Human Services. (2012, January). Results from the 2010 National Survey on Drug Use and Health:
Mental Health Findings. Retrieved from h#p://www.samhsa.gov/data/nsduh/2k10MH_Findings/2k10MHResults.pdf
10 Medicaid Home | Medicaid.gov. (n.d.). Retrieved from h#p://www.medicaid.gov/
11 Helms & Pugh. (2014, October 5). North Carolina's $10 billion Medicaid challenge: Pay for other states or take federal
money? Retrieved from h#p://www.charlo#eobserver.com/2014/09/02/5145802/north-carolinas-10-billionmedicaid.html#.VBm-3C5dUhQ
12 h#p://www.npr.org/blogs/health/2014/08/01/336907606/a-conservative-mayor-fights-to-expand-medicaid-in-northcarolina
13 h#p://www.raconline.org/states/north-carolina
14 Hoback. (2014, August 6). Medicaid expansion creates explosion in demand for mental health care. Health News Colorado.
Retrieved from h#p://www.healthnewscolorado.org/2014/08/06/medicaid-expansion-creates-explosion-in-demand-formental-health-care/
15 Coverage gap describes the gap between non-expanded Medicaid eligibility and eligibility for subsidies on
Healthcare.gov. Many Americans including 320,000 North Carolinians (4th largest in the country) do not qualify for
traditional Medicaid and do not have incomes high enough to qualify for subsidies on the exchange.
16 Millman, J. (2014, August 29). 23 states still haven't expanded Medicaid. Which could be next? Retrieved November 20,
2014, from h#p://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/29/23-states-still-havent-expanded-medicaidwhich-could-be-next/

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receive treatment because they view costs as prohibitive.17 Estimates indicate that expanding Medicaid could cover
190,000 North Carolinians with mental health conditions.18 Medicaid expansion can improve mental health
coverage, provide early detection and access to treatment, and have a profound impact on vulnerable individuals
experiencing mental illness in North Carolina.
The paper is structured as follows: the first section discusses the current structure of Medicaid as it relates
tomental health coverage both nationally andin North Carolina;the second sectionprovides examples of other
states Medicaid expansion to demonstrate impacts on mental health care access and on state and local
economies, and this sectionalso highlights the main tenets of the North Carolina expansion debate; and the final
section makes recommendations for Medicaid expansion in North Carolina within the current Medicaid
expansion debate in the state.

MEDICAID AND MENTAL HEALTH CARE

The structure of Medicaid and mental health coverage
Since its creation in 1965, Medicaid has been an indispensible health insurance program for low-income children
and adults, pregnant women, seniors 65 and older, and individuals with disabilities. The program currently
provides insurance coverage for a range of health services for 31 million children, 11 million adults, nearly 9 million
individuals with disabilities, and 4.6 million low-income dual eligible seniors who are eligible for both Medicare
and Medicaid, and finances 40 percent of all births in the United States.19, 20
Medicaid connects low-income Americans to managed care plans directed by the states that cover a wide range
of benefits and limit out of pocket costs for beneficiaries. The federal government establishes rules for eligibility,
determines which services must be covered, and recommends how those services should be delivered. States
must meet these minimum federal requirements in order to receive federal funding, and they have the option to
provide additional services or include additional eligibility groups.21
Medicaid provides a safety net for individuals and families during economic downturns, provides a coverage
option for individuals caught in generational or systemic poverty, and finances providers and hospitals that serve
low-income and uninsured Americans.22
States have a great deal of flexibility in creating state-specific benefit packages that reach broader groups of
people or provide additional services under the program.23 North Carolina expands income eligibility for some
federally required groups, and also issues traditional Medicaid eligibility to low-income families who qualify for
the Work First Family Assistance program, recipients of adoption assistance and foster care, individuals receiving
SSI or supplementary SSI payments, aged, blind, or disabled (ABD) individuals in group living arrangements, and
certain disabled children age 18 or under who are living at home and who would be eligible for Medicaid if they
were in an institution.24
17

Pearlman,S. (2013). The Patient Protection and Aordable Care Act: Impact on Mental Health Services Demand and
Provider Availability.Journal of the American Psychiatric Nurses Association,19(6), 327-334.
18 American Mental Health Counselors Association (AMHCA). (2014, February 26). Dashed hopes, broken promises, more
despair: How the lack of state participation in Medicaid expansion will punish Americans with mental illness. Retrieved from
h#p://www.amhca.org/assets/content/DashedHopesNorthCarolina1.pdf
19 h#p://www.cms.gov/About-CMS/Agency-Information/History/index.html?redirect=/history/
20 h#p://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Population/By-Population.html
21 h#p://k.org/medicaid/fact-sheet/the-medicaid-program-at-a-glance-update/
22 h#p://k.org/medicaid/fact-sheet/the-medicaid-program-at-a-glance-update/
23 h#p://store.samhsa.gov/shin/content//NMH05-0202/NMH05-0202.pdf
24 SSI describes Supplemental Security Income for individuals with limited income and financial resources, as provided by
the Social Security Adminstration.

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Before the passage of the ACA in 2010, mental health and substance abuse services combined as behavioral
health were optional services under the Medicaid program. All states, however, provided mental health
services and most states provided limited substance abuse treatment coverage. States had flexibility in designing
their Medicaid behavioral health packages and could decide how they were delivered.
Previously, service categories that could provide behavioral health services included:25
Inpatient hospital services;
Outpatient hospital services;
Federally qualified health center services;
Rural health center services; and
Physician services.
North Carolinas current Medicaid program follows the general trend of covering inpatient, outpatient, and rural
mental health services that would otherwise be out of reach for low-income Americans.26
Even though the state has not expanded Medicaid, it has expanded current benefits for Medicaid recipients. As
of January 2014, mental health and substance use disorder services, including behavioral health treatment, must
be provided through ACA-established Essential Health Benefits (EHB) to all new Medicaid enrollees.27 Medicaid
coverage must now match the benefits provided in a typical employer plan in each state.28
For 2014, North Carolina did not select its own benchmark plan and defaulted to the Department of Health and
Human Services (HHS)-selected state small group plan with the largest enrollment as its benchmark. Notably,
North Carolina was one of only two states that did not hold public meetings in the EHB benchmark decisionmaking process.29 A snapshot of the 2014 North Carolina benchmark mental health and substance use benefits is
shown below in Table 1.
Table 1. North Carolina EHB Benchmark Plan Benefits 201430
Benefit

Description

Exclusions

Mental/Behavioral Health
Outpatient Services

Evaluation and diagnosis; Medically necessary

biofeedback; Neuropsychological testing; Partial
day hospitalization; Intensive therapy services

Marital counseling

Mental/Behavioral Health
Inpatient Services

Mental/behavioral health inpatient services

Inpatient residential treatment

centers; Supervised living

Substance Use Disorder

Outpatient Services

Evaluation and diagnosis; Partial day

hospitalization; Intensive therapy services

Substance Use Disorder

Inpatient Services

Inpatient residential treatment centers;

Detoxification

Inpatient residential treatment

centers; Supervised living

25

h#p://store.samhsa.gov/shin/content//NMH05-0202/NMH05-0202.pdf
Medicaid Home | Medicaid.gov. (n.d.). Retrieved from h#p://www.medicaid.gov/
27 Essential Health Benefits are a set of health service categories that must be covered by insurance plans beginning in 2014
as established by the ACA.
28 Benchmark typical employer plan can be 1) the largest plan by enrollment in any of the three largest products by
enrollment in the states small group market, 2) any of the largest three state employee health benefit plans options by
enrollment, 3) any of the largest three national Federal Employees Health Benefits Program (FEHBP) plan options by
enrollment, or 4) the HMO plan with the largest insured commercial non-Medicaid enrollment in the state.
26

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Mental illness in North Carolina

A wide body of research shows that mental illness disproportionally aects individuals with low household
incomes. Adults with family incomes less than 100 percent of the FPL have higher rates of mental illness (29.5
percent) than adults with family incomes between 100 and 199 percent of the FPL (23.3 percent) and adults with
family incomes above 200 percent of the FPL (17 percent).31 The impact of the 2008 recession reached far beyond
labor and housing markets longitudinal studies conducted before, during, and a"er the recession showed that
decreases in household income are associated with heightened risk for mental disorders.32
Of the 9.8 million North Carolina residents in 2013, approximately 350,000 adults had a serious mental illness
and more than 100,000 children had serious mental health conditions.33 Untreated mental disorders can have
deleterious and o"en fatal consequences, including homelessness, violence, and incarceration. In 2011, 1,213 North
Carolina residents died by suicide, which is almost always the result of untreated mental illness.34
Approximately 190,000 North Carolinians with mental health conditions could be covered by Medicaid
expansion. This represents approximately 30 percent of all uninsured individuals who would be eligible for
Medicaid if North Carolina expanded the program.35
Mental health care aordability and accessibility in North Carolina
Mental health systems across the country have faced overwhelming challenges including stigma and facility
shortages that limit providers ability to eectively provide care to patients. But in the last 10 years, there have
been concentrated eorts to improve the coordination and delivery of mental health and substance abuse care
in North Carolina. Community hospital capacity for behavioral health has increased, crisis support has improved,
and new modes of care delivery, including telemedicine, have expanded across the state.36 Additionally, North
Carolina was one of the first states to pass mental health parity legislation for individuals with serious mental
illnesses.37, 38

29

h#p://www.commonwealthfund.org/~/media/files/publications/issue-brief/2013/mar/
1677_corle#e_implementing_aca_choosing_essential_hlt_benefits_reform_brief.pdf
30 h#p://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html#North Carolina
31 U.S. Dept. of Health and Human Services. (2012, January). Results from the 2010 National Survey on Drug Use and Health:
Mental Health Findings. Retrieved from h#p://www.samhsa.gov/data/nsduh/2k10MH_Findings/2k10MHResults.pdf
32 h#p://www.ncbi.nlm.nih.gov/pubmed/21464366
33 h#p://naminc.org/nn/misc/NCstats.pdf
34 h#p://www.suicidology.org/Portals/14/docs/Resources/FactSheets/2011OverallData.pdf
35 h#p://www.amhca.org/assets/content/DashedHopesNorthCarolina1.pdf
36 h#p://www.ncmedicaljournal.com/archives/?73304
37 www.nami.org/gtsTemplate09.cfm?Section=Grading_the_States_2009&Template=/contentmanagement/
contentdisplay.cfm&ContentID=74912
38 Mental health parity describes equal treatment of and payment for mental health conditions and other physical health
conditions. Traditionally, mental health coverage included higher cost sharing and restrictive limits on inpatient or outpatient
stays.

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Figure 1. Costs of Treatment for Behavioral Health Disorders

Adjustment disorders!
Pregnancy-related disorders!
Anxiety disorders!
Depression!
Drug-related disorders!
Alcohol-related disorders!
Bipolar disorders!
Average cost of hospital stay for MH!
A"ention-deficit disorders!
Schizophrenia/other psychotic disorders!
$0!

$2,000!

$4,000!

$6,000!

$8,000!

Despite these improvements, North Carolina fails to meet the needs of its low-income, mentally ill population.
Notably, the states public mental health system reaches only 34 percent of adults with serious mental illnesses
and only 27 percent of individuals with any behavioral health disorders including substance abuse.
The exorbitant cost of mental health treatment is a major barrier to care for many patients. Currently, more than
50 percent of individuals with mental illness do not receive treatment because they view costs as prohibitive, and
individuals are more likely to pay out-of-pocket costs for physical treatments rather than mental health treatments
because they prioritize physical health needs.39 In 2004, the mean cost of a physician oce visit related to
psychotherapy or mental health counseling in Southern states was $97.40 As illustrated in Figure 1, in 2011, the
average cost of a hospital stay for schizophrenia was $7,500; for bipolar disorders was $5,600; for drug-related
disorders was $4,900; and for anxiety disorders was $4,500.41 The data show that appropriate treatment is
almost always decidedly out of reach for many low-income, uninsured Americans.

MEDICAID EXPANSION
Mental health care improvements post-expansion in other states
In legislatures across the country, two primary concerns about Medicaid expansion related to mental health care
include expansion costs and lack of provider capacity to treat patients. One study estimates that nationwide,
approximately 62.5 million Americans will be newly eligible for mental health care benefits across all provisions of

39

Pearlman,S. (2013). The Patient Protection and Aordable Care Act: Impact on Mental Health Services Demand and
Provider Availability.Journal of the American Psychiatric Nurses Association,19(6), 327-334.
40 h#p://meps.ahrq.gov/mepsweb/data_files/publications/st157/stat157.pdf
41 h#p://www.healthleadersmedia.com/content/270631.pdf

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the ACA, resulting in an 18 percent proportional decrease in supply of mental health care providers. Additionally,
the study suggests that high-needs mental health patients will be smaller in number, but much more costly, than the
lower-acuity, mildly symptomatic majority of mental health patients.42
North Carolina can relate to discussions taking place in other states. For example, while mental health providers in
Illinois advocate expansion for improved access to mental health services among the states low-income population,
it is unknown whether community mental health centers will need to increase their staffing, and if so, whether
enough providers will be drawn to the poorly paid specialty. However, the state notes several benefits to
expansion, including the addition of funding for the states struggling public mental health system and the addition
of patients to existing integrated care models.43
To date, the most successful example of Medicaid expansion for improving mental health care is in the state of
Colorado. Colorado was one of the first states to expand Medicaid and made significant efforts to advertise the
expansion before enrollment took place. The results were remarkably positive community mental health centers
saw significant increases in patients needing care, indicating pent-up demand among the newly eligible Medicaid
population. With foresight, the state built up the mental health workforce by hundreds in order to manage the
increase. Additionally, hospitals in Colorado are continuing to expand inpatient bed capacity to handle greater
demand for inpatient mental and behavioral health services, drawing significant revenue to hospitals with mental
health care specialties.44
Expanding Medicaid improves state and local economies
In several states, including Colorado, Ohio, Rhode Island, Maryland, and South Carolina, governors are calling for
more state funding for mental health services. State-level mental health care funding dropped $4.35 billion between
2009 and 2012 across all states due to budget cuts from the 2008 recession.45 Young adults are disproportionately
affected by mental illness, and as a critical portion of the nation's workforce, their treatment has economic
importance. Notably, every dollar spent on treatment for depression can generate $7 for the economy as
individuals recover and return to work. On top of this, costly hospital admissions can be reduced by 40 percent if
individuals are treated in community mental health centers first.46 Medicaid expansion is a key feature of the ACA
that can improve mental health access in states experiencing budget crises, as North Carolina is today.
One North Carolina-based report examines the specific impact of Medicaid expansion on the North Carolina
economy. According to the analysis, new funds from Medicaid expansion would generate 25,000 jobs by 2016,
most of which would be in the private sector. Remarkably, North Carolina would have saved $37.8 million in FY
2014. Additionally, the state could save $120.8 million in FY 2015 and $124.2 million in FY 2016. Ose#ing these
savings with estimated state expenditures for newly eligible Medicaid recipients, the state would save a total of
$65.4 million between FY 2014 and FY 2021.47
Expanding Medicaid will have a significant impact on North Carolinas economy. Not only will the state save
financially as the federal government pays a significant portion of expanding the program, but local hospitals will

42

Pearlman,S. (2013). The Patient Protection and Aordable Care Act: Impact on Mental Health Services Demand and
Provider Availability.Journal of the American Psychiatric Nurses Association,19(6), 327-334.
43 Olsen. (2013, August 5). ACA's Medicaid expansion potential boon for mental-health patients, providers. The State JournalRegister. Retrieved from h#p://www.sj-r.com/article/20130805/News/308059909
44 h#p://www.healthnewscolorado.org/2014/08/06/medicaid-expansion-creates-explosion-in-demand-for-mental-healthcare/
45 Rolfes. (2013, February 22). Medicaid Expansion to Boost Access to Mental Health Services. PBS NewsHour. Retrieved
from h#p://www.pbs.org/newshour/rundown/medicaid-expansion-will-expand-access-to-mental-illness-treatment/
46 Rolfes. (2013, February 22). Medicaid Expansion to Boost Access to Mental Health Services. PBS NewsHour. Retrieved
from h#p://www.pbs.org/newshour/rundown/medicaid-expansion-will-expand-access-to-mental-illness-treatment/
47 h#p://www.nciom.org/wp-content/uploads/2013/01/FULL-REPORT-2-13-2013.pdf

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see significant reductions in the $300 million annual uncompensated care burden that limits hospitals ability to
expand and improve services.48 As it stands, hospitals receive no payment if a patient enters the emergency room
or a physician's oce and is unable to pay. Instead, the patient is o"en included in the hospitals charity care
policy or the visit is wri#en o as uncompensated care. For Carolinas HealthCare System, the largest provider
organization in North Carolina, charity care and bad debt currently make up approximately 10 percent of the
yearly budget, which could be significantly decreased through expansion and additional revenues from the
Medicaid program.49
The effect of uncompensated care on rural hospitals is significant. In September 2014, the only hospital in Belhaven,
North Carolina was forced to close, prompting Republican Mayor Adam ONeal to spend two weeks walking 237
miles to Washington, D.C. to demand Medicaid expansion.50 If North Carolina had expanded Medicaid, the hospital
could have received increased reimbursement for patient visits instead of having to default to charity or
uncompensated care, and thus avoided closure, which was brought on by an inability to operate at a positive
margin.
For both adults and children, early identification and treatment of mental illness can keep conditions from
worsening, as longer periods of abnormal thoughts and related behaviors have compounding eects and can limit
the eectiveness of recovery eorts. In 2007, of the 7.6 million emergency department visits for mental illness in
the United States, one in eight patients was uninsured. Uninsured patients are more likely to delay medical care
due to prohibitive costs than insured patients, so expansion of the Medicaid program will help individuals get
treatment before their situation becomes so drastic as to need emergency room services.51
Newly eligible Medicaid recipients will be able to use primary care doctors for preventive visits instead of relying
on the costly emergency department, and employers could see a decrease in health insurance costs as the need for
cost-shifting decreases.52 Additionally, Medicaid expansion will offset the $384.5 million in disproportionate share
hospital (DSH) payment cuts that North Carolina will experience through 2019. DSH payments are traditionally paid
to hospitals that serve a high proportion of Medicaid patients.53
The Medicaid expansion debate in North Carolina
Related to behavioral health care, the North Carolina Medicaid program announced in 2011 and switched in 2013
from a traditional fee-for-service model to a local management entity managed care organizations (LME-MCOs)
model. The new LME-MCO model manages the approximately $2 billion for mental health, intellectual and
developmental disabilities, and substance abuse that the state sees each year. LMEs were created by the state in
2001, and the MCO model builds on this existing community infrastructure. The MCOs are accountable for the
entire continuum of services in each area and must address the special needs of the Medicaid population in an area
by providing education and access to primary care services. MCOs allow for budget predictability through
capitated, population-based payments instead of individual fee-for-service payments and lessened administrative

48

Helms & Pugh. (2014, October 5). North Carolina's $10 billion Medicaid challenge: Pay for other states or take federal
money? Retrieved from h#p://www.charlo#eobserver.com/2014/09/02/5145802/north-carolinas-10-billionmedicaid.html#.VBm-3C5dUhQ
49 Helms, & Pugh. (2014, October 5). North Carolina's $10 billion Medicaid challenge: Pay for other states or take federal
money? Retrieved from h#p://www.charlo#eobserver.com/2014/09/02/5145802/north-carolinas-10-billionmedicaid.html#.VBm-3C5dUhQ
50 h#p://www.npr.org/blogs/health/2014/08/01/336907606/a-conservative-mayor-fights-to-expand-medicaid-in-northcarolina
51 h#p://k.org/health-reform/fact-sheet/the-uninsured-and-the-dierence-health-insurance/
52 h#p://www.nciom.org/wp-content/uploads/2013/01/FULL-REPORT-2-13-2013.pdf
53 h#p://www.nciom.org/wp-content/uploads/2013/01/FULL-REPORT-2-13-2013.pdf

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burden by only contracting with one MCO instead of many fee-for-service providers.54 The recently consolidated
LME-MCO coverage areas are depicted in Figure 2 below.
Figure 2. LME-MCO Structure in North Carolina

The North Carolina legislative leadership has stated that the Medicaid system must be sustainable and have budget
predictability before it can be expanded. But the recent announcement of a $63.6 million budget surplus for the
states Medicaid program for FY 2013-14 by North Carolina DHHS Secretary Dr. Aldona Wos positions Medicaid
expansion as a feasible, budget-appropriate solution to expand access to mental health services for North
Carolinas low income population.55
To draw on another states experience, Colorado saw an increase in demand for mental health care services and
built up the mental health workforce by hundreds in order to manage the increase. In North Carolina, only 11 of 100
counties are designated as being in an official mental health provider shortage, and only seven counties have any
unmet need for non-prescribing mental health care providers. Most counties across the state have unmet needs for
mental health providers who can prescribe medication, but recent developments like the new MCO model for
behavioral health care can impact the distribution of mental health providers by implementing incentives or
telepsychiatry initiatives to extend prescribing abilities to rural areas. The North Carolina Commission for Mental
Health, Developmental Disabilities, and Substance Abuse Services Workforce Development Initiative provides
additional recommendations for strengthening the mental health workforce in North Carolina.56
Additionally, Cardinal Innovations Healthcare Solutions operating the states Northwest Central MCO and
serving 1.4 million people across 15 counties shows success in the Medicaid program that can be further improved
by the addition of money and patients to the existing MCO model. Between July 2012 and June 2013, Cardinal

54

h#p://www.ncmedicaljournal.com/wp-content/uploads/2012/05/NCMJ_73306_FINAL1.pdf
h#p://www.journalnow.com/business/business_news/local/wos-dhhs-will-build-stability-before-expanding-medicaid/
article_280e5d9f-14a8-53ec-a006-1fcdb0674a09.html
56 h#p://www.ncdhhs.gov/mhddsas/statspublications/reports/workforcedevelopment-4-15-08-initiative.pdf
55

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10

Innovations added 900 providers to the network, and the organization will add 80 new jobs to the Charlotte region
in the next few years.57 This number would likely increase if thousands of new patients were added through
expanded Medicaid eligibility.
Today, North Carolina is easily accommodating individuals seeking treatment for mental illnesses. Systems will
need to expand to meet the demand of the influx of patients that Medicaid expansion would create, but the mental
health system in North Carolina is strong, locally focused, and able to adapt to the influx. North Carolina can be the
example for turning the challenge of Medicaid expansion into an asset for job creation.
North Carolina is poised to succeed by implementing Medicaid expansion in 2015. A Medicaid budget surplus and
the adequacy of the mental health workforce provide ample support for expansion of Medicaid as the key policy
solution to improving mental health access and outcomes in North Carolina. Senator-elect Thom Tillis recently
agreed, Were trending in a direction where we should consider potential expansion I would encourage the
state legislature and the governor to consider it.58
Approximately 190,000 mentally ill North Carolinians would gain health insurance coverage and therefore access
to early intervention and treatment for mental illness that would impact their personal, educational, and working
lives and prevent destructive consequences for them and for their communities.

CONCLUSION AND RECOMMENDATION

As the most important source of funding for mental health care at both the national and state level, Medicaid plays
a crucial role in the delivery of mental health care services in North Carolina. Expansion of the Medicaid program
will provide indispensable psychotherapy and psychiatric services to individuals with mental illnesses who might
not otherwise receive treatment.
Results from other expansion states show pent up demand for mental health services, significant reductions in
uncompensated care, and financial and healthcare relief for vulnerable residents. North Carolina could save a
total of $65.4 million by 2021 and significantly reduce the $300 million annual uncompensated care burden on
state hospitals. The state could also add 25,000 jobs by 2016 and provide mental health treatment to thousands
of residents so that even more individuals can return to work.
The promise of Medicaid expansion for 190,000 mentally ill North Carolinians is threatened by the state
governments reluctance to seriously consider expansion at the General Assembly level. Expanding Medicaid is a
critical step in meeting the mental health care needs of low-income adults and expanding financial opportunities
to individuals currently held down by expensive mental health treatment costs. As it stands, North Carolinas
mental health system reaches only 34 percent of adults with serious mental illnesses and only 27 percent of
individuals with any behavioral health disorders. Key stakeholders across the state including the North Carolina
Institute of Medicine, hospital systems like Vidant Health, and even a Republican mayor recommend expanding
Medicaid in North Carolina.

57
58

h#p://www.bizjournals.com/charlo#e/news/2014/01/07/cardinal-innovations-to-add-charlo#e-service.html?page=all
h#p://www.charlo#eobserver.com/2014/10/23/5263123/thom-tillis-once-foe-of-medicaid.html#.VGA3fvTF8ht

Copyright 2014, the Roosevelt Institute. All rights reserved.

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11

The North Carolina Institute of Medicine writes:

Based on North Carolina Division of Medical Assistances projections of the number of people who may
gain Medicaid coverage and the costs to the state, and the REMI analysis of jobs created, increase in the
states gross domestic product, and new tax revenues generated as a result of the expansion, the NCIOM
recommends that North Carolina expand Medicaid eligibility up to 138 percent FPL.59
Data shows social and economic benefits of expanding Medicaid eligibility to vulnerable residents who are in
desperate need of access to mental health and behavioral treatments. Access to early identification and
treatment of mental illness can impact individuals, communities, and economies. North Carolina and its 500,000
currently uninsured would-be-Medicaid-eligible residents, and 190,000 currently uninsured would-be eligible
residents with mental illnesses, would benefit greatly from expansion of the program and from its positive gains
felt across the state.

59

h#p://www.nciom.org/wp-content/uploads/2013/01/Medicaid-summary-FINAL.pdf

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12

APPENDIX
Exhibit 1. Pre-ACA Eligibility as Percent of FPL
Children
State

Ages 0-1

Adults
Ages 1-5

Ages 6-18

Pregnant
Women

Parents

Other
Adults

Alabama

141%

141%

141%

141%

13%

0%

Alaska

203%

203%

203%

200%

129%

0%

Arizona

147%

141%

133%

156%

133%

133%

Arkansas

211%

211%

211%

209%

133%

133%

California

261%

261%

261%

208%

133%

133%

Colorado

142%

142%

142%

195%

133%

133%

Connecticut

196%

196%

196%

258%

196%

133%

Delaware

212%

142%

133%

212%

133%

133%

DC

319%

319%

319%

319%

216%

210%

Florida

206%

140%

133%

191%

30%

0%

Georgia

205%

149%

133%

220%

35%

0%

Hawaii

308%

308%

308%

191%

133%

133%

Idaho

142%

142%

133%

133%

24%

N/A

Illinois

142%

142%

142%

208%

133%

133%

Indiana

208%

158%

158%

208%

20%

N/A

Iowa

375%

167%

167%

375%

133%

133%

Kansas

166%

149%

133%

166%

33%

0%

Kentucky

195%

159%

159%

195%

133%

133%

Louisiana

212%

212%

212%

133%

19%

N/A

Maine

191%

157%

157%

209%

100%

N/A

Maryland

317%

317%

317%

259%

133%

133%

Massachuse
#s

200%

150%

150%

200%

133%

133%

Michigan

195%

160%

160%

195%

133%

133%

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13

Children
State

Ages 0-1

Adults
Ages 1-5

Ages 6-18

Pregnant
Women

Parents

Other
Adults

Minnesota

283%

275%

275%

278%

200%

200%

Mississippi

194%

143%

133%

194%

22%

0%

Missouri

196%

150%

150%

196%

18%

N/A

Montana

143%

143%

143%

157%

47%

N/A

Nebraska

213%

213%

213%

194%

57%

0%

Nevada

160%

160%

133%

160%

133%

133%

New
Hampshire

318%

318%

318%

196%

133%

133%

New Jersey

194%

142%

142%

194%

133%

133%

New Mexico

300%

300%

240%

250%

133%

133%

New York

218%

149%

149%

218%

133%

133%

North
Carolina

210%

210%

133%

196%

45%

0%

North
Dakota

147%

147%

133%

147%

133%

133%

Ohio

206%

206%

206%

200%

133%

133%

Oklahoma

205%

205%

205%

133%

42%

N/A

Oregon

185%

133%

133%

185%

133%

133%

Pennsylvania

215%

157%

133%

215%

33%

0%

Rhode Island

261%

261%

261%

190%

133%

133%

South
Carolina

208%

208%

208%

194%

62%

0%

South
Dakota

182%

182%

182%

133%

58%

0%

Tennessee

195%

142%

133%

195%

105%

0%

Texas

198%

144%

133%

198%

15%

0%

Utah

139%

139%

133%

139%

51%

N/A

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14

Children
State

Ages 0-1

Adults
Ages 1-5

Ages 6-18

Pregnant
Women

Parents

Other
Adults

Vermont

312%

312%

312%

208%

133%

133%

Virginia

143%

143%

143%

143%

49%

0%

Washington

210%

210%

210%

193%

133%

133%

West
Virginia

158%

141%

133%

158%

133%

133%

Wisconsin

301%

186%

151%

301%

95%

95%

Wyoming

154%

154%

133%

154%

56%

0%

US Average

211%

187%

180%

198%

97%

89%

NC
Compared
to Avg.

-0.3%

12.3%

-26.0%

-1.0%

-53.7%

-100.0%

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14

Exhibit 2. Minimum Federal Eligibility Requirements

Groups that must be eligible for Medicaid include:
Children under age 6 and pregnant women in families with incomes up to 133% FPL
Children aged 6-19 in families with incomes up to 100% FPL
Low-income families with children that would have qualified for Aid to Families with Dependent
Children (AFDC) under the State plan in eect as of July 1996
Children who qualify for foster care and adoption assistance
Recipients of Federal Supplemental Security Income (SSI)
Certain other groups of Medicaid beneficiaries may keep Medicaid for a time even if they cease to
qualify for the program
Exhibit 3. North Carolina Medicaid Eligibility
North Carolina expands on the minimum federal requirements to issue traditional Medicaid
eligibility to all of the following groups:
Low-income families who qualify for Work First Family Assistance program
Parents/caretakers and children ages 19-21 from families with incomes below a limit established by
the state that varies by family size, but is about 31% FPL
Pregnant women and infants in families with incomes up to 185% FPL
Children ages 1-5 in families with incomes up to 133% FPL
Children ages 6-18 in families with incomes up to 100% FPL
Recipients of adoption assistance and foster care
Individuals receiving SSI or supplementary SSI payment
Individuals who meet SSI definition of disability or are over age 65, and have income up to 100% FPL
and limited assets
ABD individuals in group living arrangements as defined under SSI
Certain disabled children age 18 or under who are living at home, who would be eligible for Medicaid
if they were in an institution

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15