How Will the Nation's First Organized Delivery System for Drug Treatment Services in Medicaid Succeed?

Kim Flores, Principal Consultant, California Senate Office of Research

August 06, 2016
Kim Flores
Kim Flores

In August 2015, the federal Centers for Medicare & Medicaid Services (CMS) approved California's waiver to be the first state in the nation to create an organized delivery system for providing drug treatment services in the Medicaid program. The goal of the California Department of Health Care Services (DHCS) is to demonstrate the Drug Medi-Cal Organized Delivery System (DMC-ODS) will improve the success rate of Medi-Cal beneficiaries in drug treatment programs while decreasing other Medi-Cal health care costs. This new paradigm integrates Medi-Cal drug treatment programs into the larger physical and mental health systems. CHCF is actively supporting the work of DHCS to implement DMC-ODS.

The counties that choose to participate in DMC-ODS will set up systems to evaluate people for substance use disorder, whether they present in a health or a mental health clinic or at a drug treatment program, and will link them to evidence-based treatment. As of this writing, 12 counties have applied, and one — San Mateo — has had its plan approved by the federal government. Soon after receiving California's proposal, CMS issued a state Medicaid director letter announcing that all states are eligible to apply for a demonstration program mirroring California's effort.

Paula Wilhelm examined early implementation of the waiver at the request of the California Office of Research

To provide a timely update on the progress of the Drug Medi-Cal waiver rollout, the California Senate Office of Research, in its role of facilitating policy research for the legislature, proposed that University of California, Berkeley, Goldman School of Public Policy graduate student Paula Wilhelm examine the counties' early implementation of the waiver for her master's thesis. California intends to roll out DMC-ODS in phases, starting first with Bay Area counties, followed by Southern California, Central Valley, Northern California, and the Tribal Delivery System. Details are available on the DMC-ODS website.

Joined by staff from the Senate Health Committee, Wilhelm and I spent an inspiring day in San Francisco learning about the integrated programs overseen by HealthRIGHT 360. HealthRIGHT 360 was born out of the merger of the Haight Ashbury Free Clinics and the Walden House — national models for community health care, substance use disorder (SUD) treatment, and mental health services. HealthRIGHT 360 now oversees physical and behavioral health programs in 11 counties. In addition, Wilhelm visited the waiver pilot programs in Santa Clara County and spoke with county behavioral health directors in many of the other Bay Area pilot counties.

In her recent report, Drug Medi-Cal Organized Delivery System at the Starting Blocks: Insights from Phase 1 Counties, Wilhelm identifies challenges to the massive system transformation and provides recommendations to support statewide implementation. Among her key findings:

  • Successful implementation depends on adequate service payments.
  • Uncovered costs (start-up for new providers, compliance or expansion costs for existing providers, the room-and-board portion of residential treatment) exacerbate financial uncertainty for counties and providers.
  • Some counties will have difficulty recruiting and retaining an adequate network of SUD providers, making the delivery of culturally inclusive care even more difficult.
  • Shorter lengths of stay in residential treatment create an urgent need for recovery residences.
  • Standardized intake into an organized delivery system must preserve treatment on demand.
  • Multiple funding streams and managed care structures may undermine care integration.

As California continues implementation of the Affordable Care Act with the expansion of Medi-Cal to single adults, it is crucial for the state to focus on integrating behavioral health services with physical health services. The Medi-Cal single adult population has significant behavioral health needs, and California's DMC-ODS waiver is the model for states to achieve greater integration. We hope Wilhelm's paper will assist in the implementation of the Medi-Cal Drug Treatment Waiver and the larger goal of serving the behavioral health needs of this population.