California is in its second year of a five-year initiative to reform how its Medicaid program, Medi-Cal, is financed and organized. The initiative, known as CalAIM (California Advancing and Innovating Medi-Cal), seeks to orient the Medi-Cal program toward whole-person care, social influences on health, and reduction of health disparities. Achieving these goals will require that CalAIM addresses the state’s complex system for financing and delivering behavioral health care.

One component of CalAIM is a change in the way that specialty mental health services provided through California’s county-based systems of care are financed. Under CalAIM, financing for these county-based systems will transition from cost-based reimbursement to a fee-for-service (FFS) system. The FFS system is also intended as a potential stepping stone to further financial reforms, laying the foundation for potential introduction of new payment models, including value-based payment or VBP.

In CalAIM and Specialty Behavioral Health Care: Lessons from Other States on Value-Based Payment, researchers at RAND Health Care analyzed VBP in behavioral health. They synthesized existing research and profiled five examples of value-based payment models across the US.

A short issue brief, CalAIM Behavioral Health Payment Reform, focuses on the CalAIM behavioral health payment transition, with detailed descriptions of both the former cost-based reimbursement system and the new FFS approach. Both papers are available for download below.

Conclusions

The authors suggest two sets of recommendations California can follow to inform behavioral health payment reforms.

The first set represents actions that California can take now as it transitions to FFS payment for Medi-Cal specialty behavioral health services. These recommendations will benefit patients today and improve California’s capacity to make decisions about VBP in the future:

• Develop a comprehensive behavioral health quality strategy.
• Build analytic capacity and expertise in contracting at the state level.

The second set of recommendations will help California design and implement VBP in the future if it chooses to follow that path:

• Incentivize services for patients with complex needs.
• Allow for flexibility in tailoring VBP models to local circumstances.
• Address equity and population health issues in VBP designs.
• Use VBP models to promote delivery system integration.

Together, these recommendations will benefit patients in the short run while laying a foundation for successfully implementing VBP models in the future.