In response to a formal request, the CRN has filed a formal critique of California's Drug Medi-Cal (DM-C) program with the Legislative Analyst's office in Sacramento. The critique concludes that DM-C has created a system of care in California that is far below any standards of "Best Practice" in the substance treatment field. Standards of care are so low, the report suggests, that California is in violation of federal Medicaid laws requiring that services be sufficient in amount, duration, and scope to reasonably achieve their purpose

The report concludes that "to conform to science-based principles and best practices, DM-C coverage must be expanded for both adults and adolescents to include reimbursement for residential services; day treatment; detoxification (including standard detoxification medications); program-based case management; clinically justified individual counseling; acupuncture for acute and post-acute withdrawal, and services that are delivered in community-based settings. Coverage for collateral services for family members and 'significant others' must also be expanded to include individual counseling, group counseling, and therapy."

Defining the interest of the recovery community

The mission of the Community Recovery Network (CRN) is to provide ongoing leadership in community responses to alcohol and other drug (AOD) problems in California. Drug Medi-Cal (DM-C) policies significantly impact community responses to AOD problems. DM-C is important because many of those eligible for the program - such as the severely mentally ill, persons with AIDS, and recipients of public assistance, including minors - are disproportionately impacted by substance disorders; additionally, DM-C Standards are often used by Counties to define and govern non-DM-C treatment services to avoid disparities in treatment and possible discrimination litigation.

Fiscal imperatives for improving DM-C

Members of our constituencies have expressed dismay at the enormous cost to the citizens of California when AOD problems are not competently addressed. The cost of these problems in the United States is estimated at $276 billion per year (NIDA/NIAAA, 1997). California's share of this cost, based on population, is $35 billion. One could presume that a majority of that cost is imposed by persons whose alcoholism or drug addiction is the most chronic and severe, of which a disproportionate number are likely to be Medi-Cal recipients.

Based on prevalence estimates of 7.3% suggested by the most recent AOD survey data (SAMHSA, 2002), we can estimate that the number of Californians in need of treatment for chemical dependency is just under 2.5 million. In spite of an often cited study by the State of California (DADP, 1994) showing that savings to taxpayers outpaced the public cost of treating addicts by a 7-1 margin, California spends less than $600 million on treatment (CASA, 2001), adequate to treat just over 6% of those in need.

In a study of the impact of untreated AOD problems on State governments conducted by the Center for Substance Abuse at Columbia University (CASA, 2001), the percentage of California's State budget that is related to AOD problems was estimated at 15.2%. Of that, only .4% was spent on treatment, and the rest was spent on "shoveling up the wreckage" of untreated AOD problems. Portions of California departmental costs related to AOD problems are estimated in the CASA study as follows:

Applying only these percentages to California's 2002-03 budget, the cost to the State of not adequately addressing alcohol and other drug problems is $14.3 billion - over 14% of the total budget.

CRN's constituency believes strongly that we cannot afford this luxury given California's current fiscal shortfalls and deficits.

The absence of effective management in the DM-C system

The Sobky v. Smoley lawsuit in 1994 ended limits on utilization of DM-C by ruling that drug treatment is an entitlement under Medicaid guidelines. In response, utilization of outpatient and day treatment services increased dramatically. There were no caps on rates, and reimbursement occurred for clinic "visits" only, not for specific services. While providers were required to have perfunctory "Utilization Review Committees," ultimate decisions concerning both utilization of services and the rates charged for those services were being made by the service providers themselves without external regulations.

Interestingly, an analogous problem was occurring in the private sector; hospital-based chemical dependency treatment programs were charging private insurance companies thirty to forty thousand dollars and more for thirty-day residential programs, often with no limitations on the number of patient repeat visits.

In short, the chemical dependency service delivery system - both public and private - had become a fiscal "runaway train."

While the response in the private insurance sector was either strict managed care practices or the elimination of chemical dependency benefits altogether, the response of the DM-C system in 1996 was cost containment achieved by constricted services such as limits imposed on rates and on the number and kinds of services a client could access. The DM-C system appeared - because of Sobky v. Smoley - unable to adopt the kinds of managed care strategies that characterized other venues. The services received by clients under DM-C, therefore, came not to be based on clinical guidelines or recovery principles but rather on constrictions devised to contain costs. These constrictions remain in place today.

Not only are such constrictions without reference to our knowledge about successful recovery, or to research-based clinical principles or science-based treatment practices, but they sometimes frustrate the goals of other State-sponsored services and result in far greater costs than those that were "saved." For example, a chemically dependent pregnant woman on the caseload of Child Protective Services will be eligible for DM-C services during her pregnancy, but her eligibility will be removed shortly after her child is born. With non-DM-C perinatal day treatment services experiencing dramatic waiting lists in many Counties, this can result in substance relapse, loss of custody of the child, and the ultimate failure of family reunification. Or a chemically dependent severely mentally ill person who is in need of comprehensive residential treatment will find that it is not a covered Medi-Cal benefit and hence unavailable in the County, resulting in psychiatric emergency. In these cases, the "cost containment" measures result in costs to the State that are far greater than those of treatment, such as out-of-home foster care placement and exorbitant psychiatric emergency services.

Not surprisingly, these "cost containment" measures in 1996 were soon followed by the elimination of State mandates for providers to perform the monthly utilization review that had provided the only mechanism of outside monitoring of quality assurance in the system. Although an annual Utilization Review mechanism was to have been instituted by the State, this has occurred only sporadically, and the only specific control on provider utilization of DM-C is the occasional and expensive provider audit.

"Moderate Treatment" and Best Practices

Prior to Sobky v. Smoley, the DM-C system was presented in theory as a program for treating only "moderately impaired" chemically dependent persons. Those severely impaired were to be referred elsewhere, presumably to residential treatment facilities in those Counties where such services were available. The system still carries that presumption. The problem is that Sobky v. Smoley cannot be interpreted to apply solely to chemically addicted individuals who are "moderate users." Indeed, all persons who are diagnosed with chemical dependency and who are Medi-Cal eligible are entitled to treatment that meets reasonable "best practices" standards. DM-C, however, does not reimburse for services and interventions of a variety and at a frequency that would conform to the principles governing best practices and science-based treatment of substance disorders such as those defined by the National Institute on Drug Abuse's "Principles of Drug Addiction Treatment" (NIDA, 1999) and by the Center for Substance Abuse Treatment's "TIPS," (CSAT, 2002). California's DM-C program indeed appears to be in violation of 42 USC 1396a(a)(10)(B), which states that "… service(s) must be sufficient in amount, duration, and scope to reasonably achieve (their) purpose (and) the Medicaid agency may not arbitrarily deny or reduce the amount, duration, or scope of a required service ... to an otherwise eligible recipient solely because of the diagnosis, type of illness or condition."

To conform to science-based principles and best practices, DM-C coverage must be expanded for both adults and adolescents to include reimbursement for residential services; day treatment; detoxification (including standard detoxification medications); program-based case management; clinically justified individual counseling; acupuncture for acute and post-acute withdrawal, and services that are delivered in community-based (sic. non-clinical) settings. Coverage for collateral services for family members and "significant others" must also be expanded to include clinically justified individual counseling, group counseling, and therapy.

Legislation has been introduced in the past to adapt DM-C to the "rehab model" utilized by the Mental Health system, adding many of the benefits described above. While few would argue that it is acceptable for the regulations governing public treatment for chemical dependency in California to be below standards of best practice, it will be difficult for the DM-C program to achieve best practices standards unless it also incorporates realistic monitoring and management mechanisms that prevent abuse of the system. Unlike Short-Doyle Medi-Cal reimbursement for mental health services, AOD services for Medi-Cal recipients are still defined as an entitlement under federal Medicaid guidelines by Sobky v. Smoley. Extending reimbursed services to include case management, residential, and other services, is therefore not politically feasible unless there are intelligent mechanisms in place to manage the costs and utilization of this entitlement. These mechanisms are allowed under 42 USC 1396a(a)(10)(B), as follows: "The agency may place appropriate limits on a service based on such criteria as medical necessity or on utilization control procedures." In order to achieve this, the State Alcohol and Drug Program will need to obtain a Federal Medicaid Managed Care waiver from the Center for Medicare & Medicaid Services.

The CRN also urgently proposes an extension of the DM-C benefit for women under the jurisdiction of Child Protective Services who have lost custody of their children for reasons relating to their chemical dependency when family reunification is the ultimate goal. Restrictions could be placed on this extension, such as a requirement to comply with the chemical dependency treatment plan.

Distinguishing Characteristics of Substance Disorders

There is another systemic problem with the DM-C program. Medi-Cal in general has evolved to provide reimbursement mechanisms for the treatment of physical illnesses. While alcoholism and drug addiction have been identified by the medical and research communities as diseases, three very significant factors distinguish substance disorders from other diseases. These three factors must be systemically addressed in order to optimize successful outcomes in any system of care.

  1. Persons with other illnesses generally seek medical care when their condition becomes symptomatic. This is not true of persons with substance disorders due to the stigma, denial, hopelessness, impaired judgment, and other issues associated with AOD problems.
  2. While certain other medical interventions require a period of rehabilitation that involves non-medical services, and while certain other chronic diseases require behaviors or actions on the part of the patient in order for the disease to remain in remission, long term recovery from substance disorders uniquely depends in most cases upon ongoing, patient-initiated activities and involvement with non-professional community resources (e.g. peer-support groups).
  3. Persons with substance disorders - particularly in cases where the condition has progressed to the degree that public sector services are required - typically have concomitant public health, mental health, and social issues whose resolution is tantamount to substance recovery and which must therefore be thoughtfully incorporated into the AOD treatment continuum.

These three distinctions suggest a critical need for comprehensive case management services (currently not a covered benefit under DM-C). But the recovery community's collective experience with successful recovery, as well as the need for quality assurance and cost effectiveness within the DM-C system, suggests that traditional case management as utilized in the health and mental health systems of care may not adequately or appropriately address all of these unique characteristics of substance disorders.

The Solution

Based on the problems we have described so far, it may be concluded that the solution to improving the DM-C program must, at a minimum, include the following:

While our critique has made specific references to the problems of the DM-C program, it is difficult to develop realistic and comprehensive solutions to these problems without considering the overall response to AOD problems at the County level. As has been noted, DM-C guidelines are used in many Counties to set standards of care for non-DM-C treatment services. Conversely, in other Counties, DM-C has resulted in a "2-tier" system where Medi-Cal eligibility influences a person's qualification for certain services. Less restrictive Net Negotiated Amount (NNA) funding is able to fund a scope, duration and intensity of service which is more appropriate clinically. It is not possible for clients of programs funded solely by DMC to receive the same level of treatment that a client can get in a program funded by NNA or NNA + DM-C.

It is the strong belief of the CRN that the quality, consistency, appropriateness, and timeliness of services received by residents of any County should not be dictated by any status. When someone residing in a County has an alcohol or other drug problem, the case can be made - financially, ethically, and morally - that it is in the vital interest of that County (and hence of the State) to respond to that problem with dispatch, and to dedicate any and all resources necessary until successful recovery for that individual is achieved. Failure to do so inevitably results in enormous emotional costs to the person themselves and to their family, friends, and loved ones, as well as lost productivity and colossal costs to taxpayers for criminal justice, public health, and social services.

So, while it may be beyond the scope of the Legislative Analyst's current investigation, the CRN believes that any recommendations to the legislature concerning DM-C should be ultimately viewed in the context of the entire AOD system of care. The last effort by the State to address comprehensive system of care issues deteriorated into a recommendation for modifications in data collection (LAO, 1999).

An Independent, Entry Level, Recovery Advocacy System in Each County

CRN proposes the creation in each County (and in representative regions for Counties with populations under 30,000) of a "Recovery-Based Case Management System." The system would be operated under contract with the State or County by a private entity who was not a DM-C or treatment service provider, and who would perform the following functions:

  1. A 24-Hour per day drug hotline and response team. Any private citizen residing in the jurisdiction, or any professional such as a physician or therapist, or any public employee such as a probation or parole officer, public health or social service worker, could access the response team with a single phone number. The team from which the person responding would be selected would represent the diversity of the jurisdiction to assure cultural and linguistic competence in the response. Requirements for all response team members, who would work under clinical supervision, would include (a) an Alcohol and Drug Counseling Certificate or its equivalent; (b) competence in addiction severity assessment, family interventions, brief crisis counseling, and motivational interviewing, and (c) comprehensive knowledge of all community service providers, including knowledge of all means by which people achieve and maintain recovery from AOD problems, and of the community resources relative for each.
  2. Comprehensive and mobile case management services. The assigned Response Team member would assess the individual referred to the system and the environment in which they are functioning and work to remove any barrier to successful recovery for both the individual and the family members. The person would also authorize services within the formal treatment provider network of the County for both the individual and his or her family members, and would assist the client in accessing ancillary (non-treatment) services that are deemed important to support the persons long term recovery (such as mental health, public health, and vocational and other services, and safe housing). These persons would operate in conjunction with law enforcement, Mental Health crisis teams, social workers, and others who encounter people with AOD problems in the community

Recovery Advocacy in the AOD treatment system is not an unprecedented concept. Many drug court venues in California and around the country have adopted a "Court Liaison" function - a person who mediates between the court, probation, and treatment system on behalf of the client or offender. The role of the Liaison is to assess and explain options to the client, to propose referral recommendations to the drug court judge, and then to "leave no stone unturned" in assuring that the client is successfully engaged and retained in the recommended services. Many Counties in California adopted a similar "recovery advocacy" model for their perinatal case management services, and similar case management services were successfully provided to SSI recipients before the elimination of the alcoholism and drug addiction disability benefit.

The recovery community has learned that not everyone with AOD problems needs formal treatment. For many people, 12-Step and faith-based activities and their equivalent, which may or may not be in combination with clean and sober housing, are adequate for successful recovery. The proposed system would be distinguished from traditional case management services that are used in the public and private health sector in that their primary objective would not be exclusively clinical (e.g. to access clinical services), but to assist the client in engaging in those natural community supports that enable long term recovery.

Based upon the 2.5 million Californians who are estimated to be severely impacted by alcohol and other drug problems, the cost of such a Recovery-Based Case Management system, with an average case load of 70 persons, could be estimated at $1.5 billion. However, this system should not be construed as supplanting the significant need for additional treatment resources. Indeed, the system's effectiveness would be severely compromised if implemented in the current environment of resource-scarcity and substandard services.

What would a Comprehensive Treatment System Cost?

If California were to invest in a comprehensive infrastructure to provide in each County a realistic and effective response to alcohol and other drug problems, the cost would depend significantly upon whether or not the State is able to enact effective "Substance Abuse Parity" legislation. This is because an estimated 75% of persons needing treatment or recovery support services are in the work force (SAMHSA, 1999), and many of these individuals are privately insured. A relatively weak parity bill (SB599) was passed last year, but was withdrawn under threat of veto by the Governor.

Using an average treatment cost of $5,000, what might a comprehensive treatment and recovery infrastructure for California require in terms of a public investment? Of the 2.5 million needing recovery, we would estimate that 70% would either (a) require recovery support only (with no formal treatment), or (b) be able to self-pay for treatment, or (c) be privately insured. This portion of the 2.5 million people would therefore require no public investment unless the State is unable to enact private insurance parity legislation. Then the investment required for this group is estimated at $3.5 billion.

We would estimate the remaining 30% of the population as follows:

  Percentage Number Investrment
Uninsured and requiring public treatment 12% 300,000 $1,500,000,000
Eligible for Medi-Cal (includes Federal match 18% 450,000 $2,000,000,000
Recovery-Based Case Management System     $1,500,000,000 
Current Investment     ($600,000,000)
Total Infrastructure Investment:    
With Private Insurance Parity
Without Private Insurance Parity

Two things are important to note when considering this investment:

CRN's Recommendations

In summary, the CRN recommends:

  1. That application be made for a Managed Care waiver from the Center for Medicare & Medicaid Services.
  2. That the State Plan be amended to implement the "Rehab option" for AOD services.
  3. That the California Department of Alcohol and Drug Programs assemble stakeholders including County Alcohol and Drug Program Administrators, representatives of the recovery community, and providers, to address strategic issues concerning the design of the Recovery-Based Case Management System.

Sources Cited

CSAT, 2002, Treatment Improvement Exchange, Treatment Improvement Protocols (Best practice guidelines for the treatment of substance abuse).

Department of Alcohol and Drug Programs (1994), State of California, "Evaluating Recovery services: The California Drug and Alcohol Treatment Assessment." 1700 K Street, Sacramento, CA 95814.

Department of Alcohol and Drug Programs (2002), State of California, "Youth Treatment Guidelines." 1700 K Street, Sacramento, CA 95814.

Legislative Analyst's Office (July 13, 1999), "Services Are Cost-Effective to Society Substance Abuse Treatment in California," LAO Publications, 925 L Street, Suite 1000, Sacramento, CA 95814.

CASA (January, 2001). "Shoveling Up: The Impact of Substance Abuse on State Budgets." National Center on Addiction and Substance Abuse at Columbia University.

National Institute on Drug Abuse/National Institute on Alcohol Abuse and Alcoholism (1998), The Economic Costs of Alcohol and Drug Abuse in the United States, U.S. Government Printing Office, Washington, DC, 1998.

NIDA, 1999. Principles of Drug Addiction Treatment: A Research-Based Guide. National Institutes of Health, U.S. Department of Health and Human Services.

SAMHSA, 1998 (1998 National Household Survey on Drug Abuse), U.S. Department of Health and Human Services. Rockville, MD.

SAMHSA, 2002 (2001 National Household Survey on Drug Abuse), U.S. Department of Health and Human Services. Rockville, MD.





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