Highlight on California: the price of privatizing psychiatric care

California may privatize a state mental health hospital as a cost saving measure. However, critics are worried that Correct Care Recovery Solutions, the selected contractor, will achieve cost savings through dangerous reductions in care quality. The California Mental Health Services Authority—the consortium of California county mental health agencies—is proposing a facility which would serve around 250 civilly-committed patients. Additional beds are needed due to a persistent and historically high need for the most dangerous and severe of the state’s mentally ill.


The current network of state hospitals houses people who are charged with crimes but found mentally incompetent to stand trial or not guilty by reason of insanity. In June, the waiting list for hospital beds reached a five-year high of 700 individuals. The average wait time for an individual not found competent to stand trial is two months, but many are forced to wait several months.  Those patients found incompetent to stand trial who do not have access to a bed are forced to wait in county jails, typically in Los Angeles County.  In county jails, patients have access to basic mental health care but long-term psychiatric treatment is often delayed. Other patients, those who are civilly-committed, are housed in local psychiatric hospitals.


The costs are significant regardless of where patients are housed. It can cost between $600 and $1,300 a day to house civilly-committed patients in local psychiatric hospitals in Los Angeles County. When patients are eventually transferred to state hospitals, counties are still obligated to pay for the care provided to patients, and the state bills about $650 per patient, per day. In 2015, Los Angeles County, alone, spent $55 million on patient care in state mental health hospitals.

Correct Care

The contractor, Correct Care, says it can cut the state’s cost by 10 percent. However, the promise of cost savings through privatization has a complex history. The Department of Justice (DOJ) announced in August 2016 that it would end its use of private prisons noting that private facilities are both less safe and less effective than government run facilities. Soon after, the Obama Administration announced it would take steps to move away from the use of for-profit (private) immigration detention facilities. Privatization of state psychiatric facilities poses similar problems to those which led to the administration’s policy on prisons and immigration facilities.

Privatized State Hospitals: South Florida State Hospital

If California moves forward with its plan, the state will not be the first to privatize a state mental health hospital. The South Florida State Hospital was one of the first in the U.S. to be privatized.  The Florida hospital was managed by a division of GEO Group—a private prison contractor—until 2014, when Correct Care Solutions bought the unit. Following three deaths in the facility, in 2011, Florida’s Department of Children and Families investigated the hospital. In one of the deaths, a heavily medicated patient was found dead in a bathtub with water so hot the patient’s skin sloughed off his body. Investigators determined that Correct Care was addressing the problems. However, between 2011 and 2015, investigators verified 19 more claims that staff abused, neglected, or failed to properly supervise those in their care. Some of those instances of abuse and neglect included a technician throwing a patient to the ground and a patient jumping to his death from the eighth floor of a parking garage. Those opposed to privately run mental health institutions cite understaffing as a key cause of such abuse and neglect.

State-run hospitals

The state-run hospitals are not immune from criticism and instances of patient harm. In 2014, 3,500 patient-against-patient assaults were recorded in California. Metropolitan State Hospital in Norwalk admits the type of civil-commitments which would be transferred to the hypothetical Correct Care facility. Between 2011 and 2015, the California Department of Public Health investigators found at least 55 deficiencies at Metropolitan related to a patient’s harm, abuse, neglect, and restraint.


There is no dispute that California requires additional mental health hospital beds. However, regardless of who will operate additional mental health facilities, lawmakers and stakeholders in California must be careful that the wellbeing of patients is not exchanged in a bargain for a lower rate.

Covered California board supports innovation waiver, health insurance for the undocumented

The Board of Covered California, the state’s health insurance marketplace, has expressed support for an Innovation Waiver that would allow the state to offer non-qualified health plan (non-QHP) insurance coverage to certain undocumented adult immigrants via the exchange. Before the state could apply for such a waiver under section 1332 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), it would have to pass legislation enacting waiver authority; Senate Bill 10 (SB 10) is currently pending in the General Assembly, but faces opposition. The Board supported a phased approach that would allow the state to target one or two proposals in 2016, including the extension of non-QHPs to undocumented immigrants, but allow it to phase in other innovations over time.

ACA section 1332 permits states to request a state innovation waiver of certain ACA requirements for plan years beginning on or after January 1, 2017. Applications must include a comprehensive description of the waiver plan, along with a 10-year budget, and must allow for a public notice and a comment period that permits a “meaningful level of public input.” After such a period, the Covered California Board determined that a waiver would ultimately further the exchange’s mission of providing health insurance coverage and would simplify application procedures for California families.


Section 1411 of the ACA limits participation in the health insurance marketplace to citizens, nationals, and lawful permanent residents of the United States, thereby excluding the undocumented from participation. The 1332 proposal would allow undocumented immigrants to purchase health insurance via Covered California, with the caveats that they could only purchase non-QHPs and would not be eligible for premium breaks or cost subsidies. The Board believed that the proposal would allow “mixed families” with members with legal and non-legal status to purchase insurance for their entire family via the marketplace, simplifying the shopping ad enrollment experience. The Board recognized, however, that such a plan might not be approved by federal officials and that, if approved, it could cause confusion in mixed families regarding subsidy eligibility.

The Board also discussed other proposals, including:

  • allowing dependents and spouses to receive advance premium tax credits if employer-sponsored dependent coverage is not affordable;
  • offering non-QHP standalone adult vision and dental plans via the marketplace;
  • offering vision and dental benefits as essential health benefits;
  • offering Medi-Cal plans via the exchange and waiving certain requirements; and
  • offering copper plans with actuarial values of only 50 percent for consumers with income above 400 percent of the federal poverty level (FPL).

Given the debate over immigration in the United States, Covered California Chair noted that the move may be “somewhat symbolic,” but noted that “symbolism is important.”

Highlight on California: Aid-in-dying law allows patients to be given deadly dose of drugs

On October 5, 2015, California Governor Jerry Brown (D) signed AB2-15, the End of Life Option Act. Effective January 1, 2016, the law will allow an adult who is terminally ill to request and obtain a prescription for an “aid-in-dying drug,” defined as “a drug determined and prescribed by a physician for a qualified individual, which the qualified individual may choose to self-administer to bring about his or her death.”  The law requires several procedural steps and other protections to assure that the patient understands the nature and consequences of the act and that the patient has maintained the intention for a period of time. Specifically, the law requires:

  • attestation by both the patient’s attending (treating) physician and a consulting physician that the patient’s condition is terminal, the patient has the capacity to make the decision, and has done so with informed consent
  • two oral requests for the aid-in-dying drug made by the patient to the physician at least 15 days apart, and a written request. The patient must  make the requests personally, not through a personal representative, attorney-in-fact, guardian, conservator, or health care agent. All three requests must be made to and received by the physician personally, and not through a designee.
  • the written request must be made in a form prescribed by statute and signed in the presence of two adult witnesses, who must attest to the individual’s identity and to their belief in the individual’s voluntary action, the lack of duress or undue influence.
  • before writing the prescription, the attending physician must evaluate the individual’s mental health and make a referral to a mental health professional if there is any indication of a mental disorder and await the determination of the mental health professional that the individual has the capacity to make medical decisions and is not suffering from impaired judgment due to a mental disorder..

The witnesses may not be the attending physician, consulting physician, or mental health specialist. Only one of the two witnesses may be either a member of the individual’s family or entitled to any portion of the estate at death or the owner, operator or an employee of the healath care facility where the individual resides or is receiving care.

The prescription

The attending physician must give the patient the opportunity to withdraw or rescind the request before he or she writes the prescription and must confirm that the individual has the capacity to make the medical decision and understands:

  • his or her diagnosis and prognosis;
  • the risks associated with taking the aid-in-dying drug,
  • the probable result of taking it;
  • the possibility that he or she may choose not to take the drug after receiving it, and
  • all of the other treatment options available, including hospice or palliative care.

In addition, the physician must counsel the patient:

  • to take the drug in the presence of another person;
  • not to do so in a public place;
  • to notify the next of kin of the request;
  • to keep the drug in a safe, secure location until he or she ingests it; and
  • to complete the final attestation form within 48 hours before ingesting the drug.

Interpreters’ services

If the individual makes the requests and has the discussions with a physician or mental health professional in a language other than English, he or she may sign the form in English, but the interpreter must execute a form declaring under penalty of perjury that the interpreter is fluent in both English and the patient’s language and that the individual understood the meaning and significance of the decision and the document he or she signed.  The interpreter may not be a related to the individual by blood, marriage, adoption, or registered domestic partnership and may not be entitled to any portion of the individual’s estate.


The attending physician must maintain records of the patient’s requests in the patient’s medical records. Thirty days after writing the prescription for an aid-in-dying drug, the physician must report the prescription to the state Department of Health. If the patient has used the drug, the attestation form also is to be turned in to the attending physician, who must submit it to the state.

Prohibitions in contracts, wills, and other documents

Under the statute, any provision in a contract, will, or other agreement executed on or after January 1, 2016, that would affect a person’s making, withdrawing, or rescinding a request for an aid-in-dying drug is not valid. No obligation under a contract may be conditioned upon an individual’s making, withdrawing, or rescinding a request for such a drug. The sale, procurement,  issuance, or price of a life or health insurance policy may not be conditioned upon an individual’s making or rescinding a request for an aid-in-dying drug.

An individual’s ingestion of an aid-in-dying drug in accordance with the statute is to be considered a natural death as a result of the underlying disease and not a suicide.

Administration of drug: a fine line?

The law provides that an individual must have both the physical and mental ability to self-administer the drug or to coerce or exercise undue influence to persuade an individual to request the drug. It is a felony to administer the drug to an individual without his or her knowledge and consent. Section 443.18 provides, “Nothing in this part may be construed to authorize a physician or any other person to end an individual’s life by lethal injection, mercy killing, or active euthanasia.”

At section 443.14, the law provides that a person shall not be subject to civil or criminal liability solely for being present when the individual self-administers the drug. Still, the statute also provides that the person who is present may assist the patient in preparing the drug so long as he or she does not assist the patient in ingesting the drug.  it appears the statute leaves open the possibility that assisting with the injection of a drug, even at the request of a patient, could subject the person to civil or criminal liability.

Thirteen States, Including IL, FL, CA, See Opportunity to Make Medicaid Cuts

Amid the Obama Administration’s encouragement for states to expand their Medicaid rolls per the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), 13 states have implemented cuts to the program or are preparing to implement reductions in provider payments and benefits offered to Medicaid recipients. Some states may have seen June’s Supreme Court decision, requiring that states be allowed to opt-out of PPACA’s Medicaid expansion scheme, as an opportunity to scale back their Medicaid programs.

Eligibility Requirements

While the decision did not specifically state so, some state level officials have interpreted the lifting of the Medicaid expansion requirement as the lifting of the PPACA-imposed prohibition from altering their Medicaid eligibility requirements. Wisconsin has already changed its policy to deny Medicaid coverage to non-pregnant adults who are both offered affordable employer-sponsored coverage and have an income that exceeds 133 percent of the federal poverty level (FPL). Some adult recipients must also be responsible for paying new or increased monthly premiums. Wisconsin officials estimate these changes will save the state around $28.1 million.

Other states that have made changes to their eligibility requirements since the PPACA decision or are preparing to do so include the following:

  • Hawaii–Non-pregnant adults will no longer be eligible for Medicaid if their income exceeds 133 percent of the FPL (the limit was formerly 200 percent of FPL).
  • Illinois–Parents’ income must not exceed 133 percent of FPL (formerly 185 percent of FPL).
  • Connecticut–Plans to limit adult coverage to those with less than $10,000 in assets, not including one car and a home, and to calculate income for adult children aged 19 – 25 living at home by including their parents’ assets and income.
  • Maine–Plans to reduce parental eligibility to 100 percent of the FPL (currently 200 percent of FPL) and to do away with coverage for 19 and 20-year olds.

Drug Benefits

Currently, 16 states limit the monthly amount of drugs that recipients can obtain through their Medicaid programs. Four states have increased prescription drug copays and/or imposed monthly caps since the PPACA decision was issued:

  • Alabama–With the exception of long-term care patients and HIV and psychiatric drugs, Medicaid beneficiaries were limited to one brand name drug through July 31. Now, beneficiaries are limited to four brand-name drugs monthly.
  • California–Implemented $1 and $3 copays for specific drugs.
  • Illinois–Program recipients are now limited to four prescriptions monthly, in addition to being subject to increased copays. Recipients may seek state approval to receive more than four drugs.
  • South Dakota–Beneficiaries must now pay copays of $1 for generic drugs and $3.30 for brand name drugs.

Other Cuts

In addition to budget-saving measures surrounding prescription drug benefits and program eligibility, states have implemented a variety of other cost reductions since the June decision, including provider payment cuts, emergency room copays, and reductions in coverage. Among those cuts are the following:

    • Alabama–Physician and dentist reimbursement has been reduced by 10 percent. The frequency of routine eye exams has been reduced to one every three years, and eyeglass coverage has been completely eliminated.
    • California–Payment rates have been frozen for nursing facilities while private hospital reimbursement has been reduced by $150 million. Clinical laboratory reimbursement has been lowered by 10 percent.
    • Colorado–Copays and enrollment fees, to be determined by family income, have been added to the Children’s Health Insurance Program. Nursing home reimbursement rates have been reduced by 1.5 percent, and orthodontics coverage has been limited.
    • Florida–Reimbursement rates have been lowered by 1.3 percent for nursing facilities and 5.6 percent for hospitals. Florida is planning to reduce the allowable number of home health visits for non-pregnant adults to three per day maximum, emergency room visits to six per year maximum, and primary care visits to a maximum of two monthly, pending federal approval.
    • Illinois–Reduced reimbursement to non-safety net hospitals by 3.5 percent and to non-physician, non-dentist providers by 2.7 percent. Routine dental care and chiropractic services are no longer covered. Beneficiaries who visit an emergency room for non-emergency purposes now incur a $3.65 copay.
    • Louisiana–Payments have been reduced by 3.7 percent to dialysis centers and dentists, 3.4 percent to non-primary care physicians, and 1.9 percent to mental health providers.
    • Maine–Services obtained at ambulatory surgery centers and sexually transmitted disease clinics will no longer be covered. With the exception of pregnant women, smoking cessation products will also not be covered.
    • Maryland–Payments to hospitals have been lowered by 1 percent and by 2 percent for nursing facilities.
    • New Hampshire–Hospital reimbursement has been reduced by $160 million.
    • South Dakota–Coverage for non-emergency adult dental services has been limited to $1,000 per year.