They say health care is recession-proof. But, that's not exactly the case. The health and human services sector has proven to be both recession-resistant and a recession laggard. And—if U.S. governors are right—the start of the ‘recession’ in the health and human service sector will begin on July 1, 2011. The fiscal year that begins in July will be “the most difficult to date,” according to a survey of 45 states released at the winter meeting of the National Governors Association.

States must find a cumulative $18.8 billion to balance their budgets in remaining months of the current fiscal year, and in fiscal 2011, an estimated $53.6 billion in shortfalls awaits, according to the survey. For governors, Medicaid is one of the top budget issues. Medicaid spending for fiscal year 2009 was $335 billion, an increase of 7.8 percent over the previous year. Enrollment increased 5.4 percent in fiscal year 2009 and will grow 6.6 percent in fiscal 2010. Additionally, 3.3 million more people were enrolled in Medicaid in June 2009 compared to the previous year—the largest one-year increase to date.

If you haven't started your management strategy for this time of economic freefall, now is the time. For starters, employ a three-prong recession management strategy consisting of short-term cash management, business development, and preparing for the post-recession marketplace.

For more, check out:

• Prepare for the Emerging Post-Recession Marketplace: Five Management Best Practices for Organizational Sustainability
• Anticipating Emerging Post-Recession Market Models: Consumer & Payer Demands for Behavioral Health & Social Services

We are soon to have a number of states release county and state prisoners early—in order to reduce corrections budgets. While I’m all for ending our practice of incarcerating Americans for lack of available metnal health and addiction treatment, I think the current wave of early releases may actually end up costing us more without some planning.
The ‘Exhibit A’ for my conclusion is a recent report in Psychiatric Services on Bazelon Center's Blueprint for Community Reentry.

The piece has some grim statistics—approximately 16% of all prison and jail inmates have a serious mental illness, and more than half have a clinical diagnosis, a treatment history, or symptoms of mental illness. Within 18 months of release, 64% of those with mental illnesses are rearrested—more than twice the rate of those without mental illnesses. Entitlements such as Medicaid and Medicare, veterans benefits, and Social Security income support enable individuals to obtain mental health care, housing, and other services. Without assistance, released inmates often wait months for benefits—a major factor in their high recidivism rate. However, only a third of inmates receive benefits restoration planning that is essential to preventing reincarceration.

The report in USA Today was brief, but its implications leapt off the page for me:

“In the eight states that report monthly tax figures, collections from July through September declined an average of 8.3 percent from a year earlier. Even in places where there's been an income tax increase, such as New York, collections still declined. This comes after there was a 15 percent nationwide drop in tax collections during the first six months of the year.”

With health care in general (and behavioral health and social services in particular) dependent on state financing, I think the ‘end of the recession’ is nowhere in sight – despite the pronouncements of economists. Look for reductions in Medicaid (reduced eligibility, reduced service coverage, reduced provider fees, and more risk-based contracts) and cuts in state-funded services (mental health, addictions, child welfare, juvenile justice, prison health, senior support services, etc.) as the reality of tax collections cause state governments to open up their budgets once again.

If you’re a manager of an organization providing health services or social services – or a county commissioner – the pending tax shortfalls will have the biggest impact on your work. Now would be the time to develop a contingency plan.

For more on planning and managing in these harsh economic times, check out:

• On the Money - The Key Financial Challenges Facing Nonprofits Today - and How Grantmakers Can Help
• The Wolf is at the Door: The Global Economic Crisis and the Public Sector
• Surviving & Thriving in a Recession: A Management Blueprint for Health & Human Services
• Changes in Health Care Financing & Organization: Impact of the Economy on Health Care

On the board of directors of a health or social service organization? If so, Atlanta’s Grady Memorial Hospital situation is a cautionary tale. A court ruled on September 25th that Grady Memorial—Atlanta's safety net hospital—could close its outpatient dialysis unit. What brought the Grady management team to the place where courts are ruling on its service lines? Consumer desperation, of course.

Grady accepts all patients despite immigration status or ability to pay, and is the ‘last resort’ provider for many uninsured, according to a recent New York Times article. Unfortunately, Grady’s dialysis clinic was projected to lose $2 million this year, and continuing dialysis services was deemed unfeasible. This prompted a lawsuit asking for consumer relief.

The patients’ lawyer, Lindsay R. Jones, called the order Friday by Judge Ural D. Glanville “an angry, punitive decision.” “At least 51 patients had their life support system unplugged today under the authorization of this judge,” Mr. Jones said. In response to the decision, Grady has agreed to pay for up to three months of dialysis at private clinics for the 51 displaced patients. However, the clinic will still close.

The Grady situation is just the first of hundreds of similar situations we are likely to see. The combination of state and local budget deficits—coupled with a likely new range of payer-level health care cost containment measures—will increase pressure on non-profit provider organizations to continue unfunded services.

And don't expect relief from the courts. One quote from Judge Glanville says it all: “As it relates to the receipt of medical treatment, the court is unpersuaded [sic] at this time that plaintiffs have a constitutional right to the sought-after relief."

Word of advice: Understand the cost structure for each service you deliver. Be proactive in seeking additional funding where needed—or in closing those programs you can't afford to continue.

Advocates and provider organization management teams are all tracking state budget problems and what they mean for mental health. A few of my colleagues are breathing a sigh of relief because their state budgets left them 'relatively' unscathed. But, for behavioral health and social services, I think the worst budget cuts are yet to come. In 2010, we will have to deal with the effect of the planned state budgets—and probably some mid-year revisions. But, in many jurisdictions, provider organizations will see county and city budgets for these services unravel. On Saturday, ABC news in El Paso, Texas reported that of the El Paso City Council members, four voted to cut ties with the El Paso Mental Health and Mental Retardation agency. Their rationale is that, by law, those services are the responsibility of the county—not the city. ABC-7 reporter Daniel Marin wrote:

"El Paso City Representative Beto O'Rourke says, by law, MHMR is the responsibility of the county. So he along with special city council committee
members… voted to cut ties with the agency…O'Rourke says MHMR's highly publicized funding issues are the result of the old cliché: too many chefs in the mental health care kitchen…"

"MHMR spokesman Rene Hurtado says while every little bit of funding helps, this is all about more than losing the city's $100,000 yearly contribution. "The mental health care system is very complex," said Hurtado. "The more people we have at the table, the better it is for everyone."

"El Paso County Commissioner Anna Perez says, in her opinion, the city has a direct role in helping the city's mentally ill; adding there's too much at stake for city officials to hide behind a law. "[The law] doesn't mean they don't have a place at the table," she said.

The unfortunate reality? Our current systems for mental health treatment, for addiction treatment, for child welfare, and for other social services are strung together with a hodgepodge of federal, state, county, local, grant, donation, and payer dollars. From my perspective, parity and universal coverage can't come too soon. I'll look forward to a time when Americans with behavioral disorders and disabilities are not begging for safety net funding and charitable donations.