The Mental Health Association in Michigan

is the only statewide, non-governmental agency concerned with the broad spectrum of mental illness across all age groups.

November 22, 2017

Expectations & Parameters for Section 298 – MDHHS


Section 298 of Public Act 107 of 2017 instructs the Michigan Department of Health and Human Services (MDHHS) to “…implement up to 3 pilot projects to achieve fully financially integrated Medicaid behavioral health and physical health benefit and financial integration demonstration models. These demonstration models shall use single contracts between the state and each licensed Medicaid Health Plan (MHP) that is currently contracted to provide Medicaid services in the geographic area of the pilot project.” The boilerplate language further specifies the intended outcomes of these pilots, which include “…to test how the state may better integrate behavioral and physical health delivery systems in order to improve behavioral and physical health outcomes, maximize efficiencies, minimize unnecessary costs, and achieve material increases in behavioral health services without increases in overall Medicaid spending.”

This document presents the department’s current expectations of these pilots. While this document is not intended to be prescriptive, MDHHS has outlined certain parameters that define the structure of the pilots.


Michigan has employed managed care structures within its Medicaid program for nearly two decades. Throughout that time, Michigan has been a recognized leader among other states for its managed care systems. Michigan has utilized a behavioral health carve out in the managed care structure since initially implementing it. The current structure funds physical health care services through contracts with licensed managed care organizations utilizing full risk funding arrangements and competitive contracting. Specialty behavioral health services, including services for those individuals with serious mental illness, serious emotional disturbance, intellectual/developmental disabilities, and substance use disorders, are managed by sole sourced, public prepaid inpatient health plans (PIHP) utilizing shared risk funding arrangements. Under the current, carved-out, arrangement, Michigan has established a broad array of services and supports for individuals with behavioral health needs.

While the current system has developed exceptional services and capacity, the current bifurcation of funding and services management has created challenges for the successful integration and coordination of physical and behavioral health care for those with multiple comorbid conditions. There is growing national recognition of the need to integrate care at the financing, service delivery and outcome measurement levels. In response to this trend, and in recognition of the long and successful history of Michigan’s implementation of managed care structures and approaches, the Michigan Legislature has instructed MDHHS to implement pilots to test the impact of financial integration for physical health and behavioral health services.

Under the current system, two very significant and distinct benefit management philosophies coexist. These include a structure that centers around a Medicaid beneficiary, ensuring that appropriate healthcare services are accessible, coordinated and effective. This structure seeks to provide integrated physical and behavioral healthcare, as needed, to all beneficiaries. Simultaneously, this has also included a structure that is focused on managing the behavioral health needs of the community while providing needed, integrated services to those individuals in need. It is the department’s intent to preserve and integrate the values of each of these structures as it pilots financial integration.

To this end, all pilots will be expected to comply with current public policy requirements of Michigan’s public behavioral health system. MDHHS also expects that all pilots will maintain the full, current array of services that are supported by the specialty services carve-out and related waivers, and required by current contracts. These expectations should drive the funding model employed by pilot participants. Additionally, both PIHPs and MHPs are required to comply with federal Medicaid managed care regulations, which include but are not limited to: requirements for access, provider network management and capacity, medical loss ratio, enrollee information, and grievance and appeals. These regulations will also apply to the implementation of required managed care functions within the pilot sites.

To read the full 4-page report, please Click HERE.