Mental Health in the State of North Carolina is under the jurisdiction of the Department of Health and Human Services (DHHS). The responsible Division in that Department is the Division of Mental Health, Developmental Disabilities, and Substance Abuse Program (DMH/DD/SAS). Within the Division, certain sections are primarily responsible for Mental Health.
      Since there are frequent reorganizations of programs in state government, and particularly within DHHS, names and places may not be the same from year to year. We can expect more changes and reorganization with the new administration in 2001. One possibility is that Developmental Disabilities will pull out and become a separate division.
      The Mental Health System in North Carolina is community-based, with 39 Area Programs having responsibility for those who need care. We also have four state psychiatric hospitals in North Carolina. As several of the articles in this issue point out, a major - perhaps the major - problem we have is that money is allocated separately to the Area Programs and to hospitals.
      Logically, we might assume that money follows a person with a mental illness, whether they dwell at home, in supervised group housing, in a rest home, or in a state hospital. This is not the case. If a client receives care in a local Area Program, Area Program funding pays for that care. If a client goes to a state hospital - which can only happen if an Area Program sends them there, hospital funding covers that patient. Unsurprisingly, some clients with mental illness are a lot harder to care for than others. While the Division's mission is to: promote the development of services for adults with severe and persistent mental illness and seriously emotionally disturbed minors, these people may be costly to care for. If the Area Program sends these people to a state hospital it does not cost them a cent.
Click here to see the DMH/DD/SAS Organization Chart.
      Compounding that problem and confounding those of us who wish to understand and improve the system is the great variety of funding sources and mechanisms. What follows in this section of our report is a variety of funding and service data. We present data for the entire mental health/developmental disabilities/substance abuse system, the Division of MH/DD/SAS, the Mental Health program alone, and the Area Programs, all of which give us different glimpses at what is North Carolina's mental health system. We certainly wish it were less complex and that we could nicely chart the flow of money through the system. We believe that should be possible and that the changes that we propose in our recommendations can help to accomplish that. But, for now, we must struggle to understand what is.

The System

The broadest look is at the entire system of care, regardless of whether or not the money goes through DMH/DD/SAS. This is where the $1.7 billion number for 1999 comes from. Money comes into the system from the State's budget, from State Medicaid (DMA), from the Federal Medicaid program, from county general and Medicaid funds, from other local sources, and from other sources such as private insurance and fee-for-service payments (Figure 1). It goes to the State's programs: developmental disabilities, adult and child mental health, the community-based Area Programs, substance abuse, the Thomas S. and Willie M. programs, and to central administration (Figure 2).

      Forty-eight percent of the funds come from the Medicaid program - federal (30 percent), state (15 percent), and local (5 percent). The State of North Carolina contributes a total of 48 percent, combining its Medicaid and state budget contributions. Counties and other local funds contribute 14 percent, with some larger counties such as Mecklenburg and Durham providing the bulk of that support (see AP Table, Page 27). Some of these funds go through the Division of Medical Assistance, some go through the state budget process and to the Division of MH/DD/SAS, some go directly to Area Programs, some directly to hospitals, and some directly to providers. It would be next to impossible to diagram the flow of money from source to recipient as the system now functions. One perspective is to look at the state agencies involved in funneling system funds (Figure 3).

      While most of the money comes from the DMH/DD/SAS budget, (which includes Medicaid funds for state institutions that do not go through DMA), DMA and DPI are also major sources of mental health funds.
      The largest portion of system funding goes to developmental disabilities, a total of 41 percent. Less than one percent - $7 million out of $1.7 billion - goes to the central administration of the system. This is proof, if we ever needed it, of a decentralized, under-managed, and unbalanced system.
      Another way to look at the distribution is by where the money goes in terms of location. Overall, community programs receive the largest share of system funds, 66 percent (Figure 4).

      However, when we look at a more detailed breakdown, we see that adult mental health is the one program that dedicates most of its funding, $285 million or 71 percent, to institutional (hospital) care (Figure 5). There is less money available in the community for adult mental health than for child mental health, although the population at risk is much larger.

The Division of Mental Health, Developmental Disabilities, and Substance Abuse Services

     The system described above spent about $1.7 billion in 1999. The Division managed about $999.5 of that (59 percent). (The remaining 41 percent comes from the sources displayed in Figure 3 above). Looking broadly at the Division, we see that only 55 percent of its budget comes from state appropriations, with most of the rest coming from Medicaid (Figure 6). While the state pays for most of the Willie M. and Thomas S. programs, it only pays for 65 percent of the mental health budget. $420 million (42 percent) of funding in fiscal year 1999 came from the Federal government and other sources (Figure 7).


      If we exclude Willie M. and Thomas S. funds, we see that 44 percent of the remaining Division funds go to mental health (1998-99), with 23 percent of total funds going to adult mental health and 11 percent going to child mental health (1999-2000) (Figures 8 and 9). On the other hand, 47 percent of patients in the system require adult mental health services and 19 percent require child mental health services, totaling 66 percent of all clients (1997-98).


      While system-wide, 66 percent of funds go to the Area Programs, the Division budget allocates 65 percent to institutions and only 33 percent to community programs (Figure 10). With this $136 million, the Area Programs serve 90 percent of the clients served by the DMH/DD/SAS (Figure 11).


      As another indication of the Division's focus on institutions, 98 percent of its positions are in institutions.
      This is not surprising given the decentralization of the system. Whether it meets the needs of clients, however, is questionable.
      Over the last decade the demand for mental health services has greatly increased. While funding has increased as well, primarily through increased use of Medicaid, the state has not compensated the Division for inflation. Area Programs would have received 69 million additional dollars since 1994 had inflation been considered. State funding alone would have provided an additional $206 per year per client. Under-funding due to lack of inflation compensation is accompanied by the reversion of funds to the state each year (Figure 12).

      Over $20 million reverted in 1999, money that was "recalled" by the Governor or unexpended. Looking since 1993, we see the Division lost many millions that had been budgeted. Whether this is from poor management or from general budget crunches that affected all elements of state government, it is bound to affect the quality of services.

Area Programs

     We've looked at the system that includes mental health and at the Division that has responsibility for mental health services. In North Carolina's decentralized set-up, the Area Programs are at the core of the system and its services. Therefore, it is important to understand their financing as well. It is, of course, just as disjointed and uncoordinated as what we have seen above. Thirty-eight percent of the Area Program's resources came from the State in 1997-98 and Medicaid covered 39 percent (Figure 13). Of the state money designated for program services, a total of 45 percent went to mental health (Figure 14). There is some disagreement in the figures provided by the Fiscal Research Division as to the total state contribution in 1997-98.


      As always, however, when we look at patient load we see that mental health sees the majority of clients, 65 percent in this case (Figure 15).

      Finally, we look at Area Programs' growth since 1994. While the number of DD clients has remained stable, substance abuse clients have increased 24 percent and mental health clients 40 percent, reaching almost 200,000 in 1998 (Figure 16).

      Resources have also grown. Most of the increase has come from Medicaid - an astonishing 458 percent. The state contribution increased only 16 percent, counties' contribution increased 21 percent, and other sources, 39 percent (Figure 17). One of the most distressing aspects of Area Program funding can only be seen when we look at the level of individual programs.

      The Table below is ordered by the per capita funds that are contributed to an Area Program by its constituent counties. Mecklenburg contributes $42.38 per capita. The average for the programs is only $5.19. When state, federal, and county contributions are combined, Mecklenburg has $52.76 available, while the program average is $19.80. Crossroads has $8 per capita in total funding. So it matters a lot where you live. And as the State tries to move towards some equalization of funding for Area Programs, it does not take county contributions into account.

Variations in Funding to Area Programs for Mental Health
How is your Area Program doing?
(Table sorted by total per capita MH funding)
Area Program	State per capita MH funding	Federal per capita MH funding	Counties per capita MH funding	Total per capita MH funding	% of total median
Mecklenburg	8.49	1.89	42.38	52.76	266.46%
Durham	10.68	0.78	32.75	44.21	223.28%
Smoky Mountain	15.56	20.26	3.07	38.89	196.41%
V-G-F-W	6.93	27.17	2.42	36.52	184.44%
Orange-Person-Chatham	12.42	14.31	9.6	36.33	183.48%
Trend	10.28	20.30	5.28	35.86	181.11%
Centerpoint	7.27	12.21	15.99	35.47	179.14%
Blue Ridge	9.13	21.23	2.73	33.09	167.12%
Wake	7.33	11.58	12.93	31.84	160.81%
Southeastern	4.85	19.06	6.87	30.78	155.45%
Guilford	7.59	0.85	22.12	30.56	154.34%
Gaston-Lincoln	8.80	16.00	5.19	29.99	151.46%
Cumberland	9.17	0.54	17.98	27.69	139.85%
Foothills	10.24	15.58	1.37	27.19	137.32%
Pitt	9.99	1.16	14.41	25.56	129.09%
Johnston	13.84	0.21	11.14	25.19	127.22%
Cleveland	11.13	1.80	10.23	23.16	116.97%
New River	15.81	1.34	4.5	21.65	109.34%
Rutherford-Polk	16.89	1.15	2.83	20.87	105.40%
Edgecombe-Nash	11.52	0.71	7.57	19.80	100.00%
Halifax	11.53	1.85	6.33	19.71	99.55%
Randolph	13.59	0.24	5.21	19.04	96.16%
Rockingham	6.51	0.82	11.57	18.90	95.45%
Lenoir	7.27	1.38	10.08	18.73	94.60%
Catawba	8.67	1.06	8.75	18.48	93.33%
Roanoke-Chowan	14.18	1.24	2.74	18.16	91.72%
Sandhills	13.51	0.34	2.93	16.78	84.75%
Lee-Harnett	13.48	0.22	2.5	16.20	81.82%
Wilson-Greene	10.94	1.25	3.84	16.03	80.96%
Wayne	8.09	0.60	5.43	14.12	71.31%
Southeast Reg	11.00	1.06	1.69	13.75	69.44%
Duplin-Sampson	10.56	0.79	2.31	13.66	68.99%
Davidson	10.38	0.17	2.49	13.04	65.86%
Albemarle	9.60	2.00	1.35	12.95	65.40%
Neuse	9.33	0.87	2.47	12.67	63.99%
Tideland	8.89	1.09	2.62	12.60	63.64%
Piedmont	5.52	0.72	3.39	9.63	48.64%
Onslow	5.31	0.42	2.37	8.10	40.91%
Crossroads	4.60	0.75	2.65	8.00	40.40%
Calculated medians	9.99	1.15	5.19	19.80
Data from NC Budget & Tax Center's Budget Report for Coalition 2001 and from DMHDDSAS reports
Per capita funding based on 1997-98 continuation budged levels divided by July 1997 population estimates
County pc uses 7/1/98 population estimates

Conclusions

      What do these numbers and graphs suggest to us?
     1. The mental health system and DMH/DD/SAS in general are driven by funding streams that are not coordinated.
     2. The system is not client-driven nor client-focused, but is driven by funding sources.
     3. There is a great reliance on Medicaid to support the system, which may imply that those who do not reach Medicaid levels of poverty, what is often called the working poor, may not have access to the services that they need. Nor can we be sure that all who qualify apply for Medicaid. This may be partly due to a lack of aggressive outreach to this community and to providers who do not pursue registration.
     4. State psychiatric hospitals are extraordinarily expensive to maintain at current levels. They are old and poorly designed for the provision of modern treatment regimens.
     5. The administrative weakness of the Division with regard to mental health coordination and assurance throughout the state is reflected in the budget. If we hope to have strong leadership and quality control at the state level, we must be sure that there is proper funding and staffing. Until a credible long-range plan is developed, however, there is probably little to gain from additional administrative funding.
     6. Local contribution of funds through the counties and Area Programs, as well as the historical development of the Area Programs and differing levels of receptivity to change, have led to a great deal of disparity in the availability of mental health services in North Carolina.
     7. There is a great imbalance in the distribution of funds among disability programs, which may or may not be justified by need.
     8. It is not clear what will happen to Willie M. and Thomas S. clients and funds now that the class actions have been dismissed by the courts.
     9. Until and unless the mental health system has a more rational structure, dedicated to providing the right services to the most seriously ill clients, it is impossible to really know what these services would cost. How can we improve the situation in the immediate future? First and foremost, the various commissions and bureaucrats responsible for the system must take charge and make changes. Careful, creative, and thoughtful planning, based on fiscal realities, must begin immediately. The legislature must move towards greater centralization of resources and control and push or pull the administration towards the development of a long-range plan.
      One strategy would be for the state to manage all funding. To that end, it must have realistic means to estimate the number of people, who, under Olmstead guidelines, really require hospitalization. It must then do whatever is needed to make the state psychiatric hospitals meet the needs of those people rather than serve as repositories for clients that the Area Programs can't or won't serve. That will undoubtedly mean downsizing and/or replacing the hospitals. It must find ways of equalizing funding on a per capita basis to Area Programs. To do that, it will have to work with the different available funding sources, as well as find some means of serving those who do not qualify for Medicaid or other special programs.
      It is not clear how county funding, so important to some Area Programs, can be accommodated in a centralized state-controlled system. Perhaps the education system can provide a model, with counties subsidizing salaries when possible. (The recent Leandro case, that looks at inequalities in educational funding in North Carolina counties, raises questions of equity and legality that might also apply to mental health.) While we need to encourage those counties that are financially able to contribute to the mental health system to do so, there must be central control of funding to ensure that residents of low-wealth counties and of counties that refuse to contribute their share also receive the services that they need.
      It should not be surprising that we don't have an easy answer. The system we have never recovered from the de-institutionalization of the 1980s. It has been neglected and left to find resources where ever it can, responding to court decisions and crises. Report after report has pointed out the problems we again identify. It seems obvious to us that leadership has been lacking at the key levels.
      This is all particularly tragic since, at the same time, such great improvements have occurred in the identification and treatment of serious and persistent mental health problems. But, as it stands, North Carolina's organization and financing of mental health services is not in a position to take full advantage of those improvements. Many hundreds of thousands of North Carolina citizens suffer, perhaps needlessly, as a result.