CalAIM and Specialty Behavioral Health Care

California is beginning the second year of a five-year initiative to reform how its Medicaid program, Medi-Cal, is financed and organized. The initiative, known as CalAIM (California Advancing and Innovating Medi-Cal), seeks to orient the Medi-Cal program toward whole-person care, social influences on health, and reduction of health disparities. Achieving these goals will require that CalAIM address the state's complex system for financing and delivering behavioral health care. Behavioral health care is critical to the success of CalAIM because of the complex social and medical needs of people with mental illnesses and substance use disorders and the complexity of the delivery systems that treat people with these conditions.

One component of CalAIM is a change in the way that specialty mental health services provided through California's county-based systems of care are financed. Under CalAIM, financing for these county-based systems will transition from cost-based reimbursement to a fee-for-service (FFS) system. The FFS system is also intended as a potential stepping stone to further financial reforms, laying the foundation for potential introduction of new payment models, known as value-based payment (VBP) models, that would give county behavioral health plans and behavioral health care providers additional flexibility in providing care while conditioning payment on the quality of care provided to Medi-Cal enrollees with serious mental illness (SMI), serious emotional disturbance (SED), and substance use disorder (SUD).

To inform discussion about the next steps that California might take in this policy direction, RAND Health Care, with support from the California Health Care Foundation, conducted an analysis of VBP in behavioral health. The team undertook the following activities:

• Reviewed the literature on VBP in Medicaid behavioral health.
• Interviewed national policy experts.
• Compiled case studies of five examples of VBP implementation in other states through document reviews and interviews with state officials.

Interviewed county and state policymakers in California. This report summarizes RAND's evaluation of existing research about VBP models as well as issues described by state interviewees related to implementation of VBP models in their states' Medicaid programs. It includes a series of recommendations related to steps California could take in the short term to inform its future decisionmaking processes related to VBP.