Illinois to Seek Federal Funding for Behavioral Healthcare Overhaul

August 11, 2016

August 24, 2016

UPDATE 3: The State now plans to post the draft waiver application on August 26 and hold public hearings in Springfield on September 8 and Chicago on September 9. For more information, see the website of the Department of Healthcare and Family Services.

August 19, 2016 

UPDATE 2: The State has delayed indefinitely the posting of the draft waiver application and public hearings related to the application. A notice from the Illinois Department of Healthcare and Family Services, the State’s main Medicaid agency, stated that information on the waiver publication and new hearing dates would be available on its website in the near future.

August 12, 2016

UPDATE 1: The State has delayed the posting of its draft application to the federal government by one week to August 19, 2016. Public hearings on the plan were also rescheduled; the new hearing dates are August 24 in Chicago and August 25 in Springfield.

Original post published on August 11, 2016

Illinois plans to apply for federal Medicaid funding to reform the State’s system for providing services to individuals with mental health conditions and substance abuse problems.

Details of the plan have not yet been publicly released, but a draft application is scheduled to be posted on the website of Illinois’ Medicaid agency on August 12. Public hearings on the proposal will be held on August 16 in Springfield and August 17 in Chicago.

Governor Bruce Rauner’s administration expects to submit the proposal to the federal Centers for Medicare and Medicaid Services (CMS) in mid-September, according to a presentation on August 5 at a Medicaid Advisory Committee meeting.

The proposal comes as Illinois struggles with a budget crisis that has put a particular strain on human services agencies, including behavioral healthcare providers. After a yearlong stalemate, the State approved a partial spending plan on June 30, 2016 that provided about 60% of human services funding for FY2016 and half of FY2017. Increased federal support could help mitigate the State spending shortfall, although it generally takes many months to negotiate a final agreement with federal officials. 

Illinois’ proposal is a Section 1115 waiver. Section 1115 of the Social Security Act allows federal authorities to waive certain Medicaid requirements for experimental, pilot or demonstration projects. The waiver would allow Illinois to receive federal funding to implement innovations—provided that the State can identify offsetting federal savings.

Governor Rauner’s predecessor, former Governor Pat Quinn, applied for a Section 1115 waiver two years ago. As discussed here, the previous plan requested more than $5 billion in federal funding over five years for a sweeping transformation of the State’s Medicaid program.

That proposal, called The Path to Transformation, centered on building Illinois’ capacity to provide community-based care for the disabled and those with mental health and substance abuse problems. It also requested new federal money for accelerating the movement to managed care, training primary care workers to serve Medicaid recipients and for public health initiatives such as maternal-child home visitation programs.

The Path to Transformation was submitted in June 2014 and is still listed as “pending” on CMS’ website. However, Rauner administration officials have stated that CMS had objections to the prior plan. The federal agency questioned the proposal’s savings projections, criticized the level of detail about certain program changes and raised the possibility that the State could use existing authority—instead of a waiver—to achieve some of the goals, according to a May 2016 presentation to advocates for Medicaid recipients.

The new plan appears to be more narrowly focused. The May presentation explained that the concentration on behavioral health was prompted partly by the State’s annual spending of $2 billion to $3 billion on the area, “with substantial opportunity to derive better value.” The presentation also cited the growing share of the population affected by behavioral health problems, the State’s numerous federal consent decrees across several agencies involving the issue and increased federal attention to the area.

At a town hall meeting for advocates in Chicago in June, State officials said the behavioral health transformation is intended to address six problems related to the delivery of behavioral health services in Illinois:


  • Lack of coordination of services around the customer;
  • Failures to identify and access those with the greatest needs;
  • Lack of community capacity;
  • Limited set of complementary services;
  • Duplication and gaps across agencies; and
  • Data, analytics and transparency limitations.


Participants at the meeting identified funding as their major problem.

The waiver is part of what the Rauner administration has called a health and human services transformation. The initiative involves 13 units of State government, including the Departments of Healthcare and Family Services, Human Services, Children and Family Services, Corrections, Juvenile Justice, Public Health, and Veterans’ Affairs and the Department on Aging.

In his State of the State address in January 2016, Governor Rauner said the transformation will emphasize prevention and public health, pay for outcomes rather than volume of services, make evidence-based decisions and move individuals from institutions to community care.