To contain Medicaid costs during the late 1990s, Michigan shifted from a fee-for-service system to a system dominated by HMOs. While Medicaid cost increases have moderated under managed care, state officials worry about growth in pharmaceutical expenditures. These currently absorb 15 percent of the Medicaid budget and are increasing more rapidly than any other Medicaid service. In 1998, Michigan received approval for a Medicaid waiver to establish a statewide Medicaid managed care program for long-term recipients of mental health, substance abuse, and developmental disability services. The Department of Community Health contracts with local or regional Community Mental Health Service Programs (CMHSPs) to manage and provide Medicaid mental health, substance abuse, and developmental disability services and supports under a prepaid, shared-risk arrangement.
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