Money intended to plug, at least partially, a $6 million hole left by recent federal cuts to the Medicaid program is already being used for mental health treatment for indigent Utahns who don't qualify for the government insurance program.

The new director of the state Division of Substance Abuse and Mental Health told lawmakers, who appropriated the one-time, $2 million award earlier this year, that the funds have been distributed based on the needs of specific mental health centers across the state.

"As of July, those dollars are out and are being used to take care of those individuals who are not on Medicaid and are indigent," division director Mark Payne told members of the Health and Human Services Interim Committee Wednesday.

The local providers will report back to the division, which is responsible for distributing state and federal funds earmarked for mental health services, next month and again in January on the number of non-Medicaid clients served by the funds, he said.

Prior to the federal cuts, Medicaid paid mental health centers a flat annual fee for each of its Medicaid-eligible clients. Any leftover funds not used by the local center could be used to serve other clients or for system improvements, according to the state Office of the Legislative Fiscal Analyst.

Now, however, Medicaid funds can only be used for eligible clients and any excess funds must be returned. As a result, local centers, such as Valley Mental Health, with a loss of nearly $1.3 million, lost significant funds previously used to treat non-eligible Utahns with severe mental illnesses, the fiscal analyst said.

Lisa-Michele Church, director of the state Department of Human Services, pledged Wednesday that her department — particularly the division of substance abuse and mental health — will work closely with local centers to ease the pain of the cuts.

"What you're going to see from us is a much stronger partnership with the local mental health centers and the counties," Church said. "We all realize that this thread of Medicaid changes is going to affect all of us."

Failing to adequately address the needs of the mentally ill through the mental-health division will simply increase the need for funding in other areas within the Department of Human Services, she said.

"If you don't successfully fund mental health in this area, you will fund it in my other areas," Church said.

The ripple effects of unfunded mental-health treatment would also have negative impacts outside the human services arena, Rep. Steve Mascaro, R-West Jordan, said Wednesday. "We end up paying for it in a much more expensive fashion, through emergency rooms or through the court system . . . if we don't take care of it in a preventative nature."

Gov. Jon Huntsman Jr. recommended that lawmakers appropriate $3.2 million to 10 local mental health centers in fiscal year 2006. Under the governor's proposal, the funds would be used solely to provide services to clients who do not qualify for Medicaid.

---

E-mail: awelling@desnews.com