Michigan’s behavioral health system allows the same entities to control provider certification, manage Medicaid networks, and operate services. While legal, this structure raises concerns about conflicts of interest and provider access, fueling a growing policy debate about whether certification and network gatekeeping should be separated from service delivery. Pull Up Your Chair & Let’s Start the Conversation.

Who Controls the Network?
The Legal Authority Behind Provider Certification in Michigan’s Behavioral Health System

Prepaid Inpatient Health Plans (PIHPs) control access to Medicaid behavioral health services through network management. Under their contracts with the Michigan Department of Health and Human Services (MDHHS), PIHPs determine which providers are credentialed, contracted, and reimbursed within their network. If a provider is not contracted with a PIHP, it generally cannot bill Medicaid for services in that region.

Community Mental Health Services Programs (CMHSPs) also play a certification role under Michigan’s Mental Health Code. The Code authorizes CMHSPs to certify and monitor providers delivering specialty behavioral health services for individuals with serious mental illness, intellectual and developmental disabilities, and substance use disorders.

This structure creates an obvious conflict of interest when the entities that administer the system also control which providers are allowed to participate in it, particularly when the only certified provider for a service is the entity operating that service itself.

From a managed care and Medicaid law perspective, the structure itself is legal. Federal Medicaid managed care rules allow managed care entities to operate services directly while also contracting with outside providers. However, those same rules require states to maintain adequate provider networks and apply objective credentialing standards (42 C.F.R. §438.206).

The result is a structural conflict of interest. The same entity can function as regulator, payer, and competitor, controlling certification, determining network participation, and operating services within the same market. When those roles overlap, the incentive to limit outside participation is obvious.

For example, if a PIHP or CMHSP operates mobile crisis services, residential treatment, or other behavioral health programs, it may have little incentive to contract with independent providers offering the same services. If the PIHP chooses to operate the service internally and declines to contract with outside providers, competition can effectively disappear in that region even though Medicaid rules still require the state to maintain adequate access to services. 

Michigan’s Mental Health Code explicitly allows CMHSPs to operate services and certify providers. PIHPs themselves are not creatures of the Mental Health Code but exist primarily through Medicaid managed care contracts with MDHHS. Because the state authorizes this structure, public entities such as CMHSPs and PIHPs are generally protected by state action immunity from federal antitrust claims when acting pursuant to state policy.

 Impact on network adequacy and potential CMS oversight

While the structure is legal, it creates potential compliance risk for the state. Federal Medicaid law requires states to ensure beneficiaries have timely access to services. If a PIHP limits participation in the network while operating services internally, the state must still demonstrate that the network meets federal access standards.

If access to services becomes restricted or network participation becomes too narrow, the state could face scrutiny from the Centers for Medicare and Medicaid Services (CMS) regarding network adequacy.

Federal Home and Community-Based Services regulations also emphasize conflict-free service planning (42 C.F.R. §441.301). These rules were adopted to address situations where the same entity both determines services and provides them, reflecting a broader federal concern about structural conflicts of interest in Medicaid service systems. 

A current example of this concern appears in MDHHS’s proposed 2026 amendment to the Habilitation Supports Waiver (HSW). The amendment relies on a federal exception allowing a provider to both plan and deliver services when it is determined to be the “only willing and qualified provider” in a geographic area. While the amendment focuses on service planning rather than provider certification, it highlights a broader issue: federal policy increasingly recognizes the risks that arise when the same entity both administers a system and provides services within it. Comments on the amendment are due to MDHHS by March 16, 2026.

Why the system was designed this way

Michigan’s behavioral health system evolved over several decades. Beginning in the 1960s, the state shifted away from large state psychiatric institutions toward community-based care. The Mental Health Code created CMHSPs as local public authorities responsible for planning and delivering services within their communities. 

When Medicaid behavioral health services moved into managed care in the 1990s, Michigan built that system on top of the existing community mental health infrastructure. PIHPs were created to manage Medicaid funding regionally, but many were governed by the same CMHSPs already delivering services. The result is a layered system in which certification, contracting, and service delivery often occur within the same public structure.

Today, Michigan’s behavioral health system includes a large network of nonprofit and private providers delivering specialized services across the state. As this provider network has expanded, the governance structure has remained largely unchanged, raising concerns that provider participation may be influenced by entities that also operate services within the same market.

Possible policy solutions

Several reforms could address these concerns while preserving the strengths of Michigan’s public behavioral health system.

The strongest argument for reform is system integrity. Separating regulatory authority from service delivery helps avoid conflicts of interest, ensures fair provider access, protects network adequacy, and reduces administrative barriers that limit patient access to care.

Direct Care Worker Wage Mandate Raises Funding Concerns for Michigan Providers

Provider groups are warning that Michigan’s current funding levels may be insufficient to support the state’s new direct care worker (DCW) wage expectations. In a joint statement, Incompass Michigan and the Michigan Assisted Living Association said a February 6 memorandum from the Michigan Department of Health and Human Services (MDHHS) reiterates that qualifying DCWs should earn at least $17.13 per hour beginning January 1, 2026, but places responsibility on providers without clearly ensuring reimbursement rates from Prepaid Inpatient Health Plans (PIHPs) and Community Mental Health Services Programs (CMHSPs) adequately support the mandate. While MDHHS reports that approximately $51.9 million has been added to PIHP funding to help cover the increase, provider organizations argue the amount falls far short of actual costs and note that only a small share of CMHSPs have adjusted reimbursement rates so far. They warn that without additional funding and clearer accountability to ensure wage funds reach providers and workers; many organizations may struggle to sustain services for vulnerable populations.

CCBHC

CCBHC Demonstration Programs: What Happens Next?

Michigan behavioral health providers participating in the Certified Community Behavioral Health Clinic (CCBHC) demonstration program are beginning to ask an important question: what happens when the demonstration eventually ends?

Michigan’s current CCBHC sites operate under the federal demonstration model first authorized in the Excellence in Mental Health Act of 2014 and expanded through subsequent federal legislation. The program allows participating states to receive enhanced federal Medicaid funding to support comprehensive behavioral health services delivered through certified clinics.

The demonstration model provides a prospective payment rate designed to cover the full cost of care and requires clinics to provide a broad range of services, including crisis response, outpatient treatment, care coordination, substance use disorder treatment, and connections to primary care and social supports.

Demonstration programs, however, are temporary by design. Michigan’s current demonstration authority runs through September 30, 2027. After that point, the state would need to either be selected for another federal demonstration round or transition the CCBHC model into its permanent Medicaid program through a State Plan Amendment.

Under the federal Medicaid State Plan option, states can permanently establish CCBHCs and certify additional providers to operate under the model. This pathway could allow more providers in Michigan to become CCBHCs over time, expanding access to the enhanced service model across the state.

Congress is also considering legislation known as the Excellence in Mental Health and Addiction Treatment Expansion Act (S.3402), which would expand access to the CCBHC model nationwide. The bill would allow all states to participate in the federal demonstration rather than limiting participation to a small number of states and would provide planning and implementation support to help additional clinics transition to the model. While Michigan already participates in the current demonstration, passage of the legislation could broaden the program nationally and create additional opportunities for states and providers seeking to adopt the CCBHC model.

SAMHSA plans on releasing grants for CCBHC expansion on March 31. The forecast lists $94 million for 94 grants.

The CCBHC model has significantly expanded access to behavioral health services in many states. The next phase of federal and state policy decisions will determine whether the model remains limited to a small number of demonstration clinics or grows into a broader statewide network capable of reaching more individuals and families seeking care.

Dive Deeper:
Community Care Network’s Rutland Mental Health Services, one of Vermont’s first Certified Community Behavioral Health Clinics, is transforming behavioral health care in the state. Read the story.

Michigan’s New Mental Health Framework

The Michigan Department of Health and Human Services (MDHHS) is implementing a new Mental Health Framework (MHF) as part of the MIHealthyLife initiative to improve coordination, accountability, and person-centered care within Michigan’s Medicaid program. Beginning in October 2026, a standardized assessment process will determine whether a Medicaid Health Plan (MHP) or a Prepaid Inpatient Health Plan (PIHP) is responsible for a beneficiary’s mental health services. Under the new structure, MHPs will cover most mental health services for enrollees with lower levels of need, while PIHPs will continue to cover all services for individuals with higher levels of need. To support the transition, MDHHS is providing guidance, training, and new assessment tools—including the MichiCANS Screener and the LOCUS assessment—to help providers implement the standardized evaluation process and ensure appropriate placement and coordination of care across the system. This is URL link to MI Mental Health Framework initiative underway, Mental Health Framework

Congressional Updates:
Reps. Scholten, Moore, Garcia Introduce Bill to Support School Social Workers, Improve Student Success. This week, U.S. Representatives Hillary Scholten (D-MI-03), Gwen Moore (D-WI-04), and Sylvia Garcia (D-TX-29) introduced the School Social Workers Improving Student Success Act, which would establish a national grant program to improve recruitment and retention of school social workers. The Representatives also introduced a resolution to recognize this week, March 2nd – 6th, as School Social Work Week to highlight the life-changing work these professionals do in their communities. Representative Scholten directly thanked West Michigan’s school social workers here. 

Other News

A University of Kansas School of Medicine-Wichita analysis of mental health care shows the benefit of Certified Community Behavioral Health Clinics. Read the article.

MENTAL HEALTH REFORM BRINGS HOPE TO THE HEARTLAND, Heartland Forward

Will The New CMS ACO Model LEAD To Better Care For High-Need Medicare Beneficiaries?, Health Affairs Today

Legislation

House Committee on Health Policy, Agenda, Wednesday March 11, 2026, 9 AM

Funding

SAMHSA Announces More Than $69 Million in Funding Opportunities for Serious Mental Illness and Suicide Prevention Grant Programs

The Substance Abuse and Mental Health Services Administration (SAMHSA), a division within the U.S. Department of Health and Human Services (HHS), today announced $69.1 million in funding opportunities for three grant programs: the Children's Mental Health Initiative (CMHI), Implementing Zero Suicide in Health Systems (Zero Suicide) and Assisted Outpatient Treatment (AOT).

SAMHSA Notice of Funding Opportunity - Children's Mental Health Initiative

The Michigan Department of Health and Human Services (MDHHS) is pleased to announce the release of a new Grant Funding Opportunity (GFO) to support organizations in delivering primary substance use prevention programs for youth ages 12 to 17. Funding will support community-based programs that help delay the start of alcohol, tobacco, and other drug use. Approaches may include programs designed to strengthen families, expand access to positive out of school activities, build youth decision-making skills, and create safe and supportive environments. This represents one of many investments being made by MDHHS to respond to the opioid crisis leveraging funding from settlements made with drug manufacturers, distributors, and pharmacies for their role in the overdose epidemic.

This opportunity is intended to support multi-year prevention projects from June 1, 2026, through Sept. 30, 2027. A total of $3.75 million is available, with up to 10 awards anticipated. Proposals must be submitted electronically through EGrAMS by 3:00 p.m. on April 2, 2026. An information session about this grant opportunity will be held on March 9, 2026, at 9:00 a.m.For more information or to apply, visit the EGrAMS website. The full grant opportunity and supporting documents can be found under “Current Grants” in the “Specialty Behavioral Health Services” section by selecting the “PSUPS-2026” program.

MDHHS seeks proposals for primary substance
abuse prevention programs for youth  

The Michigan Department of Health and Human Services (MDHHS) has issued a competitive Grant Funding Opportunity (GFO) to support organizations in implementing primary substance abuse prevention programs for children and youth.  

The purpose of the funding opportunity is to support community-based organizations in delivering evidence-informed primary prevention programs aimed at delaying the initiation of alcohol, tobacco and other drug use among youth ages 12 to 17. These programs can achieve this goal in a variety of ways, including strengthening families as the first line of prevention, expanding access to positive extracurricular activities, building youth knowledge and decision-making skills, fostering safe and supportive environments and enhancing protective factors.  This opportunity is open to 501(c)(3) nonprofits, private and public entities, local health departments, federally recognized tribes, a group of federally recognized Michigan tribes, or an Urban Indian Health Clinic program and universities. 

The grant period is June 1, 2026, through Sept. 30, 2027, with a total of $3.75 million available. MDHHS anticipates issuing up to 10 awards.  Funding for this GFO is through the State of Michigan Opioid Healing and Recovery Fund, which is receiving payments from the nationwide settlement with the three largest pharmaceutical distributors, as well as opioid manufacturer, Johnson and Johnson. Michigan is slated to receive nearly $1.8 billion from the settlement by 2040 with half being distributed to the state’s fund and the other half being distributed directly to county, city and township governments. 

Grant applications must be submitted electronically through the EGrAMS program by 3 p.m., Thursday, April 2.  A pre-application conference will be held to discuss this funding opportunity and provide instructions on using the EGrAMS system at 9 a.m., Monday, March 9. It will last approximately 90 minutes and can be accessed at https://bit.ly/3OHR1FF.  

For more information or to apply, visit the EGrAMS website and select "About EGrAMS" link in the left panel to access the "Competitive Application Instructions" training manual. The complete GFO and resource documents can be accessed under the ‘Current Grants’ section under the “Specialty Behavioral Health Services” link and selecting the “PSUPS-2026” grant program. 

Free naloxone kits available at local MDHHS offices
Overdose reversal medication has been instrumental in overdose death reductions 

To help save lives and reduce overdose deaths, the Michigan Department of Health and Human Services (MDHHS) is providing free naloxone, medication that reverses opioid overdoses, at its local offices across the state.  

Increased investments in substance use disorder prevention, treatment, recovery and harm reduction have been made possible in large part due to opioid settlement dollars. Through this funding, MDHHS is providing free naloxone kits at its local offices to help expand the availability of this life-saving medication.  Michigan is slated to receive more than $1.8 billion from national opioid settlements by 2040, with half being distributed to the State of Michigan Opioid Healing and Recovery Fund and the other half being distributed directly to county, city and township governments across the state.  

Michigan residents can visit their local MDHHS office during business hours to request free naloxone kits while supplies last. Naloxone is a stable medication and has proven to withstand a variety of storage conditions. It is easy to use, allowing anyone to respond to an overdose situation, and Michigan’s Good Samaritan Law protects anyone who administers naloxone. Michigan has distributed more than 1.7 million naloxone kits and recorded more than 34,000 overdose reversals since the 2020 launch of Michigan’s Naloxone Direct Portal, an online portal that provides the opioid overdose reversal medication at no charge to community groups 

Free naloxone kits can also be obtained at:  Harm reduction agencies. Vending machines. Local pharmacies.  Via mail order. 

For more information about SUD resources, visit Michigan.gov/SUD.