Ability to Pay

Ability to Pay, a Requirement of the Michigan Mental Health Code

The privatization of our local mental health system a couple of years ago caused an increasingly stricter enforcement of the Michigan Mental Health Code. Namely, the “ability-to-pay” rules of Chapter 8 of that Code, especially against families with minor children using respite care, in-home staffing, supports coordination, or other mental health related services. As the Michigan legislature must have intended back in 1974, “if you can pay, you will … according to your income.”

The former state mental health agencies routinely enforced the financial liability rules of Chapter 8. However, when the state transferred all the responsibility for mental health services to the counties, some, like Oakland, never bothered to follow the letter of the law. Let’s just say, well, services were authorized and provided to consumers without true financial determinations, if any at all!

I don’t need to remind folks again about how only a couple of years ago the Oakland County Community Mental Health Authority (CMHA) transferred a substantial financial debt onto the Macomb-Oakland Regional Center, Inc. (MORC). One could say that for several years, our Oakland CMHA essentially provided $10 of service for every $5 bill it received when it was running direct services. As we all know, that sort of budget practice comes back to haunt everyone involved, especially the taxpayers. The Oakland CMHA now insists that MORC repay this financial shortfall over the course of the next twelve months. This means cutting $12 million from MORC’s already beleaguered budget!

Lately, many families have been calling The Arc office seeking advocacy assistance with their financial re-determinations and ability-to-pay requirement. Sure there are due process hearing rights, but the Code is fairly cut-and-dried when it comes to matters of financial responsibility. Unless you can truly demonstrate an INABILITY-to-pay, there is virtually no case to be made.

Chapter 8 of the Code sets up a financial liability chart that essentially says the more income the family has, the more they are required to pay. The Code uses a family’s most recent Michigan 1040 to determine taxable income, and there are some relatively minor allowances for “protected” income and assets.

A few of the financial liability examples would be that a family (or an adult individual) with a state taxable income of $6,000 or less has zero ability-to-pay each month. A family with $20,000 of state taxable income has to pay $62 a month; $30,000 - $206; $40,000 - $405; and $50,000 – $615. State taxable incomes over $50,000 per year will pay 15% of that income (e.g., $100,000 - $1,250 per month).

Okay, so how can you “fight city hall?” Well, about the only thing you can do is total up all of your household and family income and expenses for a month. You have to hope that the income is the same or less than the expenses, that is, you do not have the funds to pay for mental health services. Then declare/plead to the hearing officer that having to pay that financial liability determination is an “undue financial burden.”

Don’t think that your 401(k) or IRA or personal retirement fund is safe. The hearing officers over the years have ruled that families need to use those funds first before the taxpayer is on the hook. Also, don’t think that past services received are easily forgotten. The Code directs all public mental health service providers (a.k.a., MORC, Easter Seals, T.T.I., etc.) to go back and bill for up to 2 years!

Oh, the Code does state that indeed no “undue financial burden” shall be imposed. Further, it says that families (i.e., responsible parties) don’t have to pay anything in excess of the cost of services received by the consumer. The Code even goes on to say that private insurance can cover a portion or all of one’s ability-to-pay, and, that “an individual shall not be denied services because of the inability of responsible parties to pay for the services” (… oh, great, services will continue, but the state will run up the tab on the parents anyway, and then send them either to a collection agency, garnishee wages and/or withhold state tax refunds).

A small silver lining in all this is that once a child in need of public mental health services turns 18 years old, the parents are no longer financially liable according to Michigan Parental Financial Responsibility Act. An adult consumer is defined by law as a “family of one” and in most cases will have a liability of zero, unless their Michigan taxable income is over $6,000.

I know all of this has been a bit technical in part, but it is a current, fact-of-life reality for many member families of The Arc who are bringing the issue to our attention. We will continue to inform our constituency, and attempt to help all who ask for our help.

This article is an excerpt from our 50-page booklet entitled: “Planning A More Secure Future, 4th Edition.” For a more detailed and expanded discussion of this article, order the booklet.

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The Arc of Oakland County
  Attn: Planning a More Secure Future
  1641 W. Big Beaver Road
  Troy, MI 48084-3501