Manistee joins opposition to state mental health plan

MANISTEE — The Manistee County Board of Commissioners voted this week to support Centra Wellness Network in a dispute over how mental health services are funded and managed across Michigan.

At issue is a proposal from the Michigan Department of Health and Human Services to rebid the state's 10 regional Prepaid Inpatient Health Plans, which manage Medicaid-funded behavioral health services.

Mental health leaders discussed drafts of the plan in May, but the final request for proposal was released in August. Bids are due Oct. 6, with services set to start Oct. 1, 2026.

Centra Wellness, which serves Manistee and Benzie counties, relies on Medicaid funding each year to provide services ranging from counseling to housing support for residents with serious mental health needs.

Executive director Chip Johnston told commissioners he believes the plan would strip counties of local oversight and allow large outside organizations to make key decisions about care.

He warned that if new contractors took over, leftover Medicaid funds could be kept rather than returned or reinvested locally.

"This is about local accountability," Johnston said. "Right now, if there's a problem with services, you can come to me and to your county board. Under this plan, those decisions would be made by a company that doesn't answer to you."

According to Johnston, Molina Healthcare had asked if Centra Wellness would "enjoin them and be part of the provider network," but he declined.

"Only my county commissioners can make that decision, not me," Johnston said.

He argued that such outreach showed how large national corporations are already seeking involvement.

MDHHS says bidders must be nonprofits, universities or governmental entities. Johnston argues this effectively excludes community mental health organizations like Centra Wellness, which are governmental subdivisions under state law, while allowing private insurers, universities or 501(c)(3) nonprofits to participate.

For Centra Wellness, those Medicaid dollars account for about $19 million of its roughly $21 million budget.

"If private companies win the bid, they will be the ones funding me," Johnston told the board. "I will have no longer a connection to the county commissioners. If I'm not behaving in a way that supports our courts, sheriffs or counties, it won't matter. You'll have to go to what I call 'the thing,' because I'll be out of it."

Johnston noted that Centra Wellness currently receives about $750,000 in state general fund money to serve residents not covered by Medicaid, down sharply from past levels. He warned that if Medicaid dollars are shifted away under the state's plan, Centra could be left with only that small amount to manage directly.

"That money disappears fast," he said. "An inpatient hospital stay is $1,500 a day. It doesn't take long for that to be gone."

Looking to the past

Johnston reminded commissioners that the same issue surfaced more than two decades ago.

Johnston pointed to a 2002 case in which then-19th Circuit Court Judge James Batzer, he said, ruled the state could not remove Medicaid funding from Manistee and Benzie counties because it left residents unrepresented.

"The department tried to do this before," Johnston said. "Judge Batzer ruled they couldn't strip counties of their statutory authority, and we believe the same argument applies today."

Commissioners voted unanimously to allow Manistee County to join a lawsuit being prepared by Centra Wellness, the Northern Michigan Regional Entity and other partners to stop the state's procurement plan. Johnston said a complaint is being drafted and could be filed by the end of the month.

The board noted the county will not contribute money to the case. Instead, its name will be included only to show support.

Johnston said attorneys are reviewing the RFP, adding that he worries it could shift statutory duties from counties to a new entity — something he believes is unlawful.

"This is one of those things that directly impacts our residents," board chair Jeff Dontz said. "We need to be sure decisions about mental health care aren't made hundreds of miles away with no connection to this community."

Opposition

The Community Mental Health Association of Michigan, which represents providers statewide, has joined in opposing the procurement. In an August 2025 statement, the association warned that the RFP would effectively exclude existing public regional entities in their current form while favoring large, private nonprofits.

"Although MDHHS states this initiative will increase access, choice and preserve current community mental health providers, the reality of the proposed plan tells a different story," the association wrote. "The proposed competitive procurement process appears structured to favor large, private nonprofit health plans — while excluding the very public (Prepaid Inpatient Health Plans) that have successfully managed Michigan's specialty behavioral health services for decades."

The group said current Prepaid Inpatient Health Plans operate at about 2% administrative overhead, compared to 15% or more for private health plans, a difference the association estimates could divert $300 million to $500 million away from direct care.

"This proposal does not address the root causes of access and timeliness challenges in the system — namely, workforce shortages and chronic underfunding," said Community Mental Health Association CEO Robert Sheehan. "Instead, it risks diverting hundreds of millions of dollars away from direct care and into administrative overhead."

Manistee is not the only county sounding alarms. Earlier this summer, the Osceola County Board of Commissioners passed a resolution formally opposing the RFP, according to reporting by the Big Rapids Pioneer.

At that meeting, Bryan Krogman, executive director of Community Mental Health for Central Michigan, warned commissioners that the plan could open the door to privatization and weaken transparency, the Pioneer reported.

"Right now, public community mental health boards are subject to the Open Meetings Act and provide local accountability," Krogman said. "If these contracts go to private plans, people will lose that transparency and local voice."

He also raised concerns that mental health dollars could be diverted to shore up physical health services if the carve-out between mental and physical health is dissolved.

"Maintaining a publicly accountable and locally governed behavioral health system is essential," he said.

Krogman said current Prepaid Inpatient Health Plans may not qualify to bid in their present form despite decades of experience, and suggested the issue could lead to legal challenges under the Michigan Mental Health Code.

The Osceola resolution urged Gov. Gretchen Whitmer, MDHHS and the state legislature to halt privatization plans and instead work with counties and providers to strengthen the public system.

Benefits

While community mental health leaders and county associations across Michigan have warned the proposal could reduce transparency and local oversight, the state argues it would improve accountability and simplify a fragmented system.

"Michigan Medicaid beneficiaries deserve access to behavioral health care services when and where they need them," said Elizabeth Hertel, director of the Michigan Department of Health and Human Services, when the RFP was announced. "A competitive procurement process for the state's Prepaid Inpatient Health Plan contracts will help create a more accessible and person-centered system of care dedicated to ensuring Michigan residents a healthier future."

The department said the bidding process was shaped by a March survey that drew responses from more than 2,600 beneficiaries, families, providers and other stakeholders.

According to MDHHS, any selected contractor will be required to comply with the Open Meetings Act and Freedom of Information Act and to deliver services through local community mental health providers. Critics argue this contractual obligation is weaker than statutory requirements for public boards.

The procurement process is expected to play out through the fall, with service changes slated to begin Oct. 1, 2026.