The eight-year-old boy bounded into the stairwell leading to the roof of his Harlem school. A hard-charging classroom aide came up from behind just as the boy, distant and methodical, was pulling a handful of his shirt towards a lighter that had appeared in his other hand.

When the flint sparked, the aide screamed so loudly the boy simply forgot to set himself on fire.

Camelia Flye remembers taking her son home from school that day on the East Side subway, which was strange because she lived across from the Cathedral of St. John the Divine on the West Side. She was too distraught to even think about what she was doing. Before she could consciously form a plan, the pair sleepwalked themselves into the emergency room at Mt. Sinai, the best hospital Flye had ever heard of.

“The thing I remember is that he asked the psychiatrist to come out and tell me he was okay,” says, sitting in an apartment dominated by her son’s basketball trophies. “It absolutely shocked me. I never heard him talk that way about me. Then I realized how serious this all was.”

Over the next few months, with intensive therapy, rehabilitation and a daily cupful of medication, the boy stabilized. His unpredictable behavior–which had already earned him placement in special ed–subsided, and he eventually emerged from his medicinal stupor to make a few friends. One of them was a little girl around the same age who had tried to fling herself off an apartment building roof. Marta Nelson, Flye recalls, “was beautiful and sweet” and as angelic looking as her own son.

She tells her son’s story calmly, but when she thinks of Nelson and the other children she saw in the hospitals, the ones who tried to kill themselves, the tears roil behind her glasses.

“They are little children,” she says. “What in the world do they have to worry about?”


Camelia Flye’s son, now 14, has had his setbacks, but he has progressed so well over the last few years his teachers are talking seriously about taking him out of special ed and “mainstreaming” him into regular academic classes when he becomes a sophomore next year.

Marta Nelson, also 14, is sitting in juvenile lock-up awaiting trial on second-degree murder charges.

Last November, Nelson, who in recent years has been bounced between several foster home placements, hopped into a cab with a 22-year-old friend, pulled out a handgun and put a bullet into the head of the Senegalese driver as he tried to escape. The daily papers focused on the fact that both girls seemed to be involved with the Bloods street gang, but to the people who knew her, it was the sad culmination of a deeply troubled childhood. “She was a very sick child,” Flye says. “I pray to God they’ll be gentle with her. She needs help.”

The lives of severely emotionally disturbed children are fragile and their fates are unpredictable–especially if they happen to be poor. Mental health professionals have long known that children like Marta Nelson are even more complicated to treat than mentally ill adults because their lives can be profoundly altered by the flawed institutions upon which they depend–families, schools, friends, social service agencies, even the criminal justice system.

Yet for decades, the state- and federally-financed system cobbled together to help these kids has devoted only a fraction of the resources necessary to keep them out of hospitals and jails. “We just recently opened a facility in the South Bronx,” says Pasquale DePetris, vice-president of Steinway Child and Family Services, a multiservice mental health care agency based in Long Island City, Queens. “I told my staff, ‘The work you’re doing here is going to determine how many kids in this neighborhood are going to wind up in that new juvenile correctional facility they just built across the street.’

“I honestly believe the reason you see all these kids in jails is because we’ve never received enough funding to really do our job,” he adds.

That job is about to get a lot harder. Later than most states, New York is embarking on the road toward moving its entire Medicaid population into managed care–a process that for most welfare recipients means being placed in an HMO. Tucked into this plan is a more dangerous experiment, a program to move the state’s poorest and most severely disturbed children into managed care.

The outlines of the new plan are still very vague, but according to advocates and providers who have been working with Albany to come up with a new system, it’s clear that the final product will be geared towards containing costs in an HMO-style capitation system and keeping each child’s use of mental health services to a bare minimum.

And City Limits has learned that the new system will be designed to accommodate only 25,000 children statewide–even though a coalition of mental health providers estimates the real number of emotionally disturbed children in New York State eligible for Medicaid-funded services to be about 120,000.

“It is a social experiment the likes of which we have never seen before,” says DePetris, who has been part of the nonprofit sector’s planning process. “I hope this works.”

The terms of the experiment will be dictated by Albany, but its most volatile ingredients will be mixed together by local mental health organizations. This small, tightly knit community of neighborhood-based providers has the expertise to design a new system and will, quite possibly, form a network to administer the entire end result.
But there’s a catch. Resources will shrink–and that means some local groups will need to change or face extinction.

“We already have a system that is dealing with only a fraction of the kids that need to be served,” says Suri Duitch, a staff associate with the Citizens’ Committee for Children, which has organized an alliance of child mental health care providers to shape managed care. “If kids aren’t using services, it’s because they can’t get those services. We’re talking about imposing managed care on a system that’s never even been managed before.”


The motive behind reform is the explosion in medical costs for the poor, an Old Faithful of red ink that has nearly drowned the state’s budget throughout the 1990s. This year, Medicaid spending in New York State will reach $20.8 billion in combined federal, state and city funding. In recent legislative sessions, Albany lawmakers didn’t agree on much, but they did agree to pass a series of bills mandating that all Medicaid recipients–including mentally ill kids–be moved into managed care.

Under the current and much-maligned “fee-for-service” system, health care providers bill local Medicaid administrators for each procedure they perform on covered patients. Traditionally, government pays predetermined rates for each service, whether it’s a tooth extraction, open-heart surgery or a weekly therapy session. Because more serious procedures are reimbursed at a higher rate, professionals have a financial incentive to do work that brings in the most money, even if it’s not medically necessary. In mental health care, the most expensive services are intensive day treatment programs or residential placements, which can cost between $50,000 and $100,000 a year per patient.

The managed care model turns this system on its head. The state will now identify a set dollar amount for the sum total of all services and it will be up to whoever runs a specific managed care plan to determine how those resources can best be allocated. For child mental health, current Medicaid spending statewide is about $350 million annually, according to Duitch. The total pool of money under the managed care system is unlikely to be any larger, and could, in fact, be smaller.

To explain how all this works, DePetris–a clinical psychologist who also happens to have worked at Dun & Bradstreet–sits at his conference table and draws a sweeping bell curve, representing the distribution of people on Medicaid. The bulge in the middle–the main body of the bell–represents the bulk of people who will use services from time to time, typically once or twice a year. At the left margin of the chart–the tapering edge of the bell–is a small number of people who never go to the doctor at all. On the other end are chronic patients, the relatively small number of people who, in managed care parlance, “over-use” services. DePetris circles this end of the chart.

“This is the key, ” he says. “These are where your emotionally disturbed kids fit. They need a lot more attention and money than other people need.”

The 2.1 million members in New York’s Medicaid system include an extraordinary number of high-end users, many of them chronically ill, elderly or severely disabled. Because of this, abandoning the fee-for-service model poses problems: If the state kept all of the high-end users in the large pool of Medicaid managed care recipients, DePetris explains, they would siphon off too many resources from more moderate users and force providers into making across-the-board cutbacks that would affect everyone in the system.

As New York and other states began planning their new managed care systems, they started pressuring the Clinton administration to pull these high-use clients out of the mainstream Medicaid population. The idea was to put them in their own separate system, so each client could be given a greater per capita treatment package than standard Medicaid clients. The result has been a flurry of 16 waivers granted by the U.S. Department of Health and Human Services, creating so-called “Special Needs Plans,” or SNPs–pronounced, appropriately enough, “snips.”

In July 1997, New York won federal approval to create three such SNPs: one for AIDS/HIV patients, another for adults with mental illness, and a third for severely emotionally disturbed children. The HIV and adult mental health SNPs are currently being bid out to managed care companies or networks of neighborhood-based providers; they are expected to go on-line within a year or so. But the child mental health SNP will take at least one more year to design because of its complexity–and the fear of Marta Nelson-type horror stories if kids fall between the cracks. Even then, the new system will begin slowly, in the form of several moderately sized demonstration projects.

Yet if launching the SNPs has helped solve a problem for the general Medicaid population, it has created one massive migraine for local providers.


Trying to make sense of a system whose complexities are becoming increasingly brain-scrambling even to professionals, DePetris clicks his pen again and dutifully scrawls another bell curve on his memo pad. This time the chart represents the 24,000 or so Medicaid children in the mental health care SNP.

For the majority of emotionally disturbed kids, he points once again to that big bulge in the center. These are children who have underlying problems and need moderate but consistent treatment, kids with attention deficit disorders, for instance, or behavioral problems associated with troubled home lives. On the low-use end of the scale are kids who experience sporadic episodes of mental illness and have less stressful family situations. At the high-use end of the bell–and he circles this part again–are the most sick children, Marta Nelson and Camelia Flye’s son among them.

Within the boundaries of this little circle lies a huge and potentially fragmenting problem. Even inside the relatively safe harbor of a SNP, costs will still be capped. And that ultimately means less money for everybody.

Because the vast majority of mental health services are provided by nonprofits–a result of the 30-year-old movement to deinstitutionalize the mentally ill–local organizations will ultimately have to make the toughest decisions. Will a significant percentage of the money continue to go to costly therapeutic services for the sickest kids? Or will it be redistributed more cost-efficiently, spread around to a greater number of less-expensive social service programs?

It is a dilemma that threatens to split the tightly-woven network of neighborhood-based providers into two camps: those who want to preserve intensive services and those who want to adopt a more broad-based approach.

“There’s not enough money in this system as it is,” says John Shaw, director of mental health at St. Dominic’s House, a foster care provider that often deals with emotionally disturbed children. “Now people start cannibalizing each other for the few dollars that are left under managed care.”

Last year, the state legislature acknowledged the dilemma and agreed to temporarily “carve out” several services from managed care, in effect allowing the old fee-for-service to continue for the most intensive treatment programs. Among those services are state psychiatric centers, long-term residences and community-residence programs.

But those exemptions expire in 1999. And there’s a growing recognition among providers that all but the most intensive services need to be thrown back into the managed care pot if the system is to have any chance of succeeding. For one thing, they say, managed care is an effective system only if the pool of participants is large and inclusive. And for the system to be flexible enough to promote efficiency as well as quality care, every service needs to be available to clients without bureaucratic barriers erected to protect special services.


The details of the managed care debate may seem esoteric and technical to outsiders. But they produce a visceral reaction from Ethel Wyner, who watches over 155 severely ill children at the Lifeline Center in Douglaston, Queens. The state’s inclusion of day treatment programs in the SNP has placed Lifeline in jeopardy of a radical downsizing–or of elimination.
Wyner, who runs her center with a firm if manicured hand, is waging a campaign to have day treatment centers carved out so that she can protect her fragile funding sources from the managed care scalpel. It’s a stand that is controversial with her fellow mental health providers.

For Wyner, the fight is precisely as personal as her 40-year commitment to an organization
she founded with a group of Queens parents in 1959. That year, her group opened the first school catering to the needs of “attic children”–kids with severe problems who couldn’t function in normal school environments and were kept home by their parents. “The options back then were to put them in the state hospitals,” says Wyner, sitting in an office filled with donated furniture and a view of the largely abandoned Creedmoor Psychiatric Center, a massive brickpile that warehoused an astounding 6,000 patients 40 years ago. “Or you could take them to private clinics, which even back in the fifties cost something like $20,000 a year.”

Over the years, Wyner and her staff have created a model facility for educating and treating children from ages 4 through 16 whose mental illness places them on the severe end of the spectrum of emotional disturbance. The students, who are referred by the Board of Education, are among the toughest cases to deal with–toddlers who are so deeply withdrawn they hardly notice when a visitor enters their classroom, hyperactive or aggressive grade-schoolers who frayed the nerves of their special ed teachers, psychotic teens who would be prone to hurting themselves if they didn’t stick to a strict regimen of counseling and medication.

To deal with this range of problems, Lifeline has created an environment that is a hybrid of clinic and school. The vest-pocket classrooms, with their 3-to-1 student-to-staff ratios, sit next to even cozier counselors’ offices. Packed into Lifeline’s two small buildings are social workers, nurses, occupational therapists, psychologists and psychotherapists, along with a complement of New York City public school teachers. There is a doctor on staff who adjusts children’s medication levels, balancing their need to be alert with the teachers’ need to maintain control.

But the essence of what makes the place different from standard special education settings is found in two tiny aquamarine rooms that could easily be mistaken for a couple of cleaned-out custodial closets. The children walking by take no notice, but the cells strike a discordant note, compared to the vistas of children skipping between classes and disassembling their tuna fish sandwiches.

“These are the quiet rooms,” Wyner says. “They are used for when children throw fits and really act out.” Wyner’s assistant chimes in: “Did you notice the doors? They’re the heavy-duty type. We have to replace them from time to time, and I get them from a company that makes them for jails.”

To Wyner, the rooms aren’t an embarrassment, they are the reason she’s in business. “These are not children who would be appropriately placed in other settings,” she says.

In meetings with state health officials recently, Wyner has been told day treatment will be targeted for significant cuts because the price of Lifeline’s services are too expensive to be supported under the managed care model. Currently, Lifeline’s students remain in the school for as long as six years, until they are capable of returning to regular special ed classes.

But now the pressure is on to shorten those stays significantly–and use day treatment as a short-term tool to stabilize children, then ship them back out to clinical and educational environments that are less intensive and less costly.

On this point, executives who run larger, more diversified organizations–and who can tolerate the loss of their smaller day treatment programs–believe Wyner will have to get in line or get out of the way.

“There are organizations out there that need to change what they are doing in order to survive. It’s a philosophically different way of seeing the process,” DePetris explains. “Day treatment is the most costly of services,” he adds. “You may have 900 kids taking up 30 percent of the funding. I don’t think we’ve done enough to be innovative.”

Wyner’s anger flares when she hears this kind of talk. “These people are running industrial companies in a sense,” she responds. “It’s not based on what a child’s needs are. It’s based on where the bucks are coming from.”

She has powerful allies on either side of the aisle in Albany–including Republican State Senator Frank Padavan, who has helped Wyner by winning passage of legislation protecting day treatment facilities in the past. “I consider this a fight for my life,” she says. “This is what keeps me from retiring to play with my grandchildren and bake brownies.”


But the priorities articulated by DePetris and others aren’t merely an industrial budget-cutting strategy. They represent a philosophical shift towards integrating intense social work with traditional mental health strategies.

“You can’t extricate a kid’s mental health problems from everything else in their lives,” says Julia Stewart of the Puerto Rican Family Institute, which runs a broad slate of mental health programs. “Clinic-based, intensive therapy is nice, but what does it do to help a child whose family is falling apart? What you need to do is go into that home and help stabilize things. You can’t do it by sitting in your office and waiting for the client to come in. We as mental health practitioners have lost our commitment to communities.”

“The whole concept of a clinic with a one-time-a-week visit doesn’t work,” agrees Jacob Barak, vice-president in charge of managed care for the Jewish Board of Family and Children’s Services, the largest children’s mental health provider in the city. “I’m convinced that moving to managed care is the best way to change that system.”

The centerpiece of the reform these practitioners promote is an intensive case management system based on the principle that social workers should be given caseloads small enough to allow them to spend their time in the homes of clients, helping families get the services they need to stabilize and care for their children.

This “case-coordination” model, its proponents argue, can largely replace more intensive therapies, including state hospitals, residential care settings, some day treatment programs and eventually even the clinic-based approaches currently used by most mental health providers.

There are several case-coordination demonstration projects underway right now in the city (see “House Calls”). All have one aspect in common: Participating families have access to help 24 hours a day, seven days a week–whenever and wherever they need it.

The demonstration projects are an exception, but as a general rule, Medicaid doesn’t reimburse these kinds of services. “It’s crazy, but mental health providers are not funded to bring people care in their homes,” says John Shaw of St. Dominic’s House. “I can have a psychiatrist go to the home to see what’s going on, but I can’t get the money to send someone into that home to keep things together.” And that’s a basic element of intensive case management.

But under the managed care system now being devised, that will probably change. The most compelling argument to the state’s bean-counters for promoting case-coordination is the fact that it is often cheaper than standard outpatient therapy–as little as $550 per month.

Thus, many community-based groups who buy into the model have agreed to accept the basic realities of managed care, including tighter caps on spending and the end of most carve-outs protecting special services.

“The idea that managed care’s not going to happen is nutty,” Stewart says. “The [current] system’s unintegrated and, perhaps, grossly misdirected. Every aspect of the system needs to change. And we might as well be the ones to do it.”


If there is division among providers about the need for change, there is broad agreement on one fundamental issue: The providers themselves should be the ones who devise the new system.

In a report issued last October, the Children’s Mental Health Alliance, a broad-based group of 45 mental health care organizations from around the city, threw down the gauntlet. They outlined a series of principles managed care must reflect: adequate funding, good coordination between agencies, a respect for the expertise and effectiveness of local groups, and a comprehensive statewide assessment to find out how many kids really need to be included in the SNPs.

“I think we are going to need to create a balanced system that preserves all of what we do well,” says the Citizens’ Committee’s Suri Duitch, the report’s author. “We can’t forget that this has the potential to be a great opportunity to figure out how to serve kids better.”

The coalition members also agreed that one of the options for running managed care within the SNP should be a network of the local groups themselves.

But the main message the group wants to send to the state is that the system should not be designed by outsiders–most especially not by a for-profit HMO.

“The SNP must not be able to deny access to services or create obstacles to service through administrative and bureaucratic burdens on the child and family,” Duitch says. “We do not advocate adopting [an HMO as the care provider] as a whole. The system would have strong incentives to underserve children.”

Jacob Barak puts it even more simply: “You just can’t have a big HMO come in here and run everyone into the ground.”

No one knows that better than Joan Papageorgiou, a Queens parent who was a member of a private HMO through her employer’s health plan. She had to fight the HMO to obtain appropriate services for her 17-year-old son, who had been diagnosed with an attention deficit disorder. Because her son needed more help than what was offered by the HMO’s basic plan, she found herself on the wrong end of the managed care bureaucracy, having to fight for every additional expense her son incurred. “You’re allowed only 20 visits. By the time you’re done with the intake and the evaluations, you’ve used up like half your visits,” she recalls.

Not only did she have to go through a bureaucratic hassle but she had a hard time finding a provider near her house who would accept her insurance.

“It’s a little scary that they now want to put the whole system on managed care,” says Papageorgio, who now works as a parent advocate for Steinway Services. “Because there have been times when I would have killed to have my kid on Medicaid.”

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