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The Next Step to Transform California’s Behavioral Health System

Redesigning California's Behavioral Health System

Since 2019, California has embarked on massive investments and policy reforms to re-envision the mental health and substance use system, collectively known as the behavioral health system.

The State has invested more than $10 billion in resources to strengthen the continuum of community-based care options for Californians living with the most significant mental health and substance use needs. This proposal will complement and build on California’s other major behavioral health initiatives, including but not limited to the California Advancing and Innovating Medi-Cal (CalAIM) initiative, the California Behavioral Health Co​mmunity-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT) Demonstration proposal, the Children and Youth Behavioral Health Initiative (CYBHI)Medi-Cal Mobile Crisis and 988 expansion, and the Behavioral Health Continuum Infrastructure Program (BHCIP).

This proposal is intended to address remaining gaps in the continuum of care for the most vulnerable Californians, including new funding for housing, community-based residential care settings and the behavioral health workforce, refining the Mental Health Services Act to stretch limited dollars and meet the needs of those with the most severe mental health and/or debilitating substance use conditions, and strengthen county accountability and statewide access to behavioral health services. 

 Three Key Elements of Governor Newsom’s Proposal:

  • Authorize a general obligation bond to fund 10,000 new residential treatment and housing settings:
    • Community behavioral health residential settings
    • Permanent supportive housing for people experiencing or at risk of homelessness who have behavioral health conditions
    • Housing for veterans experiencing or at risk of homelessness who have behavioral health conditions
  • Modernize the Mental Health Services Act – Behavioral Health Service Act
  • Improve statewide accountability, transparency, and access to behavioral health services

We look forward to working with the legislature, system and implementation partners, and a broad set of stakeholders, including those impacted by behavioral health conditions, in considering these reforms.

Stakeholder questions and input can be sent to

Three Key Elements of Governor Newsom's Proposal


California’s shortage of at least 6,000 behavioral health beds contributes to the growing crisis of homelessness for those with mental illness and substance use disorders, and 55% of homeless veterans suffer from mental health issues and 70% are affected by substance use disorders.

AB 531 proposes a $.4.7 billion bond on the March 2024 ballot to:

  1. Build Behavioral Health Treatment and Residential Settings
    • Multi-Property Settings: Residential campus-style settings where multiple individuals can live, attend groups, recover, and further stabilize with a number of onsite supportive services available to meet individually tailored care plans.
    • Cottage Settings: Smaller residential settings, where many services will be available but that will also allow individuals to access existing services in the community.
  2. Build Permanent Supportive Housing
    • Permanent supportive housing for people experiencing or at risk of homelessness or those transitioning from residential settings who have behavioral health conditions. Estimated 1,800 units
    • Interim, transitional and permanent supportive housing options for veterans experiencing or at risk of homelessness who have behavioral health conditions. Estimated 1,800 units

Together, building this range of residential options is intended to ensure that individuals can transition to the level of care they need while remaining connected to their communities. 

  • The Mental Health Services Act (MHSA) has fundamentally changed how we deliver mental health care in California. For those with the most serious and persistent needs, the MHSA requires every county in the state to offer a core set of services through a program called Full-Service Partnerships (FSP) that helps keep some individuals off the streets, out of jails, and out of expensive hospital care. Today, over 80,000 Californians are enrolled in FSP programs.

    MHSA currently funds 30% of the state’s mental health system. But the MHSA has never undergone full scale reform. Since its initial passing in 2004, the Affordable Care Act and parity laws have significantly shifted the landscape, and this proposal is intended to modernize MHSA to account for expanded coverage under Medi-Cal.

    SB 326 proposes a comprehensive set of reforms, many of which will require March 2024 Ballot initiative. Key proposed reforms include:

    1. Rename the MHSA to the Behavioral Health Services Act (BHSA)
    2. Broaden the target population to include those with debilitating substance use disorders
    3. Focus on the most vulnerable and most at-risk
    4. Update Local Categorical Funding Buckets
      • 30% for Housing Interventionsfor individuals with serious mental illness/serious emotional disturbance and/or substance use disorder.
        • Counties will manage and direct the funds toward local priorities that meet designated purposes including but not limited to rental subsidies, operating subsidies, capital investments and nonfederal share for transitional rent.
      • 35% for Full Service Partnershipswhich should be optimized to leverage Medicaid as much as is allowable.
      • 30% for Behavioral Health Services and Supports(Behavioral Health Services and Supports (non FSP), Early Intervention, Capital Facilities and Technological Needs, Workforce Education and Training, innovative pilots, and prudent reserve).
        • A majority of the Behavioral Health Services and Supports allocation must be spent on Early Intervention.
      • 5% for Population-Based Preventionfor mental health and substance use disorder prevention programming.
      • Counties may pilot and test behavioral health models of care programs, community defined practices or promising practices for the programs specified in all the above. The goal is to build the evidence base for the effectiveness of new statewide strategies to implement an equitable behavioral system.
    5. Allocate 3% of total BHSA funds for state directed initiatives to expand the behavioral health workforce, including braiding $36 million with BH-CONNECT (1115 demonstration waiver) for workforce investments of $480 million annually and $2.4 billion total for the five-year demonstration period, pending federal approval.
    6. Redesign the county MHSA planning process through an Integrated Plan for Behavioral Health Services and Outcomes
    7. Increase transparency and accountability for behavioral health funding and outcomes

Increased Transparency and Accountability for BH Funding and Outcomes so Californians can know how their government programs are performing.  The information collected and assessed would be presented publicly for the purpose of demonstrating a commitment to transparency and accountability to  Californians on the value of these critical resources. 

Create the County Behavioral Health Outcomes, Accountability, and Transparency Report

Align county Behavioral Health (BH) plans (including MHPs and DMC-ODS) and Medi-Cal Managed Care Plan contract requirements when the same requirements exist across programs.

Over the next year, DMHC and DHCS will develop a plan for achieving parity between commercial and Medi-Cal mental health and substance use disorder benefits. This may include, but is not limited to, phasing in alignment of utilization management, benefit standardization, and covered services.

DMHC and DHCS will establish a stakeholder process that will include health plans, and other system partners to develop framework.

Additional Resources

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