Mental health advocates came out in opposition to a proposal from the Michigan Department of Health and Human Services they argue would privatize management of public mental health services during a rally at the state capitol. Sept. 17, 2025 | Photo by Kyle Davidson/Michigan Advance
Michigan’s Department of Health and Human Services was given the green light by the Court of Claims to go forward with a competitive bidding process for the state’s prepaid inpatient mental health plan providers and a plan to reduce the number of regions for those plans, which ensure access to mental health services for Medicaid beneficiaries, from 10 to three.
In a set of two opinions issued on Tuesday, Court of Claims Judge Christopher Yates denied a preliminary injunction to a set of those service managers and providers that would have prevented the department from continuing the bidding process for the selection of those prepaid inpatient health plans in three regions across the state.
The decision “seems unwise given the history of those existing PIHPs with the program and their strong connections with CMHSPs and providers,” Yates wrote in the first order issued. “But assessing the wisdom of such changes is a matter of policy reserved for the MDHHS, not the courts.”
That order stated that the department’s plan to restructure the prepaid unpaid health plan to a competitive system is “not only compatible with state law, but also regarded as the preferred nationwide model.”
The change had previously drawn heavy criticism from mental health advocates, who said that it would lead to increased privatization of the system.
Former U.S. Sen. Debbie Stabenow (D-Lansing), said in September, “We’re talking about a proposal that would replace a managed care system that is transparent and cost about 2% for a private managed system that is not transparent and will cost more like 15% tell me about the math on that one, resulting in $500 million in additional [overhead] costs.”
Former U.S. Sen. Debbie Stabenow (D-Lansing) Sept. 17, 2025 | Photo by Kyle Davidson/Michigan Advance
And in August, CEO of the Community Mental Health Association of Michigan Robert Sheehan wrote in a press release praising the lawsuit, saying it “illegally eliminates the public managed care organization … entrusted with managing the care for some of the most vulnerable and resilient members of our communities.”
The Community Mental Health Association declined to comment on the recent court orders.
The providers filing suit claimed that, because the new structure would require each provider to cover an entire region of the three — and these existing providers had previously only covered one region of 10 — it would essentially force them out of business.
Yates did not dispute this, but wrote, “That concern has nothing to do with the legality of the competitive procurement system.”
“In other words, although plaintiffs describe their own treatment as impermissible under Michigan law, they cannot establish that the shift from a single-source procurement system to a competitive procurement system impermissibly alters the structure of PIHPs and CMHSPs,” he added.
Yates did not rule on one element of the case in his orders — the legality of the language in the Request for Proposal put forth by the Michigan Department of Technology, Management, and Budget to collect bids for these these contracts.
In his second order denying the injunction, Yates wrote, “Only when declaratory relief has failed should the courts even begin to consider additional forms of relief in these situations.”
Because of the remaining question about the Request for Proposal language, Yates said that that the question of injunctive relief could be reconsidered once a decision had been made on that final portion of the case.
