The Michigan Department of Health and Human Services (MDHHS) rescinded its Request for Proposal (RFP) to restructure administration of Medicaid specialty behavioral health services following a January 8, 2026 court ruling. The court found that the proposed restructuring conflicted with state law governing funding for community mental health service programs (CMHSPs) and gave MDHHS three options: issue a notice of deficiency, amend the RFP, or rescind it.
The RFP, originally released August 5, 2025, represented approximately $4.9 billion in Medicaid specialty behavioral health spending. Responses were due September 29, 2025, and MDHHS had anticipated contract implementation beginning October 1, 2026. This marked the first competitive procurement for Michigan’s prepaid inpatient health plan (PIHP) contracts.
Under the proposal, the state’s current 10 behavioral health regions would have been consolidated into three regions — Northern, Central, and Metro — and public-private entities would have been eligible to administer regional PIHP contracts.
Approximately 300,000 individuals with serious mental illness, substance use disorders, and developmental disabilities receive specialty behavioral health services through the 10 regional PIHP administrators, which operate in partnership with contracted CMHSPs embedded in local communities. The PIHP system has been in place since the late 1990s (when it started with 18 PIHPs), and the current 10-PIHP system has been in place since 2013.
Following the rescission, MDHHS stated it is evaluating its options to ensure the system aligns with state and federal requirements while improving access to care, strengthening consumer choice, and reducing duplicative administrative costs. The Department said it looks forward to continued engagement with community partners as it evaluates next steps.
Two lawsuits challenged the restructuring. One was filed by Region 10 PIHP, Southwest Michigan Behavioral Health, Mid-State Behavioral Health Network, St. Clair County CMHA, Integrated Services of Kalamazoo, and Saginaw County CMHA. The second was filed by Centra Wellness Network, Northeast Michigan Community Mental Health Authority, Wellvance, Gogebic Community Mental Health Authority, North Country Community Mental Health Authority, and Manistee County. The court consolidated the cases and issued a single ruling.
The cancelation was reported in Michigan Cancels Bidding For Billions In Medicaid Mental Health Services After Court Ruling by Crain’s Detroit on February 3, 2026 (accessed February 20, 2026).
The legal ruling was reported in Judge: Michigan Bid To Rebuild Mental Health Care Has ‘Significant Conflicts’ by Detroit Legal News on January 14, 2026 (accessed February 20, 2026).
For more information, contact: Lynn Sutfin, Public Information Officer, Michigan Department of Health and Human Services, 517-241-2122; Email: SutfinL1@michigan.gov; Website: https://www.michigan.gov/mdhhs/
March 2026 00US26EUA0007