THE BEHAVIORAL HEALTH CRISIS:

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Cheat Sheet

The role of Medicaid in behavioral health care

5 Minute Read

Key Takeaways
  • Federal law requires Medicaid to cover certain outpatient and inpatient behavioral health services, while states can choose to include additional services such as case management, peer support, and residential care.
  • State Medicaid agencies deliver behavioral health care to beneficiaries via traditional fee-for-service plans, managed care arrangements, or a combination of the two.
  • Medicaid programs struggle to secure enough providers in their network, making it harder for patients to access the many services and benefits included in the relatively affordable coverage.
Other cheat sheets in this series

Check out the other cheat sheets in this series to better understand the roles of the primary stakeholders in the behavioral health care sector—including organizations that deliver and pay for care.

 

What is it?

Medicaid is a joint federal and state organized program that provides behavioral health care coverage to those who have low incomes or certain disabilities. It is the single largest payer for individuals with behavioral health conditions. As of 2020, nearly 29% of Medicaid insured individuals were diagnosed with a behavioral health condition, compared to 21% of privately insured and 20% of uninsured people.

Federal law requires Medicaid to cover certain behavioral health services, including specific outpatient and inpatient services. States can choose to include additional services such as case management, peer support, and residential care. With recent federal policy focus on expanding Medicaid coverage, many states have committed to initiatives designed to expanding tele-behavioral health coverage, community-based service access, substance use support, and crisis intervention programs. With several mandating requirements, controlled funding, and a complex patient population, Medicaid programs often generate innovative care models to be able to maximize care services for their patient population. However, the state-based structure of Medicaid leads to significant nationwide variation that can be confusing for health care partners to navigate.

 

How does it work?

Financial overview

State Medicaid agencies deliver behavioral health care to beneficiaries via traditional fee-for-service plans, managed care arrangements, or a combination of the two.

1. Traditional fee-for-service plans have states directly pay providers a fixed fee for each covered service. Low rates of reimbursement relative to the complexity of this patient population often disincentivizes providers to participate in Medicaid fee-for-service arrangements.

2. Managed care arrangements are state Medicaid agency partnerships with managed care organizations (MCOs), private health plans that take on Medicaid lines of business. This is the dominant way services are delivered today, with 69% of Medicaid beneficiaries enrolled in comprehensive managed care plans nationally.

The average Medicaid spend on an individual with a behavioral health diagnosis is almost four times higher than enrollees without behavioral health conditions ($13,303 vs. $3,564). As a result, Medicaid programs often prioritize behavioral health investments designed to reduce costs, which include including a wide range of services many other plans don't cover.

However, Medicaid programs struggle to secure enough providers in their network, making it harder for patients to access the many services and benefits included in the relatively affordable coverage. In addition to relatively low reimbursement rates, providers hesitate to accept Medicaid beneficiaries due to the administrative burden, complexity of patient population, and lack of capacity.

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