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Behavioral Health Parity and Medicaid

Behavioral health parity refers to requirements for health insurers to cover mental health and substance use disorder services on terms that are equal to those offered for medical and surgical services.  This issue brief explains how behavioral health parity applies in the Medicaid program, including the major provisions of the Centers for Medicare and Medicaid Services’ (CMS) April 10, 2015 proposed regulations, and identifies key policy issues at the intersection of behavioral health parity and Medicaid.

Key Provisions of Proposed Medicaid Parity Rules

When Parity Applies in Medicaid

Federal law requires Medicaid managed care organizations (MCOs) to provide behavioral health benefits in parity with medical/surgical benefits.  CMS’s proposed rule applies the parity requirement to all Medicaid services provided to MCO enrollees, regardless of whether services are furnished to them through MCOs, prepaid inpatient health plans (PIHPs), prepaid ambulatory health plans (PAHPs), or fee-for-service (FFS).  The rule is designed to ensure parity across all services for MCO enrollees, even if states choose to deliver certain benefits through separate delivery systems, such as managed care behavioral health carve-outs.  The parity rules also apply to Medicaid services contained in Alternative Benefit Plans (ABPs), whether those services are delivered through managed care or FFS.  In addition, states are encouraged, although not required, to apply the parity rules to FFS Medicaid state plan benefits that are provided to beneficiaries who are not MCO enrollees and that are not part of an ABP.

Definition and Classification of Benefits for Parity Analysis

CMS proposes that the state Medicaid agency define medical/surgical and behavioral health benefits for purposes of analyzing parity.  Long-term care benefits are excluded from these definitions for purposes of analyzing parity.  After benefits are defined, all services are assigned to one of four classifications, using the same standards for medical/surgical and behavioral health benefits:  inpatient, outpatient, emergency care, and prescription drugs.  Outpatient services may be sub-classified into office visits and other outpatient services, and prescription drugs may be divided into tiers.  Managed care entities (MCEs, which include MCOs, PIHPs, and PAHPs) providing services to MCO enrollees classify the benefits that each MCE provides, and the state Medicaid agency classifies FFS benefits.

Scope of Benefits Required by Parity

Parity rules require that if behavioral health benefits are provided in any classification, they must be provided in every classification in which medical/surgical benefits are provided.

Financial Requirements and Quantitative Treatment Limits

Financial requirements and treatment limits on behavioral health benefits in any classification cannot be more restrictive than the predominant financial requirement or treatment limit of that type that applies to substantially all medical/surgical benefits in the same classification.  The key terms in this rule are further defined in the proposed regulations for purposes of the parity analysis.  Cumulative financial requirements for behavioral health benefits in a classification that accumulate separately from any such requirement for medical/surgical benefits in the same classification are prohibited.

Non-Quantitative Treatment Limits (NQTLs)

A NQTL on behavioral health benefits in any classification may not be imposed unless, under policies and procedures as written and in operation, any processes, strategies, evidentiary standards or other factors used are comparable to and applied no more stringently than those used to apply the NQTL to medical/surgical benefits in that classification.  The proposed rules include a non-exhaustive list of NQTLs.

Aggregate Lifetime and Annual Dollar Limits

Parity rules for aggregate lifetime and annual dollar limits apply only to MCEs that provide services to MCO enrollees; these rules do not apply to ABPs in which all benefits are provided FFS.  The proposed rules set out the analysis for determining parity between behavioral health and medical/surgical services for purposes of these limits.

Information Disclosure Requirements

The criteria for behavioral health medical necessity determinations and the reason for any denial of reimbursement or payment for behavioral health services must be made available to Medicaid beneficiaries, potential MCO enrollees, and providers.

Looking Ahead

Public comments on the proposed regulations are due on June 9, 2015, and CMS proposes that the final regulations take effect 18 months after publication of the final regulations.  The proposed parity rules identify a number of policy issues to be resolved, including:

  • CMS’s proposal that, in the case of split delivery systems, state Medicaid agencies review all services provided to MCO enrollees across all delivery systems to ensure parity;
  • whether states will choose to apply parity rules to Medicaid services that are provided to beneficiaries who are not MCO enrollees and that are not part of an ABP, so that all Medicaid services will be provided in parity to all beneficiaries, regardless of benefit package or delivery system;
  • the specific standards that will be used to classify benefits for purposes of parity determinations and how different MCEs and the state Medicaid agency will coordinate those standards in states with split delivery systems;
  • the extent to which the final parity rules will result in changes in benefits offered and any effects on the determination of managed care payment rates; and
  • the extent to which the final parity rules will result in changes to any financial requirements or treatment limitations applied to behavioral health benefits.
Issue Brief

The Henry J. Kaiser Family Foundation Headquarters: 2400 Sand Hill Road, Menlo Park, CA 94025 | Phone 650-854-9400
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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in Menlo Park, California.