State Policies Expanding Access to Behavioral Health Care in Medicaid

Appendix A

Background on Behavioral Health Services in Medicaid

Medicaid plays a key role in covering and financing care for people with behavioral health needs. Behavioral health conditions include mental illnesses, such as anxiety disorders, major depression, bipolar disorder, schizophrenia, and post-traumatic stress disorder, as well as SUD, such as opioid use disorder. In 2020, Medicaid covered 23% of nonelderly adults with mental illness, 26% of nonelderly adults with SMI, and 22% of nonelderly adults with SUD. In comparison, Medicaid covered 18% of the general nonelderly adult population. In total, approximately 10.3 million nonelderly adults with Medicaid had a mental illness and over 4.0 million had an SUD in 2020. More than 2.5 million of these adults had both a mental illness and an SUD.1 Medicaid expenditures for enrollees with behavioral health conditions are relatively high due to this group’s substantial health needs.

Most beneficiaries with behavioral health conditions qualify for Medicaid because of their low incomes. Alternatively, people with behavioral health needs, especially those with SMI, may also qualify for Medicaid based on having a disability. Generally, individuals who have a mental illness that makes them eligible for Supplemental Security Income (SSI), the federal cash assistance program for low-income aged, blind, or disabled individuals, are automatically eligible for Medicaid; states may also offer other disability-related Medicaid eligibility pathways to people whose incomes exceed the SSI limit. Finally, though most children with behavioral health diagnoses are eligible through the poverty pathway, some qualify through the child welfare assistance pathway because of their involvement with the foster care system, and others may qualify through a disability-related pathway.

Behavioral health services are not a specifically defined category of Medicaid benefits. Some behavioral health benefits fall under mandatory Medicaid benefit categories: for example, psychiatrist services may be covered under the “physician services” category. States also cover behavioral health benefits through optional benefit categories that they choose to include in their Medicaid programs, such as case management services, prescription drugs, and rehabilitative services. Medicaid MCOs and alternative benefit plans (ABPs)2 that cover behavioral health services must do so at parity, i.e. to the same extent and on the same terms that they cover physical health services. States are encouraged, but not required, to apply the parity rules to their traditional Medicaid FFS programs as well. Behavioral health services for children are particularly comprehensive due to Medicaid’s EPSDT benefit for children, which includes all medically necessary Medicaid services permitted under federal law and is required for children from birth to age 21. Children diagnosed with behavioral health conditions receive any service available under federal Medicaid law necessary to correct or ameliorate the condition, even if the state does not cover the service for adults.

Historically, Medicaid paid for services, including those for behavioral health conditions, on a FFS basis, through which providers are paid for each billable service they deliver. During the past several decades, Medicaid payment has shifted to managed care arrangements, through which providers are paid for some or all services at a prepaid rate. Behavioral health services are increasingly provided through managed care arrangements, but some states “carve out” behavioral health services from their MCO contracts.

Appendix B

Issue Brief

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