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A Checkup on Medicaid and Behavioral Health Services

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It has been a long time coming, but on March 30, 2016, the Centers for Medicare & Medicaid Services (“CMS”) published a final rule (“the Rule”) that should strengthen access to mental health and substance use services for those with Medicaid or Children’s Health Insurance Program (“CHIP”) coverage.
This new rule is the latest step in a series of laws and regulations that extend back twenty years in an attempt to provide more treatment options for mental and behavioral health. The slow build towards behavioral health coverage signals a profound shift in how policymakers consider substance abuse, but the state of behavioral health is still somewhat of a mixed bag for those who need treatment. There are signs that the patient is improving, however.

Access to Behavioral Health Care

Two days before the publication of the Rule, the U.S. Department of Health and Human Services published a report that evaluated access to behavioral health services in light of state acceptance of the Medicaid expansion under the Affordable Care Act.
The report found, for instance, that a substantial share – 28% – of the low income uninsured individuals in states that have not accepted the Medicaid expansion required mental health or substance use disorder treatment recently.
Research on the effects of Medicaid coverage also suggests that acceptance by the remaining holdout states would decrease the number of individuals experiencing symptoms of depression, for example, by 371,000, according to the report.
The implication of the report is that coverage under Medicaid is equivalent to access to behavioral health services, but this is only one piece of the puzzle.

The New Rule

The Rule helps to shore up another front – just because a state accepted the Medicaid expansion did not (until the Rule) mean that behavioral health received parity in coverage. The Rule now applies the provisions of the Mental Health Parity and Addiction Equity Act of 2008 to any state managed-care plans that contract with Medicaid and CHIP. Currently, states could provide services through delivery mechanisms other than Medicaid managed care organizations. These systems could place limits on the type and frequency of services available in behavioral health, and medical necessity rules often stymied coverage as well.

Under the Rule, all beneficiaries who receive behavioral health services through managed care organizations, alternative benefit plans or CHIP must receive mental health and substance use disorder benefits on parity with other medical benefits, regardless of the mechanism for delivery of services. Additionally, these plans must disclose information on any mental health or substance use disorder benefits when requested, as well any criteria for determinations of medical necessity. States must also disclose the reason for a denial of payment for behavioral health services.

The Rule effectively brings these programs in line with parity requirements on private insurers, but it notably does not apply to traditional Medicaid programs.

State Level Action

Now that the expansion of Medicaid has taken root and new rules require parity for coverage of mental health and substance use disorders, the next part of the equation is state administration. To understand the state of behavioral health in Kentucky, it is probably best to address one of the more enduring, challenging and proliferating problems confronting behavioral health – epidemic substance use disorder.

As a response to the opioid addiction epidemic in the state, Kentucky accepted the Medicaid expansion early and moved to implement expanded behavioral health services, creating a multitude of new behavioral health provider types that are eligible for reimbursement under the state’s Medicaid plans. The most significant are the Behavioral Health Services Organization (“BHSO”) and the Behavioral Health Multi-Specialty Group (“MSG”). Licensed under 902 KAR 20:430, BHSOs may provide a comprehensive variety of services from mental health and substance disorder providers.

While the acceptance of the Medicaid expansion has ostensibly led to expanded access to behavioral health treatment among the uninsured population, it is unclear how the current administration’s attempts to transform the Medicaid system in Kentucky will affect the provision of these services. Still, there has been no indication that behavioral health benefits will be curtailed.

In 2015, in response to the rising heroin epidemic in Kentucky, the General Assembly passed Senate Bill 192, the “heroin bill,” which provides an array of tools at the state level to increase access to care for those with substance use disorders. Among those tools is statutory language providing that “The Department for Medicaid Services shall provide a substance use disorder benefit consistent with federal laws and regulations which shall include a broad array of treatment options for those with heroin and other substance use disorders.”
The law also exempts several behavioral health providers from Certificate of Need requirements, easing a key regulatory burden.

Where are the Providers?

To recap, the Medicaid expansion brought expanded coverage, the new CMS Final Rule will ostensibly bring parity of benefits, and Kentucky laws and regulations place a premium on access to behavioral health services. The final piece in the puzzle remains the shortage of providers.

Kentucky, for instance, is listed by the HHS Health Resources and Services Administration as having 100 health professional shortage areas in the field of mental health, and a map depicting these areas covers almost the entire state, save for counties directly adjacent to relatively large municipal areas. If low-income Kentuckians who need behavioral health services now have coverage, their next challenge is finding a provider of that care.

Medicaid’s low reimbursement rates may be a factor in the shortage, with behavioral health providers loath to accept these rates in such highly regulated areas of care such as medication-assisted therapies for substance use disorder treatment. With the increased law enforcement component, providers may not see the reimbursement rates as justification for the regulatory burdens and potential consequences of noncompliance.


Efforts to expand access to behavioral health services have been substantive in recent years, but there is still a gulf that divides those who need mental health and substance use disorder treatment and provision of the services themselves. Policymakers have been steadily working on easing the demand for these crucial services, but they are still short on incentives to increase the supply.

1 42 C.F.R. 438, 440, 456, and 457 (2016).

2 U.S. Dept. of Health and Human Services, Office of the Asst. Sec. for Planning and Evaluation, Benefits of Medicaid Expansion for Behavioral Health (2016).

3 Ibid. at 4.

4 Ibid. at 7.

5 KRS 205.6311

Christopher J. Shaughnessy is an attorney at McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Shaughnessy concentrates his practice area in health care law and is located in the firm’s Lexington office. He can be reached at or at (859) 231-8780.

This article is intended as a summary of state law enforcement activities and does not constitute legal advice.