Medicaid mental health spending uneven even within single state

Would you expect a New York Medicaid client to be able to access mental health service equally well, regardless of where he or she lived within the state?

"In a single state, you should have the same provision and coverage of services," says Teresa A. Coughlin, a senior fellow at the Urban Institute's Health Policy Center in Washington, DC. However, there was a significant amount of geographical variation in spending on mental health services even within an individual state, according to the February 2011 report, "New York Medicaid Beneficiaries with Mental Health and Substance Abuse Conditions."1

"That was somewhat surprising to us," says Ms. Coughlin, the report's lead author. "It raises some important issues for states about what is driving those differences." The study didn't address whether outcomes were poorer in areas that were spending considerably less, she notes.

The report also showed that total mean Medicaid spending for beneficiaries with mental health conditions ($28,451) was nearly twice that of their counterparts without mental health conditions ($15,964).

This population is severely and persistently mentally ill, with both mental and physical health problems, and isn't in managed care, Ms. Coughlin notes, and so is very high-cost. "It certainly looks to be a population that could benefit by having coordination of services," she says.

States are increasingly targeting this population to improve efficiency of care, adds Ms. Coughlin, and need to look at both mental health and physical health simultaneously. Often, Medicaid clients with mental health conditions go to a mental health provider, but won't go to a doctor for their physical health problems, she notes.

"The providers are sometimes in different networks, and are not always talking to each other," she says. "Our data suggests that having primary care physicians in the same location as behavioral health providers could be a useful strategy."

Level of coverage uncertain

"There are plenty of challenges, and certainly some opportunities" for Medicaid mental health services currently, according to Ronald S. Honberg, JD, national director for policy and legal affairs at the National Alliance on Mental Illness in Arlington, VA.

The challenges involve the current economic and continuing state budget crisis uncertainty, he says, with efforts being made both at the state and federal level to control entitlement spending.

"Medicaid is the most important funding source for public mental health services. It tends to cover services that traditional insurance doesn't cover," says Mr. Honberg, such as rehabilitative services that individuals need which may not fall within a narrow medical definition.

"The problem is that virtually all mental health benefits for adults under Medicaid are optional. The states can cover them, but they don't have to," says Mr. Honberg.

Mr. Honberg says that he expects that the newly eligible population in 2014 will include significant numbers of adults with serious mental illnesses. One concern, he adds, is that it doesn't appear states will be required to provide the same level of coverage for the expanded populations.

"If states adopt a very narrow medical model private insurance model, it might mean that the kind of services that might be covered in traditional Medicaid programs won't be covered," says Mr. Honberg.

"Myopic" budgetary thinking

Over the years, many states have expanded their mental health coverage with case management or home and community-based service options, he notes. States may cut back on these expansions due to economic pressures, says Mr. Honberg, compounded by the expiration of the 18-month increased Federal Medical Assistance Percentages in June 2011.

"We really worry about what that is going to mean with vital services for people with mental health illness," says Mr. Honberg. "We haven't seen a lot of states cut back so far, but it's pretty early." A lot will depend on the direction that state economies go, but the effectiveness of advocacy efforts will also play a role, says Mr. Honberg, especially by demonstrating that mental health benefits save money in the long run by reducing unnecessary hospitalizations.

"It's well-documented that when you don't provide people with interventions when they most need those services, it just leads to longer term costs down the road," says Mr. Honberg.

The problem is that those costs may not be in the Medicaid program, notes Mr. Honberg, and each agency has their own bottom line to consider. A state may save money in its mental health budget, but end up spending more in its correctional budget, he says, and similarly, the effect of increased ER visits may not immediately be seen in the state mental health budget.

"Basically, you are robbing Peter to pay Paul," says Mr. Honberg. "During times of economic desperation, we tend to become more myopic in our budgetary thinking."

The goal is to get key policymakers to understand that all of these costs are part of the same "budget umbrella," says Mr. Honberg. "A sound fiscal strategy ought to look not only at the immediate impact on the mental health budget, but also the impact on law enforcement, correctional and emergency services."


1. Coughlin TA, Shang B. New York Medicaid beneficiaries with mental health and substance abuse conditions. 2011: Medicaid Institute at United Hospital Fund, New York.

Contact Ms. Coughlin at (202) 261-5639 or and Mr. Honberg at (703) 516-7972 or