As the nation’s largest insurer, Medicaid plays a significant role in the delivery of mental health services and a growing role in the delivery of substance use disorder services. While Medicaid is federally controlled, states have broad discretion in designing their Medicaid programs. Many are using Section 1115 waivers, which authorize states to implement new approaches in Medicaid that are outside of the usual federal requirements as a vehicle to improve behavioral health. As of February 2017, 12 states have sought waivers that provide enhanced mental health and/or substance use disorder, or SUD, services or integrate physical and behavioral health services. Some demonstration programs worth watching include the following:

Arizona: In 2015, Arizona launched a mandatory integrated health plan for individuals with serious mental illnesses, combining physical and behavioral health benefits for 50,000 Medicaid beneficiaries. Regional behavioral health organizations coordinate care under the integrated program, including physical healthcare. According to early results, the state has seen a decline in emergency department visits and hospital readmissions, as well as a slight increase in the use of physical health services.

California: A major initiative of California’s Medicaid demonstration is the Whole Person Care pilot, which aims to better coordinate physical health, behavioral health, and social services through a patient-centered approach with the goals of improving overall health and well-being. The program targets high-risk, high-utilizing Medicaid beneficiaries, including those with serious mental illness and SUDs. The pilot defines several performance metrics to monitor progress, and two key metrics measure healthcare utilization for behavioral health: follow-up after hospitalization for mental illness and initiation and engagement of alcohol and other drug dependence treatment.

Massachusetts: Massachusetts’ new waiver to amend and extend its Section 1115 demonstration has five major goals, two of which target behavioral health. The waiver, which takes effect in July 2017, authorizes substantial funding to invest in the integration of physical and behavioral health and to expand access to recovery-focused SUD services. Accountable care organizations and community-based organizations that become behavioral health community partners are eligible to receive $1.8 billion over five years to improve integration of care and outcomes for beneficiaries with serious mental illness. To address the state’s opioid epidemic, the waiver also expands the state’s capacity for residential rehabilitation services programs for SUDs, funds care coordination and recovery services for SUDs, expands Medicaid benefits to include the full continuum of medically necessary 24-hour community-based rehabilitation services, and establishes a standardized American Society of Addiction Medicine assessment across all SUD providers.

Virginia: Virginia developed a comprehensive Medicaid Addiction and Recovery Treatment Services Benefit in response to a growing substance use epidemic in the state, and it obtained a 1115 waiver, which took effect in April 2017, to implement the benefit. The benefit expands coverage of inpatient and residential detox substance abuse treatment, increases reimbursement rates for existing substance abuse treatment services by 50 percent to 400 percent, and adds coverage of peer support for individuals with SUD or mental health conditions. The benefit also carves community-based addiction treatment services into managed care to promote integration of physical health, mental health, and addiction treatment services. Prior to the waiver, Medicaid beneficiaries in the state had access to only four residential treatment programs for substance abuse. Today, those with SUDs who rely on Medicaid have access to 71 treatment facilities, as the waiver removes a federal bed-limit restriction on funding.

With Congress working to repeal and replace the ACA, the role of Section 1115 waivers under the GOP is unclear. For the short term, however, states will continue to leverage their flexibility under Section 1115 of the Social Security Act to implement innovative Medicaid programs. States that have been hit hard by the opioid epidemic are the most likely to pursue waivers that emphasize behavioral health, increasing access to mental health and SUD services.

Nicole Witowski is an Associate Analyst at DRG and a behavioral health expert. Follow her on Twitter at @NicoleWitDRG.

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