Medicaid’s Role in Financing Behavioral Health Services for Low-Income Individuals

Behavioral health conditions affect a substantial number of people in the U.S. and are especially common among people with low incomes.^1,2,3 Behavioral health conditions include mental illnesses, such as anxiety disorders, major depression, bipolar disorder, schizophrenia, and post-traumatic stress disorder, as well as substance use disorders (SUD), such as opioid addiction. These conditions range in severity, with some being more disabling than others.  People with behavioral health needs may require a range of services, from outpatient counseling or prescription drugs to inpatient treatment.

As a major source of insurance coverage for low-income Americans, and as the only source of funding for some specialized behavioral health services, Medicaid plays a key role in covering and financing behavioral health care. In 2015, Medicaid covered 21% of adults with mental illness, 26% of adults with serious mental illness (SMI), and 17% of adults with SUD.⁴ In comparison, Medicaid covered 14% of the general adult population.⁵ In total, approximately 9.1 million adults with Medicaid had a mental illness and over 3 million had an SUD in 2015. Nearly 1.8 million of these adults had both a mental illness and an SUD.^6,7

Current Medicaid program financing guarantees federal financial support to states with no pre-set limit. The Better Care Reconciliation Act (BCRA), as proposed by the Senate, restructures federal Medicaid financing by changing it to a per capita cap or block grant, which would likely impact states’ ability to provide coverage for and access to behavioral health services for people who need them. This issue brief provides an overview of Medicaid’s role for people with behavioral health needs, including eligibility, benefits, service delivery, access to care, spending, and the potential implications of the BCRA.