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Mental Health Services

Medicaid is the single largest payer for mental health services in the United States. Although federal law does not contain explicit provisions concerning the exact types of mental health services that can be provided, all State Medicaid programs provide some mental health services to enrollees. There are several vehicles that States can use to support effective community mental health services in Medicaid, including State plan services, managed care, waivers, and the Early Period Screening, Diagnostic and Testing (ESPTD) benefit.

Medicaid reimbursement is available for mental and behavioral health services covered under various service categories: physician's services, inpatient and outpatient hospital services, licensed practitioner's services, clinics, rehabilitative services, inpatient psychiatric hospital services for individuals under age 21, as well as, prescription drugs. Examples of Services in these categories include: Counseling, therapy, medication management, psychiatrist's services, licensed clinical social work services, peer supports, and substance abuse treatment.  

Individuals may receive services in their homes, other residences, in schools, or medical institutions, if necessary. While states have the option to cover some of these services, EPSDT requires that children receive all medically necessary services, including mental health services. In addition to State Plan services, states may offer mental health benefits through .

Mental Health Parity and Addiction Equity Act

Medicaid Alternative Benefit Packages (ABPs) are required to comport with the Mental Health Parity and Addiction Equity Act (MHPAEA). The enactment of the Affordable Care Act extended MHPAEA application in Medicaid to all coverage of MH/SUD services offered in Alternative Benefit Plans (ABPs), in addition to its application to the Children Health Insurance Plan (CHIP) program, and state Medicaid plan services offered through managed care organizations. Under MHPAEA, treatment limitations and financial requirements applicable to mental health/substance use disorder (MH/SUD) benefits cannot be more restrictive than those applicable to medical/surgical benefits. 

  1. The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act: Federal Mental Health Parity Law of 2008
  2. Interim final regulations for implementing the federal mental health parity law of 2008
  3. U.S. Department of Labor Fact Sheet on MHPAEA
  4. U.S. Department of Labor Federal Parity Law Frequently Asked Questions (FAQs)