Obama Finalizes New Mental Health Rules for Medicaid

The new rules could create an influx of patients with mental health and substance abuse issues in states that are already struggling to meet the current demand.
by | March 31, 2016
President Barack Obama announced the final rules at the National Rx Drug Abuse and Heroin Summit in Atlanta. (AP/Jacquelyn Martin)

This week, Obama unveiled a set of executive actions to help states combat the opioid epidemic. But perhaps most notably in his speech for health officials was the announcement of final rules for Medicaid's mental health and substance abuse coverage.

The rules aim to strenghten the existing 2008 Mental Health Parity and Addiction Equity Act, which requires health insurers to offer the same level of benefits for mental health and substance abuse that they do for physical health. States, however, haven't been enforcing that law, partially because of the federal government's lack of explanation of how to do so.

Under the new rules, states will have to -- if requested -- disclose coverage information as well as reasons for rejecting claims related to mental health and substance abuse care. The Centers for Medicare and Medicaid Services proposed the new requirements last year. They've now been finalized by the U.S. Department of Health and Human Services.

When the rules were released last year, the National Association of Medicaid Directors said "Medicaid directors are hopeful that parity ultimately helps to level the playing field ... and ultimately reduce future reliance on Medicaid."

The 2008 law requires all Medicaid plans to cover some form of mental health services, but the offerings have widely been considered weak -- especially compared to private insurance plans. Obama emphasized the need to “let the insurance carriers know we are serious about this.”

The new rules could create an influx of new lower-income patients in mental health and substance abuse treatment that previously couldn’t afford it or didn’t have options they were comfortable with. Medicaid recipients are also much more likely to have behavorial health issues; 35 percent have some form of mental illness, compared with 18 percent of the general population.

Medicaid plans vary by state, so the new rules will probably be a bigger deal in some states than others, according to Anya Rader Wallack, Rhode Island’s Medicaid director.

“We have greater restrictions on substance abuse coverage in the state, so this is huge for us," she said. "It’s a great opportunity for us to expand care."

But actually expanding these offerings could be a heavy lift for many Medicaid directors who already struggle with a lack of financial and personnel resources.

Adding to the challenge is the national shortage of mental health workers. Ten states currently have less than 50 percent of the mental health workers they need. Only six states have more than 75 percent of their need met. The problem is even worse in rural areas, where the opioid epidemic has hit hardest. For every 10 miles you move from a city, it becomes 3 percent more difficult to find a behavioral health worker.

“Demand has increased, but supply of these practitioners simply has not,” said Haiden Huskamp, health policy expert at Harvard Medical School. “I think it’s very likely that we will have people with this new coverage ... but with nowhere to get [care].”

Some of Obama’s proposals hope to fill in those gaps. He released $94 million in new funding for community health centers and $1.4 million for education projects in rural areas focused on health and safety.

States have tried a variety of ways to address the mental health-care worker shortage. Some are experimenting with telehealth to reach people in more remote areas. Others are turning to more drastic measures, such as licensing religious leaders as mental health counselors.

There is also the issue of Medicaid spending, which is already at record highs in some states. Medicaid directors say it’s tough to say if parity implementation will cause Medicaid costs to rise even more, but some studies suggest costs may actually decline.

“There have been many studies done on private health plans that have implemented a parity, and they’ve all shown that spending either stayed the same or actually went down a bit in the long run,” said Harvard's Huskamp. “However, we know that a disproportionate amount of people impacted by heroin epidemic are on Medicaid. And since an expansion of services like this within Medicaid has simply never been done, I just don’t know how overall spending could be impacted.”

Medicaid officials may be scrambling in the next few months but are largely thrilled by the Obama administration’s helping hand.

“Even in Maryland, where we think of ourselves having a very robust health-care system, it’s going to be tough logistically to figure it all out,” said Shannon McMahon, Maryland’s deputy secretary for health care financing. "[But] anything that will help us improve access to care for our most vulnerable populations is wonderful."