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Addressing the Challenges to Utilizing Medicaid Managed Care for Behavioral Health Issues

Administrative burden, workforce shortages, and incentivizing participation are the biggest barriers reported by states


September 7, 2023 –  Managed Care is being utilized the majority of states to address behavioral health issues. This is good. It’s progress from many states using a less consumer-friendly and costlier fee-for-service model to address behavioral health, but the transition doesn’t come without challenges. 

In our past blog in the Behavioral Health Series, we looked at how states are taking a managed care approach to behavioral health. In this blog, we are going to take a deep dive into the challenges states face when incorporating behavioral health into Medicaid managed care models and how they can and are addressing those obstacles. 

A Quick Recap: Why Behavioral Health Matters & What Are States Doing About It?

There is a strong correlation between behavioral health and physical health. In fact, numerous studies indicate that poor mental health can lead to deteriorating physical health and vice versa. This has caused the realization that behavioral health needs to be taken seriously, and that physical health and behavioral health cannot be treated in silos. 

In our previous Behavioral Health Series blog, we looked into how states have been using Medicaid managed care to address behavioral health issues. Through managed care, states can provide integrated care and more streamlined access to necessary behavioral health services. It makes sense that states use this approach, because Medicaid is the single largest payer in the United States for behavioral health services. However, the approach does have some complexities. Each state has a unique demographic and legislative landscape, and thus needs to tailor Medicaid managed care programs to suit their individual needs. 

So, what are the issues that states are facing when utilizing Medicaid managed care to address behavioral health? Let’s dive in!

Challenge #1: Reducing Administrative Burden

The utilization of Medicaid managed care to provide behavioral health services has been lauded for its patient-centered approach, but it hasn’t been without its administrative challenges. The layering of various systems—each with its own requirements and processes—can lead to increased bureaucracy. For providers, this can mean navigating prior authorization, lengthy forms or documentation requirements, unclear processes, lengthy credentialling process, and unclear reasons for denials or auditing.

Studies have shown that administrative burdens can impede provider insurance acceptance. It also slows down access to care that consumers need in a timely matter when there are lengthy or confusing prior authorization processes to navigate. Those working with multiple MCOs see varying requirements and processes due to lack of standardization at the state level. The issue with this is that smaller behavioral health organizations and providers often cannot handle the challenge of navigating the various processes and thus limit Medicaid acceptance. When there is already a shortage of behavioral health providers, this is an issue that cannot be overlooked.  

The good news is that many states are recognizing this impediment and are working to implement strategies to simplify processes. There are many ways to do this, including seeking provider input on the administrative process, streamlining documentation, and standardization across the board for enrollment, credentialling, and prior authorizations. These changes likely will not come from the MCOs, states will need to step in and use their authority to implement changes that can reduce administrative burdens to make the process of delivering and receiving behavioral health services as seamless as possible.

Challenge #2: Addressing Workforce Shortage Issues

Another significant obstacle to realizing the full potential of Medicaid managed care in behavioral health is the prevailing workforce shortage in the sector. According to one report, in 2021, less than 50% of people with a mental illness were able to access timely care. This number was even lower for those with substance use disorders or those living in rural or economically stressed cities, which is unacceptable. 

The need is staggering. In fact, the Kaiser Family Foundation survey found that the shortage of behavioral health professionals is a predominant concern for nearly every state. To make matters worse, because Medicaid typically has lower fees, the already constrained behavioral health providers are more likely to turn away these consumers. To realize the true potential of Medicaid managed care for addressing behavioral health, states need to address the behavioral health workforce shortage so consumers can get the care they need and deserve in a timely manner.

Why the shortage? A combination of factors is at play. The demand for behavioral health services has surged, especially in the wake of COVID-19. But other issues include providers leaving due to burnout, the cost of schooling and licensing to become a provider, the amount of time spent completing administrative tasks instead of with patients, and the lack of providers living in rural and lower-economic areas. 

So, what can states do about this? There are many different options and Medicaid managed care states are applying a wide range of solutions. Some are reimbursing new provider types or those without a supervising provider to expand the workforce. Others are harnessing the power of telehealth and loosening in-person requirements to provide more access to timely care. The good thing is that Medicaid agencies have the flexibility to decide what providers and services are eligible for reimbursement as well as where those services are provided. This flexibility allows for Medicaid managed care states to get creative and adopt new strategies to increase the behavioral health workforce and ensure that consumers get the care that they need in the setting that works best for them. 

Challenge #3: Incentivizing Participation

Money talks, especially in healthcare. One of the significant deterrents for providers considering participation in Medicaid is the concern over delayed payments. According to analysis, prompt and adequate compensation is a pivotal factor in ensuring that providers remain engaged in the system. Delayed reimbursements not only strain the finances of healthcare providers but can also demotivate them from prioritizing or accepting Medicaid patients. This, in turn, reduces the accessibility and quality of care for beneficiaries.

To address this, there are different solutions. Many states are choosing to implement prompt payment policies that incentivize provider participation by requiring that payments are made within 30 days. North Carolina is an example of this, and even takes it a step further by requiring MCOs to notify providers within 18 calendar days of any additional information needed to process a claim.

Other states are looking to use financial incentives to encourage provider participation in integrated physical and behavioral health systems. In many states, psychiatrists are paid the same as primary care physicians for delivering behavioral health services. This often discourages them from taking Medicaid patients, which limits access to care. That is why some states, albeit a small number, are requiring MCOs to implement FFS rates for psychiatrists and mental health professionals to incentivize them to take Medicaid patients. This is not the best solution, but it does plug the gap in the short term.

Perhaps the best option states are using are pay increases for providers. Oregon is a great example of this, increasing payments by 30% for providers who get 50% of their revenue from Medicaid. This encourages providers to accept Medicaid patients, as they can get a 30% rate increase by having the majority of their patients under Medicaid plans. 

 As you can see, there are many strategies that come into play when trying to incentivize behavioral health providers to become engaged with Medicaid managed care patients. The underlying message is – if we want providers to invest their time and expertise in Medicaid beneficiaries, the system needs to reciprocate with timely, fair compensation.

Challenge #4: Coordination at the State Level

Another issue is that some states have their Medicaid and behavioral health authorities under different agencies. This can create added layers of bureaucracy that puts a strain on the entire system. A better approach is to operate Medicaid and behavioral health under a single agency as this can allow for better communication, collaboration, and data-sharing

Some states are recognizing this, such as Iowa who reported that they have plans in FY 2023 to merge their Department of Human Services and Department of Public Health to form a single agency that houses behavioral health and Medicaid divisions. Idaho is taking a similar approach, though they are merging their behavioral health and Medicaid divisions into a joint division under a single agency, with plans to manage both Medicaid and non-Medicaid behavioral health services through a managed care organization (MCO). 

While this integration is a great way to address administrative issues, not all states are on board. 17 states still have their Medicaid and behavioral health authorities in different agencies, which can hinder collaboration data sharing. 

Advocates Perspective

Addressing the complexities of behavioral health through Medicaid managed care is a challenge that states are confronting head-on. While the integration offers a more holistic, integrated and coordinated approach to patient care, there are some hurdles to overcome. From administrative intricacies to workforce shortages, there are obstacles that states must adopt innovative strategies and learn from each other’s successes and shortcomings to address. We can see that states are taking different approaches to addressing these issues, but what remains the most important is delivering quality, comprehensive, and timely behavioral health services to those who need them most. Active stakeholder engagement, including the consumers who receive services and the local providers who offer them, is the best way to advance the initiative and ensure that consumers get the quality care they need. 


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About the Author

Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).

His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.

mandy sahhar

About the Co-Author

Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.