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Medicaid, the publicly funded insurance provider for low-income individuals, is the “single largest payer for mental health services” in the United States. In 2010, Medicaid financed 28% of all mental health services, spending over $31 billion, but accounted for only 17% of total health care outlays; these statistics demonstrate the program’s comparatively significant commitment to funding mental health treatments. Medicaid has expanded rapidly over the past quarter century: in 1986, the program accounted for only 16.1% of mental health service payments, or $7.5 billion. As Medicaid plays an increasingly significant role in financing mental health services, policymakers need to understand its payment mechanisms as well as eligibility requirements, and to address both the efficiencies and inefficiencies in the system.
Jointly administered by the state and federal governments, Medicaid consists of numerous programs and incentive schemes aimed at financing mental health treatments. Three of the most prominent programs include home- and community-based services (HCBS), health homes and targeted case management (TCM). An evaluation of these programs indicates that their efficiency, measured by both cost-effectiveness and patient outcomes, varies significantly across states depending on the specific implementation techniques adopted by state officials. This paper analyzes the methods that states employ to provide insurance through Medicaid, examining the factors that have enabled some administrators to see significant declines in costs and increases in quality of care. Specifically, states that prioritize mental health services, provide for early-onset disease intervention and focus on holistic community-based care see the most efficient outcomes in treatment of mental health patients. This paper also aims to assess mental health pilot programs and promote implementation rationales based on clinical outcomes and cost effectiveness criteria. The analysis in this paper offers evidence that, when applied to the framework of mental health management, programs designed to integrate holistic care models offer greater potential than fragmented care systems to offset long-term spending and improve health outcomes.