Medicaid Financing for Services in Supportive Housing for Chronically Homeless People: Current Practices and Opportunities. 3.1. Who is Eligible for Mental Health Services Covered Under Medicaid?


Each state establishes its own specific criteria for eligibility for community mental health services. Generally, in order for services to be covered there must be “a need for mental health services for a mental disorder or suspected mental disorder,” and the person must meet the first of the following three criteria, plus either one or both of the other two:

  1. Diagnosis: a qualifying mental or emotional disorder verified by a diagnosis contained in the DSM-IV or ICD-9-CM. (Each state is likely to publish a list of qualifying diagnoses.) Level of disability and duration of illness also help determine the presence or absence of SMI.

  2. Functioning: serious or significant impairment in one or more areas of life functioning, such as basic life and survival skills, self-care, employment or occupational functioning, functioning in school, family or social relationships, use of appropriate supportive community services, etc.

  3. Treatment History: prior hospitalization(s) or treatment at some point during the person’s lifetime for a diagnosed mental illness in outpatient, residential, or other mental health program.

States may impose additional medical necessity criteria for service initiation, continuing service, exclusion, and service termination. States may also establish systems of “utilization management, including prior authorization (“gatekeeping”) or utilization review for some types of community mental health services--particularly services that are costly or intensive. States set up these criteria and systems with the goal of controlling costs and ensuring that limited resources are used effectively. Eligibility and medical necessity criteria established by states may focus almost exclusively on a diagnosis and symptoms related to SMI, or they may incorporate functional criteria that reflect complexity and impairment related to co-occurring substance abuse disorders, health conditions, and homelessness. The text box gives an example of how Illinois attempts to target the use of expensive Community Support Team (CST) services.

Illinois Eligibility Criteria for Community Support Team (CST) Services

Among other criteria, the person “has tried and failed to benefit from a less intensive service modality or has been considered and found inappropriate for less intensive services at this time,” AND exhibits three or more of the following:

  • Multiple and frequent psychiatric inpatient hospital readmissions, including long-term hospitalization.
  • Excessive use of crisis/emergency services with failed linkages.
  • Chronic homelessness.
  • Repeated arrests and incarcerations.
  • History of inadequate follow-through, related to risk factors, with elements of a treatment plan, including lack of follow-through in taking medications, following a crisis plan, or achieving stable housing.
  • High use of detoxification services--two or more episodes per year.
  • Medication-resistance due to intolerable side effects, or the illness interferes with consistent self-management of medications.
  • Ongoing inappropriate public behavior within the last three months including public intoxication, indecency, disturbing the peace, delinquent behavior.
  • Self-harm or threats of harm to others within the last three months.
  • Evidence of significant complications such as cognitive impairment, behavioral problems, or medical problems.

The list includes other criteria less relevant to most homeless persons.

Also taken into consideration in determining whether a person meets medical necessity criteria for CST are: chronic homelessness, repeat arrests and incarceration for offenses related to mental illness, and multiple service needs.

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