Using Medicaid to Support Working Age Adults with Serious Mental Illnesses in the Community: A Handbook. Finding the Fit


Finding the fit between the mental health services that a state wishes to offer and Medicaid coverage requirements can be challenging. Mental health practices and treatment approaches frequently (and appropriately) are described in terms that may not readily lend themselves to translation into Medicaid coverage. Important concepts such as recovery involve supports that are individualized, consumer-driven, and geared toward helping individuals live successfully in the community. Promoting a recovery-oriented system of services and supports through Medicaid involves selecting services that promote independence and focus on assisting individuals to take progressively greater control over their lives (e.g., skill building, illness management and peer services). Service planning approaches that focus on the individual and stress rehabilitation are also ways of promoting recovery.

Translating mental health practices, approaches, and concepts into covered Medicaid services requires states to fashion benefits in the context of the Medicaid coverage framework depicted on the next page. This framework requires a state to answer in concrete, practical operational terms several questions about the services it intends to offer. Mental health approaches and practices must be described in coverage terms in order to secure Medicaid funding.

As noted in Chapter 4, there is no pre-established, federally defined array of Medicaid community mental health benefits that a state must include in its coverage. Federal policy defines the terms under which federal payments flow to the states and a state must conform to those terms. But, it is up to each state to decide how to meld Medicaid funding into its mental health system, taking into account coverage requirements and limitations on what Medicaid will pay for. Fundamentally, a state's overarching goals and objectives for supporting its citizens with serious mental illnesses should serve as the basis for deciding which Medicaid services it will offer. In this context, Medicaid is properly regarded as a tool for advancing important state policy aims by enabling a state to leverage and amplify its own financial resources.

Stressing Recovery in Service Planning
Maine stresses rehabilitation and recovery in its coverage of community support services for persons with severe and disabling mental illnesses. Maine's rules concerning the rehabilitation/service plan provide that1

"An individualized rehabilitation/service plan is developed for and with a person receiving community support services by a designated community supports provider.… An individualized rehabilitation/service plan

  1. Identifies the person's wants and needs in the context of the present and future,
  2. Recognizes both the strengths and needs of the person,
  3. Includes rehabilitation-oriented targets for initiating positive change(s) for the person, and
  4. Coordinates other plans that are developed to achieve targets."

"Finding the fit" starts with a state's identifying the service capabilities it wants to establish, and sorting out which services can be underwritten in whole or in part by Medicaid. At the same time, a state must recognize that there may be service capacities or components that have to be underwritten with other non-Medicaid funds, or secured through other public programs. It is also important to recognize that coverage design is multi-dimensional and necessitates decisions about provider qualifications, services eligibility criteria, medical necessity criteria, and other dimensions. Coverage should be approached holistically, identifying how each component will work in tandem with others. For example, securing coverage of Assertive Community Treatment (ACT) under the rehabilitative services option has proven to be relatively straightforward for states. However, ACT is but one component of an overall system of supports, many of which are needed to effectively support individuals when they no longer require intensive ACT services.

Because Medicaid has distinctive requirements, an important consideration for states is to avoid the creation of a two-tiered service system where Medicaid-funded services differ markedly from the services that a state offers to non-Medicaid eligible individuals who are members of the same priority population. Medicaid eligibility limitations can result in a portion of the priority population of individuals with serious mental illnesses not qualifying for Medicaid even though they may have relatively low incomes. A more seamless system for serving individuals in the priority population is achieved when a state's Medicaid coverages are derived from and mesh with a state's design of its service system. To the extent possible, this result is advanced when Medicaid and state funding streams employ:

  • Common service definitions, recognizing that some components of a service may not qualify for Medicaid funding;
  • The same provider qualifications;
  • Equivalent payment rates;
  • A similar approach to utilization management;
  • Common quality management and improvement practices; and,
  • Shared data systems.

The latitude afforded states in designing Medicaid coverages and managing Medicaid services means that the use of Medicaid financing need not lead to a bifurcated approach to serving individuals with serious mental illness.

Medicaid Coverage Framework
  • What services (defined concretely) will be provided?
  • Which of these services (or service components) qualify for Medicaid payment?
  • Under which coverage category do these services fall?
  • What are the coverage category's requirements and limits?
  • To whom will these services be provided? (Services eligibility criteria)
  • Who will provide these services? (Provider qualifications)
  • Under what circumstances are the services provided? (Medical necessity criteria)
  • Who authorizes the services? (Practitioner? Other mental health professional? Treatment team? State?)
  • Where will the services be provided? (Location)
  • How much will be provided? (Amount, duration and scope)
  • How will payments be made for the services? (Payment rates and billing units)

In deciding whether to cover services through Medicaid, many factors need to be weighed beyond the technical feasibility of securing Medicaid. One factor, for example, can be the "readiness" of service providers to furnish a service, especially for an entirely new service, or imposing a higher standard of care on an existing service. In some respects, securing Medicaid funding for evidence-based practices is less a problem of the technical feasibility of covering them (since most fall well within Medicaid coverage boundaries) than a question of the capabilities of providers to meet the high standards that such practices envision. In addition, the initiation of a new service may need to be accompanied by technical assistance and training. Obviously, another practical but, nonetheless, critical factor is whether the state has the necessary matching dollars to underwrite the costs of adding a new service.

In addition, there is no doubt that the management of Medicaid services is demanding in its own right, especially when a state plans to employ prior authorization and active utilization review/management to ensure the appropriateness and effectiveness of services. Hence, managerial readiness also is a factor that may need to be weighed in deciding when to cover a service under Medicaid.

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