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CMS Funding Changes May Put Medicaid Recipients’ Mental Health at Risk

While the stigma around mental health is finally easing in popular culture, mental health care and insurance coverage for mental health and substance use disorder treatment is under attack from almost all directions.

Politico reported in January that the Centers for Medicare and Medicaid (CMS) is working toward introducing a plan that ushers block grants into Medicaid funding formulas. Block grants would impose more restrictive spending limits, curbing states’ abilities to provide health care for low-income residents. Fewer people could be insured and coverage benefits could shrink.

Under current allocation for Medicaid funding, the amount states receive is tied to the number of qualifying individuals within that state. By federal law, states cannot deny medical assistance to anyone who meets the criteria for Medicaid, and Medicaid must be provided to as many or as few enrollees who qualify. This entitlement protection has ensured that millions of Americans have access to health care – and mental health care – that they would not otherwise have. Medicaid expenditure, therefore, rises and falls with the number of Medicare enrollees and with the cost of health care and health care products. The federal contribution to each state’s Medicaid budget is, under this formula, “open ended” and adjusts according to states’ needs and Medicaid costs.

The introductions of block grants would dramatically shift the funding formula. Under block grants, the federal government would provide states a static sum, regardless of number of Medicaid enrollees, even in the case of rising state expenditures. If precedent serves as a guide, the block grants themselves will slash federal funding from the start. This all opens doors to waiting lists, eligibility restrictions, and cutbacks on benefits and reimbursement rates in order for states to adapt to decreased federal contribution. It will hurt low-income individuals, persons with disabilities, and children across America – especially those with mental health and substance use disorders.

In addition to the mandatory benefits that states must offer through Medicaid, individual states can choose to offer optional benefits, reimburse different providers, make use of innovative and effective delivery models, and set varying eligibility levels. When faced with a tighter budget, these optional benefits – mental health and substance use disorder treatment chief among them – will likely be amongst the first to go.

This will have a significant impact on access to care because Medicaid is the largest payer for mental health services and covers a significant portion of addiction treatment. In fact, Medicaid covers about a fifth of adults in America living with mental illness, a fourth of adults living with serious mental illness, and just under a fifth of adults living with substance use disorder. With the implementation of block grants, not only will fewer people who need it be provided coverage, less mental health and addiction coverage could be offered for those who remain on Medicaid.

This is yet another example of the administration’s inadequate response to our opioid crisis. It is contradictory to tout a resolution to the crisis as a top priority, while chipping away at the Patient Protection and Affordable Care Act (ACA) and attempting to slash funding that provides essential mental health and addiction treatment services.

In short, block funding for Medicaid would be a major overhaul in the way this program operates – and not for the better, as proponents would have everyone believe. As CMS releases more information, The Kennedy Forum will continue to track developments and to advocate on behalf of those with mental health and substance use disorders.

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“We stand on the doorstep to make momentous progress in advancing the cause of this new civil rights struggle started by the work of President Kennedy over 50 years ago.”
— Patrick J. Kennedy
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