Insurance and Reimbursement

The largest obstacle to mental and physical health integration is insurance reimbursement and financing. Most public and private insurance systems have separate processes for reimbursement, making it difficult for clinicians to coordinate whole-person care for their patients.1Mandros, “Do States Still Have Medicaid Behavioral Health Carve-Outs?,” OPEN MINDS (blog), accessed June 19, 2019, In other cases, some patients cannot receive reimbursement for mental health care without a mental health-related diagnosis.2Tynan, “Integrating Health and Mental Health Services in the US.”

Insurers pay primary care clinicians 20% more than mental health and addiction clinicians for the same services, resulting in grossly inadequate networks of mental health and addiction providers.


Unable to find the in-network clinicians they need, people are forced to turn to out-of-network providers nearly six times more often for mental health and addiction care than for other types of medical care.3Steve Melek, FSA, MAAA Stoddard Davenport, MPH T.J. Gray, FSA, MAAA, “Addiction and mental health vs. physical health: Widening disparities in network use and provider reimbursement.” Milliman Research Report, November 19, 2019. In fact, these inequities have grown – not decreased – over the past few years.

6 times

Insurers spent only 1% of their health care reimbursement on substance use disorders care, and only 4% on mental health disorder care in 2017.4Stephen Melek, Daniel Perlman, and Stoddard Davenport, “Addiction and Mental Health vs. Physical Health: Analyzing Disparities in Network Use and Provider Reimbursement Rates.” Milliman Research Report, December 2017.

While reimbursement does not determine everything about mental health care, how services are paid for does influence everything from workforce supply to how care is delivered.
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Solutions for Better Mental Health

Coverage Parity

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) — a landmark law that prohibits discrimination in mental health and addiction coverage — is, unfortunately, not well implemented or enforced by states or the federal government. As a result, coverage of mental health services continues to be inadequate, driving up out-of-pocket costs for consumers and denying many the treatment they need. To end coverage disparities, state and federal regulators must aggressively enforce MHPAEA in a proactive way, rather than placing the burden on individuals and families experiencing a crisis.

View Action Items5“Navigating the New Frontier of Mental Health and Addiction: A Guide for the 115th Congress”; “Recommendations of Congressman Patrick J. Kennedy to the President’s Commission on Combating Drug Addiction and the Opioid Crisis.”

  • Congress should amend the Employee Retirement Income Security Act (ERISA) to authorize the Department of Labor to impose fines on plans and insurers offering health insurance coverage in connection with a group health plan that violate the parity law.
  • The federal government should provide adequate funding for federal agencies to conduct random audits of health plans on an annual basis and establish a system for reviewing all consumer complaints for potential violations of MHPAEA. The federal government should assist states with funding to enforce MHPAEA.
  • The federal government should require health plans to conduct detailed parity compliance analyses on their non-quantitative treatment limitations (NQTLs) and require that these analyses to be made public.
  • The federal government should require each plan to conduct a MHPAEA “risk assessment” – similar to the existing HIPAA privacy and security risk assessment — that details the plan’s capabilities to document, assess, and comply with all aspects of MHPAEA, thus encouraging the plan to develop a robust parity compliance program.
  • The federal government should direct the Center for Consumer Information and Insurance Oversight to exercise its authority under the parity law to regulate plans in states that fail to “substantially enforce” the law by relying solely on consumer complaints to check for parity compliance.642 U.S.C § 300gg-22(a)(2)
  • The federal government should require that insurers cover the full range of intermediate mental health and addiction services, including residential care, intensive outpatient, and partial hospitalization services.
  • The federal government should create a definition of medical necessity and require that all medically necessary mental health and addiction care be covered by insurers.
  • The federal government should apply parity provisions to Medicare, Medicaid fee-for-service, and TRICARE, which currently are not subject to MHPAEA.
  • The federal government should direct CMS and state Medicaid agencies to prioritize ongoing enforcement of MHPAEA for Medicaid managed care plans.
  • The federal government should create health plan performance standards for mental health and addiction coverage that, if not met would trigger parity investigations.
  • The federal government should give the Department of Labor – like many state insurance departments – the power to charge health plans for the cost of parity investigations to help the Department increase the number of investigators (currently 1 per every roughly 10,000 plans).
  • The federal government should require insurers to publicly report metrics comparing mental health and addiction coverage to medical/surgical coverage such as denial rates, utilization review practices, appeals, out-of-network usage, and reimbursement.
  • The federal government should make it easier for patients wrongly denied care to protect their rights by ensuring all patients have the ability to access federal courts and to receive damages for harm caused by wrongful denials, and prohibiting insurance “discretionary clauses” where insurers are given the right to interpret the meanings of their own policies.
  • The federal government should require the U.S. Department of Labor and other applicable federal agencies to enforce existing health insurance appeals protections to consumers, including disclosing the clinical review criteria used in a medical necessity denial and ensuring that health plans comply with statutory/regulatory timeframes for processing each appeal.
  • The federal government should require the U.S. Department of Labor and other applicable federal agencies to publish an annual report card, which rates health plan parity compliance similar to CMS’s Five-Star Quality Rating System.
  • The federal government should promote parity compliance tools that help automate the compliance process such as 1) the CMS Compliance Toolkit Applying MH/SUD Parity Requirements to Medicaid and CHIP (Jan 2017); 2) The “Six-Step” Parity Compliance Guide for Non-Quantitative Treatment Limitation (NQTL) Requirements published by The Kennedy Forum, American Psychiatric Association, and The Parity Implementation Coalition (September 2017); 3) the U.S. DOL Self-Compliance Tool for MHPAEA (May 2018); and ClearHealth Quality Institute ParityManager™ Compliance Tool (July 2019).

Statutory Limits on Care

Modern restrictions have helped protect those who were often subjected to dehumanizing conditions in state-run mental hospitals. Over time, however, limited availability of access to inpatient care has prompted revisiting these longtime restrictions.

View Action Items

  • Congress should require MACPAC to assess the recent expansions of Institutions for Mental Diseases (IMD) access through Medicaid and recommend to Congress additional changes that expand access to both residential and community-based services and promote integration, and quality of mental health and substance use disorder services.
  • The federal government should eliminate Medicare’s 190-day lifetime limit on inpatient psychiatric hospital care.7“Recovery Support Services for Medicaid Beneficiaries with a Substance Use Disorder,” MACPAC, July 2019 ”

Recovery Services

Over the past several decades, communities responded to the lack of effective mental health care by building a range of innovative supports and services to better promote recovery – many of which were created by individuals in recovery. While some Medicaid plans reimburse for these services, Medicare and few commercial insurers do not. As a result, only a small proportion of people get access to recovery services as part of their care.

View Action Items

  • The federal government should revise current Medicare fee-for-service payment policies to incorporate recovery services where appropriate.
  • The federal government should task CMS to initiate multi-payer collaboratives, which engage both public and private insurers, to develop efficient reimbursement policies to spur the uptake of recovery services in communities.

Preventive Care

Federal law increasingly supports effective preventive care in mental health, but these policies haven’t translated well for young children. Although the American Academy of Pediatrics recommends screening for depression in young children and developing psychosocial needs, coverage for interventions for these needs is inconsistent and unclear – often failing to ensure that children get access to care.

View Action Items

  • Federal preventive care regulations should support coverage of services that promote healthy mental development and prevent the later onset of mental health conditions, rather than solely focusing on screening for early indications of a developing condition. In doing so, the regulations should include services provided to parents and primary caregivers of children, with or without the child present – appreciating the evidence for supporting parents in promoting mental health.

Tailored Policies for Unique Needs

To be effective, mental health solutions need to address individuals' range of identities based on race, ethnicity, language, gender, or gender identity, sexual orientation, disability, veteran's status, or life circumstances. We recommend meaningful policies to combat a harmful legacy of one-size-fits-all solutions.

Explore our recommended policies for focus populations

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