Understanding The Medicaid Behavioral Health Carve-Out Map – Step One In Health Plan Contracting

Executive Briefing | by | April 18, 2017


Athena Mandros
Athena Mandros

Today Medicaid managed care is nearly ubiquitous – 38 state Medicaid programs are operating at least one health plan and 69% of Medicaid beneficiaries are enrolled in a comprehensive managed care plan (see The 2016 OPEN MINDS Medicaid Managed Care Update: A State-By-State Analysis). This, coupled with the move to value-based purchasing both at the state level and the individual health plan level, has made negotiating contracts with managed care plans even more important (see State-By-State Analysis Of Medicaid MCO Requirements For Provider Alternative Payment Reimbursement).

However, in those 38 states with managed care, knowing who to contract with to provide behavioral health services can be extremely difficult. First, executive teams need to understand how behavioral health services are financed – fee-for-service (FFS) through the state, through a primary behavioral health carve-out to a behavioral health care management organization, or through a Medicaid health plan.

In a primary behavioral health carve-out, the state Medicaid program delegates some or all behavioral health benefits to a separate management entity (private or governmental). If a state has a primary carve-out, figuring out who is managing the carve-out and for what specific behavioral health services, is usually the first step in contracting. Currently there are 24 states that manage at least a portion of behavioral health benefits under a primary carve-out arrangement. For a list of these states and the specific contracting arrangements see: State Medicaid Behavioral Health Carve-Outs: The OPEN MINDS 2017 Annual Update.

When the health plan is responsible for managing all or some of the behavioral health services, the health plan can either manage those benefits internally or contract with a specialty management program (the “secondary carve-out”). In short, the state Medicaid program contracts with a health plan to manage all benefits, including behavioral health, and the health plan then subcontracts the behavioral health benefit management to another organization. This usually is on a full-risk or a gainsharing arrangement with substantial upside and downside risk.

In 2017, there are 38 states with 312 health plans and more than 450 contracts to provide Medicaid managed care services. Of those 38 states, four (Maryland, New Jersey, Pennsylvania, and Utah) had primary behavioral health carve-outs where all services except those provided in a primary care setting were excluded from the health plan’s capitation rate. Due to the very limited nature of behavioral health services provided by the health plans, these states were not included in analysis.

In the remaining 34 states there are 286 health plans and more than 400 contracts. Of these health plans, 40% (or 113) had a secondary carve-out and 60% (or 173) managed behavioral health benefits within the health plan. Of those health plans with a secondary carve-out, 60% (or 68) had an external behavioral health vendor and 40% (or 45) had a subsidiary acting as the behavioral health vendor.

For strategy development purposes, this global view is helpful, but not enough. What most executive teams need is a tactical plan with health plan specific information in the states where they operate (or want to expand). Our latest OPEN MINDS market intelligence report, The Medicaid Health Plan Secondary Carve-Out Market Landscape: The OPEN MINDS 2017 Annual Update, provides the needed state-by-state guide describing behavioral health financing arrangements for each health plan. The report includes:

  • A state-by-state directory of the 173 Medicaid health plans who carve-out behavioral health benefits and the name of their behavioral health management organization
  • A strategic market landscape overview with key stats on the use of secondary carve-outs
  • The number of lives covered under secondary carve-outs
  • An overview of the different types of carve-outs, including primary carve-outs, secondary carve-outs, and secondary carve-out sub-types.

The report is available at no charge to OPEN MINDS Circle premium-level and elite-level subscribers – or can be purchase in our e-store. For more on contracting with managed care plans be sure to join us on June 6 and 7 at The OPEN MINDS Strategy and Innovation Institute for the session, Finding New Opportunities With Health Plans: How To Market To Managed Care with Steve Ramsland, Ed.D., Senior Associate, OPEN MINDS; Alyssa L. Rose, JD/MSW, Director, Network Strategy, Beacon Health Options; and Matthew O. Hurford, M.D., Chief Medical Officer, Community Care Behavioral Health Organization. And don’t forget to follow me on twitter @athena­_mandros for more new, analysis, and updates.


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