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A Medicaid vertical carve-out is a financing model where some portion of the population receives services through separately managed care organizations that are at-risk for a continuum of physical and behavioral health services and pharmacy services. The populations served by this model are those with complex needs who can benefit from specialty plans that provide integrated care and increased care coordination. Examples of populations served by this model include foster care children, consumers with serious mental illness (SMI), children who are medically fragile, and consumers with HIV/AIDs.

In 2018, less than 1% of Medicaid beneficiaries were enrolled in vertical carve-out models of care across eight states; however, this represents an 18% increase in enrollment in Medicaid vertical carve-outs since 2016. The majority of enrollees were adults with SMI. Across these eight states, 25 insurers manage these health plans, with Centene operating the most plans across five states.

In recent years, health plans have pushed for integration of care coordination particularly for the “super-utilizer” group of high-cost consumers with multiple chronic conditions and complex social support needs. These consumers represent only 5% of the Medicaid population but are responsible for close to 50% of Medicaid spending. About 70% of those consumers in the top 5% have a mental health and/or substance use disorder.

Additional states are expected to add a Medicaid vertical carve-out model, while states with these models already implemented are expected to expand to include new populations.

This trends report provides updates on:

  • State Medicaid behavioral health financing models in a state-by-state reference guide
  • Which states have carve-ins, carve-outs, and specialty health plans
  • Changes in Medicaid specialty health plan enrollment—by state and by consumer type
  • Changes in Medicaid specialty health plan enrollment from 2016 to 2018
  • The specific health plans offering specialty health plans in every state
  • The national insurers with the largest specialty health plan enrollment

For a deep-dive into Medicaid financing for behavioral health benefits by state, read: State Medicaid Behavioral Health Carve-Outs: The OPEN MINDS 2018 Annual Update

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