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An OPEN MINDS Market Intelligence Report

Some state Medicaid plans carve-out certain services depending on populations served. A behavioral health carve-out is defined as a financing model where a portion of Medicaid benefits for mental health outpatient, psychiatric inpatient, addictions, pharmacy, etc. is separately managed and/or financed on an at-risk basis by another organization or retained by the state Medicaid agency on a fee-for-service (FFS) basis. The carve-out can take place at one of two levels: At the payer level — referred to as a primary carve-out; and at the health plan level — referred to as a secondary carve-out.

There are two types of behavioral health carve-out models:

  1. Primary carve-out: The payer (in this case Medicaid) excludes behavioral health services from the primary managed care contract. Behavioral health services are instead paid fee-for-service (FFS) by the state, managed by an administrative-services-only organization, or managed by a managed behavioral health organization (MBHO) in some type of capitated arrangement.
  2. Secondary carve-out: The payer (Medicaid) contracts all with a managed care organization (MCO) to manage all benefits, including behavioral health. The MCO then sub-contracts with another organization (an MBHO) to manage behavioral health services.

The push for integrated care coordination in the health care field is causing a shift in the carve-out concept. In the past, state Medicaid plans carve-out models have been focused on separate management of benefit plan services. The emerging models are focused on separate management of consumers with specific characteristics. This has been referred to as a shift from horizontal management models focused on benefits to vertical management models focused on consumers.

The report has a state-by-state detail of the financing and management of behavioral health in every Medicaid system – what organizations are at risk for outpatient mental health, specialty mental health, outpatient addiction treatment, mental health pharmacy, and general pharmacy. The report also provides an update on the state Medicaid programs that are planning to change the finance or delivery of behavioral health services in the next five years. The report also answers the following questions:

  1. What Is A Medicaid Behavioral Health Carve-out?
  2. Which States Carve-Out Medicaid Behavioral Health Benefits & How?
  3. What Is The Future Of Behavioral Health Carve-Outs?

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