DEPARTMENT OF HEALTH AND HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, MD 21244-1850 
 
 
Frequently Asked Questions: 
Mental Health and Substance Use Disorder Parity Final 
Rule for Medicaid and CHIP 
October 11, 2017 
General  
Q1.  What benefits are subject to the parity analysis? 
A1.  All medical/surgical (M/S) and mental health and substance use disorder (MH/SUD) 
benefits that are provided through an Alternative Benefit Plan (ABP) in a state Medicaid 
program; through the Childrens Health Insurance Program (CHIP); or to enrollees of a 
Managed Care Organization (MCO) (regardless whether the services are furnished by 
that MCO, a prepaid inpatient health plan (PIHP), a prepaid ambulatory health plan 
(PAHP), or through a fee-for-service (FFS) delivery mechanism) are subject to parity 
requirements, regardless of the statutory authority under which they are provided.     
Q2.  Is non-emergency medical transportation (NEMT) subject to the parity analysis? 
A2.  Medicaid managed care regulations specifically exempt NEMT PAHPs from parity 
requirements (42 CFR  438.9(b)(iv)), in addition to a variety of other regulatory 
requirements that do apply to PAHPs that provide medical services.  Consistent with the 
unique nature of the NEMT requirement under the state plan and the specific exemption 
of NEMT PAHPs from parity, the Centers for Medicare & Medicaid Services (CMS) will 
not pursue enforcement of parity requirements with regard to NEMT provided through 
other delivery systems, including MCOs, the state plan brokerage option, Medicaid FFS, 
or as a Medicaid administrative activity.  
Q3.  If a separate CHIP provides all benefits through an MCO, does the MCO have to 
complete the parity analysis? 
A3.  For separate CHIPs using an MCO to provide all benefits to enrollees, there is flexibility 
for either the MCO or the state (i.e. the CHIP agency) to conduct the parity analysis. In 
either case, the state should work closely with the MCO to ensure compliance with parity 
requirements.  States with a separate CHIP program must submit a title XXI/CHIP state 
plan amendment (SPA), but may request deemed compliance with parity requirements if 
early and periodic screening, diagnostic and treatment (EPSDT) is provided, consistent 
with the requirements of 457.496(b).  States with a Medicaid expansion CHIP will not 
need to submit a title XXI/CHIP SPA, and must follow all Medicaid managed care rules 
related to parity. 
 
  Defining MH/SUD 
Q4.  How should definitions of MH/SUD benefits and M/S benefits apply to long term 
supports and services that can be provided for both MH/SUD and M/S conditions? 
A4.  The parity rules for Medicaid and CHIP define MH benefits, SUD benefits, and M/S 
benefits to include long-term services and supports (LTSS) (42 CFR  438.900, 
440.395, and 457.396).  LTSS are defined for Medicaid managed care programs as 
services and supports provided to beneficiaries of all ages who have functional 
limitations and/or chronic illnesses that have the primary purpose of supporting the 
ability of the beneficiary to live or work in the setting of their choice, which may include 
the individual's home, a worksite, a provider-owned or controlled residential setting, a 
nursing facility, or other institutional setting (42 CFR  438.2). LTSS include home and 
community-based services (HCBS). 
A variety of LTSS benefits, such as personal care and respite care, could be defined as 
either MH/SUD or medical/surgical (M/S), depending on the condition of the beneficiary 
being treated.  For these benefits, the state may define the benefit as MH/SUD or M/S for 
the entire beneficiary population using a reasonable method, such as whether the service 
is most commonly or frequently provided due to a MH/SUD or M/S condition.  For 
example, if more than 50% of spending on personal care is for beneficiaries who are 
receiving the service due to M/S conditions, the state may reasonably define personal 
care services as a M/S benefit for the purposes of the parity analysis.    
Non-Quantitative Treatment Limits (NQTLs) 
Q5.  Are states required to apply the NQTL analysis to Medicaid program eligibility 
criteria for participation in a program, such as participation in an array of services 
offered under a 1915(i) or 1915(k) state plan amendment? 
A5.  No, states are not required to apply the NQTL analysis to eligibility determinations and 
eligibility criteria for participation in a Medicaid program.  For example, eligibility 
criteria for participation in a suite of services offered under a 1915(i) or 1915(k) state 
plan or Medicaid rehabilitation optional state plan services, or for enrollment in a 
Medicaid Health Home or similar program, do not require an NQTL analysis.  Waiver 
programs and other benefit packages such as these are generally created to offer a set of 
intensive services for acute or high-need populations to supplement the core services 
offered through the state plan.  Eligibility criteria for these programs may be restricted to 
beneficiaries with certain diagnoses or assessed as meeting a certain level of need. 
Q6.  Does the implementation of National Correct Coding Initiative (NCCI) edits require 
an NQTL analysis?   
A6.   No; the NCCI promotes national correct coding methodologies and reduces improper 
coding which may result in inappropriate payments of Medicare Part B claims and 
Medicaid claims.  Section 6507 of the Affordable Care Act requires each state Medicaid  program to implement compatible methodologies of the NCCI, to promote correct 
coding, and to control improper coding leading to inappropriate payment.  Compliance 
with federal requirements for implementing NCCI methodologies does not require an 
NQTL analysis under the Medicaid and CHIP parity rules.  
Q7.  If a state or managed care plan has a prior authorization requirement for some 
outpatient medical/surgical benefits, and a prior authorization requirement for 
some outpatient MH/SUD benefits, does the state or the managed care plan have to 
conduct the NQTL analysis to determine if the prior authorization requirement for 
outpatient MH/SUD benefits complies with parity? 
A7.  Yes. It is not sufficient to note that prior authorization applies to both M/S and MH/SUD 
benefits. Instead, it is necessary to analyze the processes, strategies and evidentiary 
standards as written and in operation associated with prior authorization for M/S and 
MH/SUD benefits within the same classification.  
Q8.   Some states/MCOs restrict beneficiaries who are not already on the state agency or 
providers caseload from receiving MH or SUD counseling from an unlicensed 
practitioner. This is required because under state licensure laws, unlicensed 
practitioners are not permitted to diagnose or establish a treatment plan that would 
be necessary for new Medicaid patients. Would this NQTL be impermissible? 
A8.  To the extent the scope of practice of a health care provider is limited in order to comply 
with state licensure laws, it is not an impermissible NQTL. State/MCO limits on scope of 
practice that are more restrictive than state licensure requirements or that are only 
applicable to Medicaid/CHIP providers would be subject to the NQTL analysis under the 
Medicaid and CHIP parity rules. 
 
Availability of Information  
Q9.   If an MCO already provides notices of adverse benefit determinations for payment 
denials in accordance with managed care regulations, does this have to be verified 
and/or documented as part of the parity analysis? 
A9.  If the managed care contract(s) specify that the plan(s) is required to provide a notice for 
adverse benefit determinations in the event of payment denials pursuant to 42 CFR  
438.404, this is sufficient in documenting compliance in this area.  State monitoring of 
these notices through external quality review is recommended. 
 
Documentation of Compliance  
Q10.  Does a state have to document authorization denial rates as part of the NQTL 
analysis? 
A10.  No.  While highly disparate authorization denial rates for MH/SUD services as compared 
to M/S services may be an indication that utilization management protocols are not 
meeting NQTL requirements (in writing and/or in operation), states are not required to  document these differences for all services for the submission of MCO contracts or 
contract amendments. However, if concerns exist about whether a particular NQTL is in 
compliance with parity, a comparison of service denial rates may provide clarifying 
information.  We recommend that states develop monitoring strategies to ensure ongoing 
parity compliance, and states may choose to track data on denial rates as an important 
component of that strategy. 
Q11.  What documentation does a state need to provide to CMS if the MCO provides all 
medical/surgical and MH/SUD benefits?   
A11.  All MCO contracts must require parity compliance.  CMS will review parity provisions 
in MCO contracts as part of the normal contract review process.  For more information 
about the requirements for parity compliance that must be included in MCO contracts, 
please see the State Guide to CMS Criteria for Medicaid Managed Care Contract Review 
and Approval: https://www.medicaid.gov/medicaid/managed-care/downloads/mce-
checklist-state-user-guide.pdf  
In addition to the requirements outlined in the Contract Review tool, states may also wish 
to consider including provisions in their contracts with MCOs to ensure adequate 
oversight of the MCOs parity-related monitoring and compliance activities.  The states 
oversight process and documentation requirements should be sufficient to ensure that 
enrollees are receiving services in compliance with the federal Medicaid and CHIP parity 
rules.  For example, in situations where the MCO has responsibility for offering all 
medical/surgical and MH/SUD benefits and is responsible for undertaking the parity 
analysis, the state may wish to include language in their contracts with MCOs to ensure 
the state can see the results of the MCOs analysis.  This may help the state to work with 
the MCO to implement any changes to the MCO contract that are necessary for 
compliance with parity requirements.   
Note that for separate CHIPs using an MCO to provide all benefits to enrollees, there is 
flexibility for either the MCO or the state to conduct the parity analysis. In either case, 
the state should work closely with the MCO to ensure compliance with parity 
requirements.