Key Benefits Under Medicaid and the State Children's Health Insurance Program (SCHIP) for Children With Mental Health and Substance Abuse Problems
Released: 2004-04-21T00:00:00

Background

What are Mental Health And Substance Abuse Services?

Mental health and substance abuse services are designed to ameliorate the negative effectsof mental illness and use of, or addiction to, illicit drugs, respectively. (6) According to the 1999Surgeon General's report on mental health, (7) mental illness refers to all diagnosable mental disorders, which areconditions characterized by alterations in thinking, mood or behavior (or combinations thereof).Among children, for example, attention-deficit/hyperactivity disorder is primarily marked byalterations in behavior (overactivity) and/or thinking (inability to concentrate). Depression ischaracterized by alterations in mood. In general, mental disorders can lead to distress, impairedfunctioning in daily life, and increased risk of pain, disability, death or loss of freedom. Treatmentfor mental illness is generally of three types--psychosocial (various types of individual, family andgroup therapies), pharmacological (prescription drugs), or a combination of both.

The Surgeon General's report also describes a patchwork of mental health services that havecome to form a de facto mental health system over the past three centuries. This system has distinctsectors, two of which are most relevant to the purpose of this report -- the specialty mental healthsector and the general medical/primary care sector.

Speciality mental health services include services provided by specialized mental healthprofessionals (e.g., psychologists, psychiatric nurses, psychiatrists, and psychiatric social workers),expressly for the provision of mental health care. The general medical/primary care sector consistsof health professionals (e.g., family practitioners, nurse practitioners, internists, pediatricians, etc.)who provide the full range of medical and health services, including but not exclusively for mentalhealth care.

Various types of mental health treatment are also defined by their duration and setting. Duration of care is divided into services for the treatment of acute conditions versus long-termchronic care. Settings of care include institutional (e.g., hospital, nursing facility, residentialtreatment facilities), community-based (e.g., in public and private schools, services provided bymental health professionals in an office), and home-based.

While a recent comprehensive analysis of the current system of care for substance abuse inthis country is lacking, the Surgeon General's description of the patchwork nature of the mentalhealth care system likely applies in this context as well. Substance abuse treatment services aregenerally of two types: (1) detoxification (i.e., to rid the body of the toxic substance) and medicationmanagement (i.e., to control withdrawal symptoms and drug craving, and to block the effects ofdrugs), and (2) education, counseling and rehabilitation. All these services are designed to reduceor eliminate use of and dependence on alcohol or illicit drugs, to improve the individual's ability tofunction, and to minimize other medical and social complications of drug abuse. (8) Care is provided in bothinpatient and outpatient settings, including community- and home-based services, with varying levelsof intensity in response to the individual's acute or chronic care needs. And as with mental healthcare, there are substance abuse specialty practitioners as well as general medical/primary careproviders that treat individuals with alcohol and drug problems.

The Role of Medicaid and SCHIP

Medicaid. Medicaid is a federal-state entitlementprogram that pays for medical services on behalf of certain low-income individuals. Medicaidprovided access to medical services for 44.3 million people in FY2000 (the latest official enrollmentfigure) at a cost to the federal government of $116.9 billion, representing 57% of total program costs,the remainder of which was covered by state and local governments. In FY2002, federal paymentsrose to $146.2 billion. (9)

Eligibility for Medicaid. To qualify for Medicaid,applicants' income and resources (also called assets) must be within program financial standards . These standards vary considerably among states, and different standards apply to different populationgroups within a state. Medicaid eligibility is also subject to categorical restrictions -- generally, itis available only to low-income persons who are aged, blind, disabled, members of families withdependent children, and certain other pregnant women and children. In addition, certain individualswithin these categories and with higher income, especially those facing high costs for medical care,may also be eligible. (This latter group is sometimes referred to as the medically needy; see belowfor more details).

The Medicaid statute defines over 50 distinct population groups as potentially eligible,including those who must be covered and those for whom coverage is optional. Eligibility groupshave traditionally been divided into two classifications -- the "categorically needy" and the"medically needy." For the purposes of this report, this distinction is important because the scopeof services that states must provide to categorically needy individuals is much broader than thatrequired for the medically needy.

In addition to financial requirements, for some eligibility groups, disability status is alsoconsidered. For example, the mandatory categorically needy coverage group of recipients ofSupplemental Security Income (SSI) (10) requires the presence of a disability. For children, the SSIdisability criteria are defined by types of functional impairments affecting daily life and may includemental illness. Substance abuse is not considered to be a disability for SSI purposes, and hence, forMedicaid.

Examples of other major mandatory categorically needy groups relevant to children and forwhich no disability criteria apply include: (1) members of families who meet the requirements of theformer Aid to Families with Dependent Children (AFDC) program as in effect on July 16, 1996, (2)pregnant women and children under six years of age living in families with income up to 133% ofthe federal poverty level (FPL), (11) and (3) children ages 6 to 19 living in families with income upto 100% of the FPL. Children with mental illness and/or substance abuse problems may qualify forcoverage under these latter groups if the financial criteria, which in some cases are more generousthan the SSI pathway into Medicaid, are met.

The medically needy are persons who fit the definition of a categorical group (e.g., they areaged, disabled, children or members of families), but who do not meet applicable income and/orresource standards. States may establish higher income and resource standards for the medicallyneedy. (12) Also, suchpersons may "spend down" to the medically needy income standard by incurring medical expenses. That is, net income after subtracting medical expenses is used to determine eligibility.

States have the option of covering the medically needy, and if they choose to do so, they mustinclude children under 18 who would qualify under a mandatory categorically needy group, andpregnant women who would qualify under a mandatory or optional categorically needy group, exceptthat their income and/or resources are too high. States may also offer medically needy coverage tootherwise ineligible individuals under 21 who meet the applicable financial criteria. States maycover all such individuals or reasonable subclassifications (e.g., those in publically subsidized fostercare or adoptions, those receiving active treatment as inpatients in psychiatric facilities or programs). In 2002, 36 states had medically needy programs. (13)

There were 24.2 million children under the age of 21 enrolled in Medicaid in FY2000 (thelatest official enrollment information), accounting for nearly 55% of the total Medicaid populationnationwide. Total Medicaid expenditures for these children was $38.5 billion, representing 22.9%of all Medicaid spending in that year.

Mental Health and Substance Abuse Benefits UnderMedicaid. As with eligibility, some benefits under Medicaid are mandatory andothers may be covered at state option. Some categories of service, by virtue of their label, have anobvious connection to mental health care or substance abuse treatment, while others do not.

The mandatory benefits relevant to children that all states must offer to their categoricallyneedy groups, and that are likely to or may include mental health and substance abuse services, are:

inpatient hospital services (other than in an institution for mental diseases orIMD), (14)

outpatient hospital services,

rural health clinic services,

federally-qualified health center services,

early and periodic screening, diagnosis and treatment (EPSDT) for personsunder age 21 years (more on this benefit below),

physician services (e.g., psychiatrists), and

home health services for persons entitled to nursing facilitycare.

The EPSDT program provides screening and preventive care to nearly all groups of Medicaidbeneficiaries under 21 years old, as well as services necessary to correct a health problem identifiedthrough screening, including mental illness and substance abuse as well as conditions caused by druguse or addiction. That is (with the exceptions noted below), states are required to provide allfederally-allowed treatment to correct identified problems, even if the specific treatment needed isnot otherwise covered under a state's Medicaid plan . Thus, states may be required to cover someservices for children that would be optional or not covered at all for adults. EPSDT is not amandatory benefit for the medically needy, although states may choose to make this benefit availableto this group.

There are a wide variety of optional Medicaid benefits relevant to children which states mayoffer to their categorically needy groups that could include mental health and substance abuseservices. These are:

medical care provided by other licensed practitioners (e.g., psychologists,social workers),

other clinic services,

prescribed drugs,

other diagnostic, screening, preventive, and rehabilitative services for themaximum reduction of physical or mental disability and restoration to the best possible functionallevel,

inpatient psychiatric services for persons under age 21 years (includingpsychiatric residential treatment facilities (15) ), and

case management services. (16)

States that cover the medically needy may offer a more restricted set of benefits to theseindividuals than is offered to the categorically needy. For medically needy beneficiaries, at aminimum, states must cover the following benefits that may include mental health and substanceabuse services:

ambulatory services for those under 18 and persons entitled to institutionalservices, and

home health services for persons entitled to nursing facilitycare.

There are additional benefit requirements for those states that cover IMD services (seefootnote 14) or services in intermediate care facilities for the mentally retarded (ICF/MR) (17) for any group of medicallyneedy beneficiaries. In these cases, states must cover either the mandatory services available to thecategorically needy (except services provided by pediatric and family nurse practitioners), oralternatively, any seven categories of care and services listed in Medicaid law defining coveredbenefits. Again, such coverage may include mental health care and substance abuse treatment.

Finally, states may apply for waivers of program rules to establish special programs toaccommodate unique needs. Many states have such waivers which can be statewide or limited tocertain geographic areas. Such programs may include coverage for mental health care and substanceabuse services. Three states -- Kansas, New York and Vermont -- have waivers specifically toprovide special services to children with severe mental illness. Some of the services offered underthese waivers include caregiver training and respite care, crisis intervention and support, independentliving skills training, and case management. The number of children served under these waiverprograms is small (roughly 1,200 in Kansas in 2002, 375 in New York in 2000, and 240 in Vermontin 2001).

SCHIP

SCHIP was established in 1997, and provides health insurance to certain uninsured childrenin families with modest income. A total of $39.7 billion has been appropriated for SCHIP forFY1998 through FY2007. Approximately 5.3 million children were enrolled in SCHIP duringFY2002. Nationally, through June 2003, $12.5 billion in federal funds had been spent under theprogram.

Eligibility for SCHIP. In general, SCHIP allowsstates to cover uninsured children under age 19 in families with incomes that are above applicableMedicaid financial standards.

States can define the group of children who may enroll in SCHIP. The law allows states touse the following factors in determining eligibility: geography, age, income and resources,residency, disability status, access to other health insurance, and duration of SCHIP enrollment. Children who are eligible for Medicaid or are covered by a group health plan or other insurance arenot eligible for SCHIP.

As of FY2002, the upper income eligibility limit under SCHIP had reached 350% FPL (inone state). Nearly one-half (24) of the states and the District of Columbia had established upperincome limits at 200% FPL. Another 13 states exceeded 200% FPL. The remaining 13 states setmaximum income limits below 200% FPL.

Mental Health and Substance Abuse Benefits UnderSCHIP. The SCHIP statute defines child health assistance to include a wide rangeof coverable benefits. As with Medicaid, some categories of service, by virtue of their label, havean obvious connection to mental health care and substance abuse treatment, while others do not. Thecategories of service that may include mental health care and substance abuse treatment are:

inpatient hospital services,

outpatient hospital services,

physician services,

clinic services (including health center services) and other ambulatory healthcare services,

prescription drugs,

inpatient mental health services,

outpatient mental health services,

home and community-based health care services and related supportiveservices,

nursing care services (e.g., psychiatric nursepractitioner)

inpatient substance abuse treatment services,

outpatient substance abuse treatment services,

case management services,

care coordination services,

any other medical, diagnostic, screening, preventive, restorative, remedial,therapeutic, or rehabilitative services (if recognized by state law, and prescribed, furnished orsupervised by a physician or other licensed practitioner or state- or local-government operated healthcare facility), and

any other health care services or items.

Under SCHIP, states do not simply select among these benefits in establishing what is andis not covered. Rather, states choose from three options when designing their SCHIP programs. They may expand their current Medicaid program, create a new "separate state" program, or devisea combination of both approaches. These program level choices determine the package of benefitsoffered. All 50 states, the District of Columbia, and five territories have SCHIP programs inoperation. As of August, 2003, 19 had Medicaid expansions, 19 had separate state programs, and18 used a combination approach. (18)

States that choose to expand Medicaid to new eligibles under SCHIP authority must providethe full range of mandatory Medicaid benefits for the categorically needy, as well as all optionalservices covered. Alternatively, states deciding to use a separate state program may choose any ofthree other benefit options: (1) a benchmark benefit package, (2) benchmark equivalent coverage,or (3) any other benefits plan that the Secretary of Health and Human Services determines willprovide appropriate coverage to beneficiaries. The option chosen determines the set of coveredbenefits under separate SCHIP programs.

A benchmark benefit package is one of the following three plans: (1) the standard BlueCross/Blue Shield preferred provider option offered under the Federal Employees Health BenefitsProgram (FEHBP), (2) the health coverage that is offered and generally available to state employeesin the state involved, and (3) the health coverage that is offered by a health maintenance organization(HMO) with the largest commercial (non-Medicaid) enrollment in the state involved.

Benchmark equivalent coverage is defined as a package of benefits that has the sameactuarial value as one of the benchmark benefit packages. A state choosing to provide benchmarkequivalent coverage must cover each of the benefits in the "basic benefits category." The benefitsin the basic benefits category are inpatient and outpatient hospital services, physicians' surgical andmedical services, lab and x-ray services, and well-baby and well-child care, includingage-appropriate immunizations. Benchmark equivalent coverage must also include at least 75% ofthe actuarial value of coverage under the benchmark plan for each of the benefits in the "additionalservice category." These additional services include prescription drugs, mental health services,vision services, and hearing services.

Finally, as with Medicaid, states may apply for waivers of program rules to establishdemonstration projects to accommodate unique needs. Currently, only a few states have suchwaivers under SCHIP. While none of these waivers specifically focus on mental health or substanceabuse benefits, they may provide access to such services.

Scope of Mental Health And Substance Abuse Benefits for Children -- A Snapshot of Selected Medicaid and SCHIP Coverage Policies in FY2000

In this section, a description of the state survey data collection instruments andimplementation issues is provided, followed by important data caveats that affect interpretation ofthe survey findings presented in the subsequent section.

Survey Design and Implementation

In 2000, the Congressional Research Service (CRS) contracted with the National Academyfor State Health Policy (NASHP) to collect data from Medicaid and SCHIP state agencies on limitsplaced on selected benefits for children under each program. Two parallel survey instruments (19) were developed withextensive input from state officials, one for Medicaid programs and one for separate state SCHIPprograms. The benefits data collected from these surveys represent general program policies as ofJune 2000.

For each benefit category listed on the survey, respondents indicated the amount of eachservice children could receive without special permission, that is, before prior authorization (20) was required. If there wasno point at which prior authorization for continued services was necessary, the benefit was identifiedas unlimited. State officials could also indicate that limits for a specific benefit were absolute,meaning that children could not receive more than the specified amounts even with priorauthorization.

For Medicaid, survey results were reported for all 50 states and the District of Columbia. ForSCHIP, survey results were reported for 41 separate programs in 33 states, representing the universeof such states and programs in June, 2000. Two states (California and New Jersey) had two SCHIPprograms with different benefit plans, and three states (Connecticut, Florida, and Massachusetts)each had three SCHIP programs with different benefit plans.

Because there was limited space available on the two survey instruments for questions oncoverage of and limitations placed on benefits, only five general mental health and substance abuseservice categories were included. These were inpatient mental health services, outpatient mentalhealth services, inpatient detoxification services, outpatient substance abuse services, and residentialtreatment center (RTC) services.

There is no direct one-to-one correspondence between each of the five service categoriesincluded on the surveys and a single coverable benefit listed in Medicaid statute. This is in part dueto the fact that many of the benefit categories listed in Medicaid statute identify a type of providerrather than a type of service. For example, a wide variety of providers can deliver outpatient mentalhealth and substance abuse services. Under Medicaid, the benefit categories listed in statute underwhich such care is most likely covered include outpatient hospital services, rural health and federallyqualified health center services (providers that deliver primary medical services and mental healthcare), physician services (e.g., psychiatrists), other practitioner services (e.g., psychologists, socialworkers), and other clinic services (e.g., community mental health centers and other specialty mentalhealth or substance abuse clinics). Inpatient mental health services and inpatient detoxification aremost likely covered as inpatient hospital services or inpatient psychiatric services for persons underage 21. Such care is typically delivered in general acute care hospitals with distinct psychiatric carewings or designated psychiatric beds, or in psychiatric hospitals. Residential treatment centers aretypically covered as inpatient psychiatric services for persons under 21, or under the rehabilitativeservices option.

In general, the coverable benefits listed in SCHIP statute are more closely aligned to theservice categories included on the surveys. However, there is not an obvious, single benefit categorylisted in SCHIP statute that would encompass residential treatment centers. Several could apply here(e.g., inpatient mental health services, inpatient substance abuse services, rehabilitative services).

In sum, each of the five categories of service used in the surveys likely corresponds tomultiple benefits listed in both Medicaid and SCHIP statute. This is an important problem for thesurvey design because very different limits may apply to "outpatient mental health services," as usedon the surveys, when delivered as a "physician service" versus an "other clinic service," for example. For this reason, the survey data are imprecise. Therefore, the results from the two surveys representgeneral, statewide benefit limit policies for broad classifications of mental health and substanceabuse services for children under each program.

Overall, the value of the survey data presented here is not in the specific, detailed responsesthat each state agency provided on benefit limits for each service category. To further complicatethe picture, both Medicaid and SCHIP programs rely on managed care organizations (MCOs) todeliver services to most beneficiaries (described further below). Detailed data on variations inbenefit limits specific to individual managed care contracts under each state program, which candiffer from the general criteria delineated in state plans as reported here, were not captured. Also,states may have changed coverage policies since June, 2000 (the point in time represented by thesurvey data), especially during the past few years as they began to face growing state budgetconstraints and rapidly rising Medicaid costs. Instead, the importance of these survey results lies inthe identification of the different methods states use in their Medicaid versus SCHIP programs todefine the breadth of these services for children. Also, these survey data serve as a baselinedocumenting general coverage policies in place during a strong economic period when many stateswere expanding their Medicaid and SCHIP programs.

General Coverage Policies

For each of the five mental health and substance abuse benefit categories included in theCRS-sponsored surveys, Tables 1 through 5 provide a summary of whether the service is covered,and general information about service limits and monitoring activities for Medicaid and separateSCHIP programs across states.

As of June 2000, nearly all Medicaid and SCHIP programs covered inpatient and outpatientmental health services for children. When covered, proportionally more Medicaid programs (aboutone-third) than SCHIP programs (about one-fourth) reported that inpatient and outpatient mentalhealth benefits for children were unlimited.

Most Medicaid and SCHIP programs also covered inpatient detoxification and outpatientsubstance abuse services for children. Roughly one-third of Medicaid and SCHIP programs thatoffered inpatient detoxification services indicated that this benefit was unlimited. In contrast, withrespect to outpatient substance abuse services for children, about 40% of Medicaid programscovering such care identified this benefit as unlimited, compared to approximately 22% of SCHIPprograms.

The biggest discrepancies in general coverage between Medicaid and SCHIP programs wasfor RTCs. Among SCHIP programs, 44% did not make RTC services available. In contrast, onlyone-fourth of Medicaid programs indicated that RTC services were not covered.

It is no surprise that SCHIP programs often exclude RTC services since this kind of benefitis not typically available in commercial insurance products. It is more noteworthy that some SCHIPprograms do provide access to RTC services.

Table 1. Coverage of, and Limits for/Monitoring of InpatientMental Health Services for Children Under Medicaid and SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000surveys, one for state Medicaid programs and the other for separate state SCHIP programs,conducted by the National Academy for State Health Policy under contract to CRS. Stateabbreviations are used in this table.

a. In the Medicaid column, the sub-column labeled "CN only"means that coverage, limitations andmonitoring of inpatient mental health services apply only to beneficiaries classified ascategorically needy, and the sub-column labeled "CN+MN" means that coverage, limitationsand monitoring of such services apply to both categorically needy and medically needybeneficiaries.

As of Oct. 2000, 36 states had medically needy programs that covered at least some groupsunder Medicaid. These 36 states may be shown in either the "CN Only" or the "CN+MN"sub-columns, depending on benefit coverage policies for categorically needy versusmedically needy beneficiaries. Those states WITHOUT medically needy programs were AK,AL, AZ, CO, DE, ID, IN, MO, MS, NM, NV, OH, SC, SD, and WY. These 15 states arealways listed in the "CN Only" sub-column.

b. In the SCHIP column, 28 states had a single separate SCHIP program represented by the stateabbreviation. The remaining five states with separate SCHIP programs each had more thanone such program with different benefit plans. Two states (California and New Jersey) eachhad two separate SCHIP programs. In this case, an A or B extension was added to the stateabbreviation to distinguish these programs (e.g., CA-A, CA-B). Three states (Connecticut,Florida, and Massachusetts) each had three separate SCHIP programs. In this case, an A, B,or C extension was added to the state abbreviation to distinguish these multiple programs(e.g., CT-A, CT-B, CT-C).

Table 2. Coverage of, and Limits for/Monitoring of OutpatientMental Health Services for Children Under Medicaid and SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000surveys, one for state Medicaid programs and the other for separate state SCHIP programs,conducted by the National Academy for State Health Policy under contract to CRS. Stateabbreviations are used in this table.

a. In the Medicaid column, the sub-column labeled "CN only"means that coverage, limitations andmonitoring of inpatient mental health services apply only to beneficiaries classified ascategorically needy, and the sub-column labeled "CN+MN" means that coverage, limitationsand monitoring of such services apply to both categorically needy and medically needybeneficiaries.

As of Oct. 2000, 36 states had medically needy programs that covered at least some groupsunder Medicaid. These 36 states may be shown in either the "CN Only" or the "CN+MN"sub-columns, depending on benefit coverage policies for categorically needy versusmedically needy beneficiaries. Those states WITHOUT medically needy programs were AK,AL, AZ, CO, DE, ID, IN, MO, MS, NM, NV, OH, SC, SD, and WY. These 15 states arealways listed in the "CN Only" sub-column.

b. In the SCHIP column, 28 states had a single separate SCHIP program represented by the stateabbreviation. The remaining five states with separate SCHIP programs each had more thanone such program with different benefit plans. Two states (California and New Jersey) eachhad two separate SCHIP programs. In this case, an A or B extension was added to the stateabbreviation to distinguish these programs (e.g., CA-A, CA-B). Three states (Connecticut,Florida, and Massachusetts) each had three separate SCHIP programs. In this case, an A, B,or C extension was added to the state abbreviation to distinguish these multiple programs(e.g., CT-A, CT-B, CT-C).

Table 3. Coverage of, and Limits for/Monitoring of InpatientDetoxification Services for Children Under Medicaid and SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000surveys, one for state Medicaid programs and the other for separate state SCHIP programs,conducted by the National Academy for State Health Policy under contract to CRS. Stateabbreviations are used in this table.

a. In the Medicaid column, the sub-column labeled "CN only"means that coverage, limitations andmonitoring of inpatient mental health services apply only to beneficiaries classified ascategorically needy, and the sub-column labeled "CN+MN" means that coverage, limitationsand monitoring of such services apply to both categorically needy and medically needybeneficiaries.

As of Oct. 2000, 36 states had medically needy programs that covered at least some groupsunder Medicaid. These 36 states may be shown in either the "CN Only" or the "CN+MN"sub-columns, depending on benefit coverage policies for categorically needy versusmedically needy beneficiaries. Those states WITHOUT medically needy programs were AK,AL, AZ, CO, DE, ID, IN, MO, MS, NM, NV, OH, SC, SD, and WY. These 15 states arealways listed in the "CN Only" sub-column.

b. In the SCHIP column, 28 states had a single separate SCHIP program represented by the stateabbreviation. The remaining five states with separate SCHIP programs each had more thanone such program with different benefit plans. Two states (California and New Jersey) eachhad two separate SCHIP programs. In this case, an A or B extension was added to the stateabbreviation to distinguish these programs (e.g., CA-A, CA-B). Three states (Connecticut,Florida, and Massachusetts) each had three separate SCHIP programs. In this case, an A, B,or C extension was added to the state abbreviation to distinguish these multiple programs(e.g., CT-A, CT-B, CT-C).

Table 4. Coverage of, and Limits for/Monitoring of OutpatientSubstance Abuse Services for Children Under Medicaid and SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000surveys, one for state Medicaid programs and the other for separate state SCHIP programs,conducted by the National Academy for State Health Policy under contract to CRS. Stateabbreviations are used in this table.

a. In the Medicaid column, the sub-column labeled "CN only"means that coverage, limitations andmonitoring of inpatient mental health services apply only to beneficiaries classified ascategorically needy, and the sub-column labeled "CN+MN" means that coverage, limitationsand monitoring of such services apply to both categorically needy and medically needybeneficiaries.

As of Oct. 2000, 36 states had medically needy programs that covered at least some groupsunder Medicaid. These 36 states may be shown in either the "CN Only" or the "CN+MN"sub-columns, depending on benefit coverage policies for categorically needy versusmedically needy beneficiaries. Those states WITHOUT medically needy programs were AK,AL, AZ, CO, DE, ID, IN, MO, MS, NM, NV, OH, SC, SD, and WY. These 15 states arealways listed in the "CN Only" sub-column.

b. In the SCHIP column, 28 states had a single separate SCHIP program represented by the stateabbreviation. The remaining five states with separate SCHIP programs each had more thanone such program with different benefit plans. Two states (California and New Jersey) eachhad two separate SCHIP programs. In this case, an A or B extension was added to the stateabbreviation to distinguish these programs (e.g., CA-A, CA-B). Three states (Connecticut,Florida, and Massachusetts) each had three separate SCHIP programs. In this case, an A, B,or C extension was added to the state abbreviation to distinguish these multiple programs(e.g., CT-A, CT-B, CT-C).

Table 5. Coverage of, and Limits for/Monitoring of ResidentialTreatment Center (RTC) Services for Children under Medicaid and SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000surveys, one for state Medicaid programs and the other for separate state SCHIP programs,conducted by the National Academy for State Health Policy under contract to CRS. Stateabbreviations are used in this table.

a. In the Medicaid column, the sub-column labeled "CN only"means that coverage, limitations andmonitoring of inpatient mental health services apply only to beneficiaries classified ascategorically needy, and the sub-column labeled "CN+MN" means that coverage, limitationsand monitoring of such services apply to both categorically needy and medically needybeneficiaries.

As of Oct. 2000, 36 states had medically needy programs that covered at least some groupsunder Medicaid. These 36 states may be shown in either the "CN Only" or the "CN+MN"sub-columns, depending on benefit coverage policies for categorically needy versusmedically needy beneficiaries. Those states WITHOUT medically needy programs were AK,AL, AZ, CO, DE, ID, IN, MO, MS, NM, NV, OH, SC, SD, and WY. These 15 states arealways listed in the "CN Only" sub-column.

b. In the SCHIP column, 28 states had a single separate SCHIP program represented by the stateabbreviation. The remaining five states with separate SCHIP programs each had more thanone such program with different benefit plans. Two states (California and New Jersey) eachhad two separate SCHIP programs. In this case, an A or B extension was added to the stateabbreviation to distinguish these programs (e.g., CA-A, CA-B). Three states (Connecticut,Florida, and Massachusetts) each had three separate SCHIP programs. In this case, an A, B,or C extension was added to the state abbreviation to distinguish these multiple programs(e.g., CT-A, CT-B, CT-C).

Methods for Limiting Benefits

For each of the five mental health and substance abuse benefit categories, Appendices Athrough E provide information on the specific limits and monitoring activities identified by statesfor their Medicaid and SCHIP programs (when applicable) as of June, 2000. The methods forlimiting benefits are summarized below.

Inpatient Mental Health Services. With respectto limits on inpatient mental health services under Medicaid, many states (23 of 51) (21) reported using priorauthorization or other types of review only. A few states specified other kinds of limits in additionto or in lieu of prior authorization or other review, usually in the form of a quantity limit on thenumber of inpatient mental health days per year or per admission.

In contrast, few separate SCHIP programs relied exclusively on prior authorization or otherreview only for inpatient mental health services. Nearly one-half of these programs (17 of 39)indicated that specific quantity limits applied to inpatient mental health services. Some of theseprograms (9 of 17) set a single overall quantity limit, usually expressed in terms of days per year, oninpatient mental health services in combination with other related benefits, such as inpatientsubstance abuse treatment or other residential care, and in some cases, outpatient mental healthand/or substance abuse services, or partial hospitalization programs. (22) This practice of applyinga single quantity limit to a combination of related services may facilitate the tailoring of benefits toever changing individual needs, especially for persons with both mental health and substance abuseproblems, while at the same time controlling utilization, and hence costs, for services that tend tobe expensive.

For several programs (8 of 39), state respondents highlighted that quantity limits for inpatientmental health care varied by managed care organization, while others established thresholds thatvaried by type of provider (e.g., general acute care versus psychiatric hospitals; 3 of 39) orbeneficiary diagnosis or condition (e.g., unlimited care only for children with severe emotionaldisturbances enrolled in a behavioral health plan; 1 of 39).

Outpatient Mental Health Services. Other typesof thresholds were used by states to define the breadth of outpatient mental health services. UnderMedicaid, a few states (4 of 51) reported that dollar-based limits were used. More often, othernon-dollar quantity limits applied, expressed in units or hours of service, or in visits, typically peryear (14 of 51). In a few cases, limits varied by type of outpatient mental health service (e.g.,individual versus group versus family therapy; 2 of 51) or by whether the provider was a physicianversus other practitioner (4 of 51). A few states (4 of 51) required an initial evaluation anddevelopment of a treatment plan for each beneficiary which would determine what the Medicaidagency would pay for on behalf of such individuals.

In general, the types of limits placed on outpatient mental health services under SCHIP weresimiliar to those under Medicaid. Non-dollar quantity limits were applied in over one-half ofseparate SCHIP programs (22 of 40). In several cases (6 of 40), a single overall quantity limit foroutpatient mental health services, in combination with related benefits, was used. Few programs (2of 40) used dollar-based limits. And a handful of programs had provider-specific, type ofservice-specific or condition-specific restrictions on outpatient mental health services (4 of 40).

Outpatient Substance Abuse Services. In general,under both Medicaid and SCHIP, the methods used to limit outpatient substance abuse services weresimilar to those used to define restrictions on outpatient mental health care (see above).

Inpatient Detoxification. The immediate purposeof hospitalizations for detoxification is to rid the body of the toxic substance. Under Medicaid,one-half of the states (22 of 43) used prior authorization or other types of review to monitor suchcare. In a few cases (3 of 43), day limits for inpatient detoxification tended to be short (e.g., threeto five days) probably reflecting per admission/episode limits. Otherwise, such stays were treatedin the same way as any other acute care hospitalization, and thus, overall quantity limits (typicallyexpressed as total admissions and/or total inpatient days per year) on general inpatient acute careapplied.

Limits placed on inpatient detoxification services under SCHIP were somewhat differentfrom those reported for Medicaid. For example, only three programs relied solely on priorauthorization or other review for this benefit. One-fourth of these programs (9 of 37) used day limitsper year or benefit period for such care. Some set a single quantity limit for inpatient detoxificationservices in combination with other related benefits (4 of 37). A few (3 of 37) also specified lifetimelimits (e.g., expressed as total dollars or admissions per lifetime) on inpatient detoxification services.

Residential Treatment Center Services. RTCsare rapidly replacing hospitals in treating children with psychiatric disorders. (23) In many state Medicaidprograms (19 of 38), prior authorization or other types of reviews accompany admissions to RTCsfor children. When quantity limits were specified, they tended to be day limits per admission orepisode (4 of 38).

As reported above, under SCHIP, most programs did not cover RTC services at all. Amongthose which did, most (9 of 23) reported day limits per admission, episode, year or benefit period. As with many of the other services included in the CRS-sponsored surveys, some SCHIP programs(5 of 23) established a single quantity limit applicable to RTC services in combination with otherrelated institutional and outpatient treatments for mental illness and/or substance abuse.

The Nature of Coverage and Benefit Limits for Children Under Medicaid and SCHIP

Comparing benefit limits under Medicaid and SCHIP must be done with care because theterm "limits" does not have the same meaning across these two programs. This difference in themeaning of "limits" has implications for both the relative breadth or scope of care available undereach program as well as efforts to collect uniform, comparable data on benefit restrictions.

In addition to defining the amount, duration and scope of all covered services, states alsoelect the service delivery systems under which benefits are made available to Medicaid and SCHIPbeneficiaries. There are two primary service delivery systems under each program: fee-for-service(FFS) and managed care. Generally, under FFS, state Medicaid and SCHIP agencies monitor andcontrol all service delivery. In contrast, under managed care, MCOs under contract to states monitorand control all service delivery. These two systems of care are not entirely independent of eachother. There are hybrid models across states that combine various features of FFS and managed carefor a given population or set of interrelated services. At any given point in time, beneficiaries mayobtain all their services under a single system or different sets of services under both systemssimultaneously.

Under Medicaid, specific limits on benefits have grown out of the fee-for-serviceenvironment in which Medicaid began. State Medicaid agencies determine which optional serviceswill be covered, and set limits on both mandatory and optional services. Such agencies alsoestablish other utilization controls (e.g., prior authorization) to ensure that beneficiaries do notreceive services they do not need or in amounts greater than that needed to serve their medicalpurpose. Providers receive payments from the state based on rates established by the state for agiven benefit or type of provider.

Under FFS, health care providers must obtain special permission or approval from the stateto continue delivery of medically necessary services beyond the pre-defined, standard upper limitset by the state for a given benefit. For example, a state Medicaid plan may limit coverage ofoutpatient mental health services to 24 visits per year. But children who need more than 24 suchvisits in a year can obtain additional visits, as long as the provider of care demonstrates the medicalnecessity for more visits. Stated limits on benefits reflect what providers can generally expect to bepaid for in the absence of official clearance for more services, rather than definitive limits on whatbeneficiaries may receive. The fee-for-service delivery system is generally used by individualswhose Medicaid eligibility group (e.g., the aged and individuals with disabilities) or geographiclocation (e.g., rural areas) is not served through managed care, or for persons who opt out whenmanaged care is voluntary.

Most Medicaid children without disabilities receive services in the managed care setting. Under this system of care, state Medicaid agencies negotiate different benefit plans with one or morecontracted managed care organizations (MCOs). MCOs may be commercial plans (e.g., KaiserPermanente) that serve private sector beneficiaries as well as Medicaid and/or SCHIP enrollees. Insome cases, states also contract with Medicaid-only plans. State Medicaid agencies generally payeach MCO a fixed, prospectively determined, monthly fee for each beneficiary enrolled. In turn, theMCOs establish networks of participating providers to deliver the agreed-upon covered services andpay those providers negotiated rates. Benefit plans may be comprehensive or limited in scope (e.g.,behavioral health services only, also referred to as "carve out" plans). There are likely to bevariations in coverage of, and limits placed on, specific benefits across Medicaid managed care planswithin a given state. Managed care plans also employ utilization controls to monitor service deliveryand to insure that benefits provided are medically necessary (similar to the point at which priorauthorization begins in the fee-for-service delivery system in Medicaid).

Even though most Medicaid programs provide services through managed care plans,especially for children without disabilities and families, most states continue to operate significant,parallel fee-for-service programs. Under a Medicaid managed care plan, if benefit limits are met bya Medicaid child and additional services are medically necessary beyond the contractual agreementbetween the MCO and the Medicaid agency, additional funding may be provided to the MCO forextended services, or that child may continue to receive such services in the fee-for-service setting.

Coverage policies and benefit limits described in state Medicaid plans are seldom absolute,especially for children, due to the medical necessity criterion, but also because of EPSDT. Underboth fee-for-service and managed care, for nearly all Medicaid children, states are required toprovide all federally-allowed treatment to correct identified problems, even if the specific treatmentneeded is not otherwise covered under a state's Medicaid plan. As a result, when a Medicaid agencyreports that a specific benefit is not covered for children, that means the service is only availablewhen delivery of that service meets the EPSDT requirement. In these circumstances, providerstypically go through a prior authorization process to receive payment for what are sometimes called"EPSDT extended benefits."

Unlike Medicaid, but consistent with federal statute, separate SCHIP programs are modeledafter private sector, commercial insurance products. The requirement to use benchmark plans (oractuarial equivalents of those plans), most of which are state employee health plans or commercialHMO plans, provides the framework for defining benefit limits.

Under SCHIP, managed care is the predominant service delivery system. At the time of theCRS-sponsored survey (June, 2000), all but five SCHIP programs (Alabama, North Carolina, NorthDakota, West Virginia, and Wyoming) contracted with one or more managed care or indemnity plansto deliver care to SCHIP children. California contracted with 23 comprehensive health plans. Somestates also use a FFS delivery system. Under commercial insurance products, benefits are alwayslimited by medical necessity, but other limits, when applicable, vary by insurance product, as do thepoints at which each insurer monitors service delivery for medical need and appropriateness. Payments to providers participating in these plans may be altered based on the outcome of suchservice utilization reviews, which can in turn affect access to care.

In the CRS-sponsored survey, some of the benefits for which data on limits were collected(i.e., residential treatment centers) are commonly covered under Medicaid, but not routinely includedin commercial insurance products, and hence, SCHIP. There is no federal EPSDT requirement underSCHIP that would guarantee the availability of uncommon, but coverable benefits.

In sum, a small, but significant proportion of children have mental health problems. Somealso suffer from the consequences of substance abuse. Medicaid and SCHIP provide access to anarray of inpatient and outpatient services that can help such children in low to moderate incomefamilies overcome these difficulties. However, the breadth of benefits available under these twoprograms likely differs within and across states. Limits on benefits for the lowest income childrenunder Medicaid are seldom absolute, while restrictions on services for higher income children underSCHIP may be. SCHIP children have access to the same types of benefit packages available in theprivate sector as intended by Congress.

Changes in Benefits Under Medicaid and SCHIP Today

Given the recent economic downturn, some members of Congress and advocates for childrenhave raised concerns about the elimination or reduction in benefits under state health care programs. On average, Medicaid expenditures account for approximately 12% of the state funded portion ofstate budgets. Much of the recent increases in costs have been attributed to pharmaceuticals, nursinghome, community-based long-term care services, and payments to managed care plans. However,enrollment increases have also contributed to significant growth in Medicaid costs in the past fewyears.

Faced with declining revenues and increasing expenses, states proposed or implemented anumber of Medicaid cost containment strategies for fiscal years 2003 and 2004. (24) The majority of changeshave focused on prescription drug costs followed by reductions in provider reimbursement rates, andthe elimination or reduction in optional services and populations. Examples of such actions includeeliminating coverage for certain adults and non-custodial parents, and eliminating dental,chiropractic, optometry and podiatry services. In addition, many states are delaying or rescindingplans for expansions of services.

Some states are also facing problematic enrollment growth and limited revenues in theirSCHIP programs. About one-third of states have either implemented cost containment measures intheir SCHIP programs in FY2003 or plan to do so in FY2004. Examples of such activities includeeliminating dental care for adults without children (under SCHIP waiver programs), reducingpayments for providers, capping enrollment and increasing beneficiary cost-sharing requirements. In some states, cost containment activities under Medicaid, such as reducing pharmacyreimbursement rates and increasing prior authorization for pharmaceuticals, carry over to SCHIP.

Detailed state-level information on explicit plans to reduce benefits for children under eitherprogram is not available. While the cost containment strategies summarized above appear to leavemental health and substance abuse benefits for children largely intact, these actions may stilleffectively reduce access to such care in the near term.

Mental Health Parity

Finally, what about mental health parity? (25) While the CRS-sponsored surveys described in this report donot address this question, mental health parity is a leading policy issue for the mental healthcommunity and providers, as well as lawmakers.

In 1996, Congress enacted the Mental Health Parity Act (MHPA), which established newfederal standards for mental health coverage offered by group health plans. The MHPA, however,is limited in scope and does not compel group plans to offer full-parity mental health coverage. Itrequires group plans that choose to provide mental health benefits to adopt the same annual andlifetime dollar limits on their coverage of mental and physical illnesses. Group plans may stillimpose more restrictive treatment limitations and cost sharing requirements on their mental healthcoverage. MHPA specifically excludes treatment of substance abuse and chemical dependency fromthe definition of mental health benefits.

Both Medicaid managed care plans and SCHIP programs must comply with the MHPA.Specifically, all prepaid Medicaid managed care contracts that cover medical/surgical benefits andmental health benefits must comply with MHPA without exemptions. The MHPA does not applyto fee-for-service arrangements because state Medicaid agencies do not meet the definition of agroup health plan. (26) In separate SCHIP programs, to the extent that a health insurance issuer offers group healthinsurance coverage, which can include, but is not limited to managed care, the MHPA applies.

Congress has reauthorized the MHPA through December 31, 2004. Lawmakers introducedfull-parity legislation in the 107th Congress, but it failed to pass. The legislation, which has beenreintroduced in the 108th Congress ( S. 486 / H.R. 953 ), would expand theMHPA by requiring group health plans to impose the same treatment limitations and financialrequirements on their mental health coverage as they do on their medical and surgical coverage. Thebills are strongly supported by advocates for the mentally ill and have broad, bipartisan support inCongress. Employers and health insurance organizations oppose full-parity legislation because ofconcerns that it will drive up costs. As with the MHPA, both Medicaid managed care plans andSCHIP programs would have to comply with the full-parity provisions in S. 486 / H.R. 953 .

Appendix A. Specified Limits and/or Monitoring of Inpatient Mental Health Services for Children UnderMedicaidand SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000 surveys, one for state Medicaid programs and the otherfor separate state SCHIP programs, conducted by the National Academy for State Health Policy under contract to CRS.

Note: See Appendix F for definition of abbreviations used here.

Appendix B. Specified Limits and/or Monitoring of Outpatient Mental Health Services for Children UnderMedicaidand SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000 surveys, one for state Medicaid programs and the otherfor separate state SCHIP programs, conducted by the National Academy for State Health Policy under contract to CRS.

Note: See Appendix F for definition of abbreviations used here.

Appendix C. Specified Limits and/or Monitoring of Inpatient Detoxification Services for Children UnderMedicaidand SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000 surveys, one for state Medicaid programs and the otherfor separate state SCHIP programs, conducted by the National Academy for State Health Policy under contract to CRS.

Note: See Appendix F for definition of abbreviations used here.

Appendix D. Specified Limits and/or Monitoring of Outpatient Substance Abuse Services for ChildrenUnder Medicaidand SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000 surveys, one for state Medicaid programs and the otherfor separate state SCHIP programs, conducted by the National Academy for State Health Policy under contract to CRS.

Note: See Appendix F for definition of abbreviations used here.

Appendix E. Specified Limits and/or Monitoring of Residential Treatment Center Services for ChildrenUnderMedicaid and SCHIP

(as of June, 2000)

Source: Congressional Research Service (CRS) analysis of benefits data collected in two 2000 surveys, one for state Medicaid programs and the otherfor separate state SCHIP programs, conducted by the National Academy for State Health Policy under contract to CRS.

Note: See Appendix F for definition of abbreviations used here.

Appendix F. Notes and Abbreviations Used in Appendix A Through E

Notes: In the two "Programs" columns (one for Medicaid and one for SCHIP), stateabbreviations are used. For SCHIP, 28 states had a single separate SCHIP programrepresented by the state abbreviation. The remaining five states with separate SCHIPprograms each had two or three such programs with different benefit plans. In thiscase, an A, B, or C extension was added to the state abbreviation (e.g., CT-A, CT-B,CT-C) to distinguish multiple programs as needed.

In the "Covered groups" column for Medicaid, "CN only" means this benefit iscovered for categorically needy beneficiaries only, and "CN+MN" means this benefitis covered for both categorically needy and medically needy beneficiaries.

Under the SCHIP columns, N/A means that the state had no separate SCHIP programat the time of the survey, and thus, coverage of this benefit is not applicable.

Definition of other terms (in alphabetical order) :

BHO -- behavioral health organization (also see PHP below)

CY -- calendar year

day treatment -- see partial hosp (below)

eval -- evaluation

FFS -- fee-for-service

ICF/MR -- intermediate care facilities for the mentally retarded

IMDs -- institutions for mental disease

IP -- inpatient

MC -- managed care

MCO -- managed care organization

MD -- physician

med eval -- medical evaluation

med management -- medication management (e.g., monitoring use of prescribeddrugs to treat mental illness or substance abuse)

MH -- mental health

OP -- outpatient

PA -- prior authorization

partial hosp -- also called day treatment or partial care; is a structured environmentfor youth during the day that does not involve an overnight stay; may include anintegrated curriculum that includes education, counseling and family interventions;setting of care may be a hospital, school or clinic; may be a transitional service afterinpatient psychiatric or RTC care for youth who no longer require institutionalizationbut who are not ready to be placed back in the school system due to on-going needsfor extensive treatment and supervision.

PHP -- prepaid health plan; typically these are managed care plans that provide lessthan a comprehensive set of benefits (such as behavioral health services that mayinclude only mental health care or mental health and substance abuse services only)

RTC -- residential treatment centers (facilities)

SA -- substance abuse