Financing by Payer

Key considerations for financing IBH with Medicare include:

• Eligibility Requirements: Medicare is available to people age 65 and older, certain younger individuals with qualifying disabilities, and those with End-Stage Renal Disease or ALS (amyotrophic lateral sclerosis). Some Medicare enrollees may also qualify for Medicaid, with Medicaid covering costs not paid by Medicare. Learn more about Medicare eligibility and enrollment, and about people who are dually eligible for Medicare and Medicaid (PDF – 2 MB).
• Coverage Requirements: Medicare Part A covers inpatient behavioral health care services, Part B covers outpatient behavioral health services and certain behavioral health medications that patients can’t self-administer, and Part D covers certain protected prescription behavioral health drug classes, including antipsychotics, antidepressants, and anticonvulsants. In 2026, Medicare Part D implemented the Medicare Prescription Payment Plan, which helps with the affordability of expensive psychiatric medications by allowing beneficiaries to spread out-of-pocket costs over the year. Learn more about Medicare coverage of behavioral health services (PDF – 7 MB), Medicare participation options for physicians (PDF – 397 KB), and the Medicare Prescription Payment Plan.
• Medicare Advantage: Private insurance companies can offer Medicare Advantage plans that are approved by and contracted with the federal government. These plans include Medicare Part A, Part B, and usually Part D. Medicare pays plans a per-member-per-month (capitated) rate for each enrollee. These plans account for around half of total Medicare enrollment.2,3 While all Medicare Advantage plans must cover Part A and Part B services, some provide supplemental benefits for behavioral health services beyond what Original Medicare covers.4,5 A 2026 rule also requires Medicare Advantage plans to ensure their cost-sharing for behavioral health services is no higher than what is charged under Original Medicare.6 Medicare Advantage plans vary in benefit design, network rules, reimbursement levels, and use of prior authorization. Learn more about Medicare Advantage coverage of behavioral health services and find contact information for the Medicare Advantage plans in your area.
• Prior Authorization: Prior authorization requires that providers obtain approval before providing a specific item, service, or medication. Nearly all Medicare Advantage plans require prior authorization, most commonly for behavioral health services and medications.7,8 In Original Medicare, prior authorization remains rare. However, as of 2026, the WISeR (Wasteful and Inappropriate Service Reduction) Model has introduced prior authorization for 17 specific services—primarily surgical procedures and medical devices—in six states (AZ, NJ, OH, OK, TX, and WA). While Original Medicare is testing prior authorization expansion, it remains limited to non-behavioral health services. Learn more about prior authorization in Medicare Advantage (PDF – 205 KB), prior authorization in Original Medicare, and the WISeR Model.
• Fee-For-Service: The Medicare Physician Fee Schedule sets national reimbursement rates for Part A and Part B services using Healthcare Common Procedure Coding System (HCPCS) and Current Procedural Terminology (CPT) codes. The fee schedule includes billable codes for IBH services—such as the General Behavioral Health Integration (BHI) and Psychiatric Collaborative Care Model (CoCM) codes—but these payments often fall short of covering the full cost of team-based care.9 Learn more about the Medicare Physician Fee Schedule. Search for which behavioral health services are covered by Medicare and find Medicare payment information for behavioral health services. You can also refer to the National Council for Mental Wellbeing’s Decision Support Tool and Billing Modules to help you estimate Medicare and Medicaid revenue for IBH services.
• Alternative Payment: Medicare uses a Prospective Payment System (PPS), a method of reimbursement based on a fixed amount for a set of services or an entire episode of care, for some Part A and Part B behavioral health services, including hospital outpatient services and inpatient psychiatric facilities. For Original Medicare enrollees, Medicare pays a per-visit national rate for covered behavioral health services provided by federally qualified health centers (FQHCs) and a facility-specific, all-inclusive, per-visit rate (AIR) for covered services provided by rural health clinics (RHCs). For Medicare Advantage enrollees, both FQHCs and RHCs negotiate rates with individual plans, but only FQHCs receive supplemental payments from Medicare to make up any difference between the traditional Medicare rate and what the plan pays. The Centers for Medicare & Medicaid Services has deleted and unbundled the CoCM code G0512 for FQHCs and RHCs. Starting January 1, 2026, these facilities must report individual component codes (99492, 99493, etc.) rather than the single bundled code.10 Learn more about Medicare prospective payment systems and Medicare payment models for FQHCs and RHCs. Find the current Medicare FQHC PPS payment rate and the current Medicare RHC AIR payment rate.
• Accountable Care: Over one-third of Medicare beneficiaries receive care from Accountable Care Organizations (ACOs) through programs like the Medicare Shared Savings Program and ACO REACH.11 ACOs create value-based payment opportunities to finance IBH by tying reimbursement to shared savings, total cost of care, and quality performance. Participation requires continuous quality monitoring, benchmarking against national standards, and meeting or exceeding metrics on patient experience, preventive services, and behavioral health outcomes. Learn more about accountable care and Accountable Care Organizations and find contact information for Accountable Care Organizations in your area.
• Telehealth and Telemedicine: Medicare covers behavioral health services delivered via telehealth or telemedicine (telebehavioral health), with several CPT and HCPCS codes available for billing. Several flexibilities that began during the COVID-19 public health emergency for behavioral health are now permanent, including coverage in patients’ homes; the use of audio-only options for mental health; eligibility for FQHCs, RHCs, marriage and family therapists, and mental health counselors as distant-site providers; and virtual direct supervision, allowing physicians to supervise staff via real-time audio-video technology. Some telehealth provisions for behavioral services remain temporary. Notably, the in-person visit requirement for mental health services is currently waived through December 31, 2027. Learn more about Medicare telehealth services, Medicare telebehavioral health policy updates, and billing Medicare for telebehavioral health services.

Key considerations for financing IBH with Medicaid and CHIP include:

• Eligibility Requirements: Medicaid covers children and parents with low incomes, women who are pregnant, people with disabilities, older adults, and, in expansion states, adults with low incomes.¹³ States set some standards within federal minimums and may extend coverage further. When beneficiaries also have Medicare or private insurance, Medicaid acts as the payer of last resort, covering or cost-sharing services that are covered by Medicaid but not paid by the primary insurer. Find Medicaid eligibility requirements and verification tools on your State’s Medicaid website. Learn more about people who are dually eligible for Medicare and Medicaid (PDF – 2 MB).
• Coverage Requirements: Under the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit (PDF – 614 KB), states must cover any medically necessary services identified during preventive screening for children and youth under age 21. States are required to provide any service needed for healthy growth and development—even if the state’s Medicaid program does not normally cover that service (e.g., certain behavioral health interventions). The EPSDT benefit ensures broad, mandatory coverage for pediatric and transition-age youth, including intensive community-based services and specialized diagnostic tools. Behavioral health coverage for adults age 21 and older depends largely on state policy and optional benefit selections. Outside of the mandatory benefits, states may adopt different lists of covered services. Learn more about coverage of behavioral health services on your state’s Medicaid website.
• Behavioral Health Carve Outs: State Medicaid programs can choose to exclude (carve out) certain services from their contracts with MCOs so the services are provided separately through fee-for-service or through limited-benefit plans. Behavioral health and pharmacy services tend to be the most commonly carved out services in Medicaid programs.12 Learn more about MCO behavioral health coverage (see Table 2).
• Prior Authorization: Medicaid fee-for-service programs and MCOs can require providers to obtain approval before providing a specific item, service, or medication. While federal law prohibits states from imposing prior authorization requirements for screening services provided under the EPSDT benefit, state Medicaid agencies and MCOs have flexibility outside of EPSDT. Behavioral health services and medications—particularly residential or other intensive services—commonly require prior authorization. Learn more about prior authorization in Medicaid (PDF – 841 KB) and prior authorization process policies in Medicaid managed care.
• Fee-for-Service: Medicare establishes Healthcare Common Procedure Coding System and Current Procedural Terminology codes—including those for behavioral health integration—along with national rules and payment rates under the Physician Fee Schedule. State Medicaid programs may choose whether to reimburse these codes and, if they do, set their own rules, fee schedules, and payment rates. Even when reimbursed, Medicaid fee-for-service payments often fail to cover the full cost of IBH services, particularly team-based care. On average, Medicaid fee-for-service payment rates for physician services are approximately 70% of Medicare rates, although this varies significantly by state and specific service.⁹ Learn how much providers are paid for services under Medicaid in your state relative to Medicare. Find reimbursement rates for behavioral health services on your state’s Medicaid website. You can also refer to the National Council for Mental Wellbeing’s Decision Support Tool and Billing Modules to help estimate Medicare and Medicaid revenue for IBH services.
• Alternative Payment: State Medicaid programs must reimburse Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) for covered behavioral health services. Usually, state Medicaid programs pay through a Prospective Payment System (PPS), which pays a fixed, per-visit bundled rate for qualified services delivered to Medicaid patients. FQHCs and RHCs can agree to an alternative payment methodology, but the reimbursement rate must be at least as much as would be paid under the PPS methodology. State Medicaid programs can also opt in to reimburse Certified Community Behavioral Health Clinics (CCBHCs) using a PPS that covers the total cost of providing a broader range of services. The payment rate can be monthly or daily, depending on the state's chosen PPS option. Learn more about Medicaid payment models for FQHCs and RHCs and Medicaid payment models for CCBHCs. Find PPS rates for behavioral health services on your state’s Medicaid website.
• Managed Care: In most states, Medicaid is delivered through managed care organizations (MCOs). Each state contracts separately with MCOs, but many MCOs operate in multiple states. States decide which populations and behavioral health services to include in their contracts with MCOs, and provide MCOs with capitation payments (usually per-member-per-month) to cover the cost of providing covered services.¹⁴ MCOs negotiate with providers to deliver services to their enrollees, either on a fee-for-service or capitation basis. While MCOs can negotiate rates with FQHCs or RHCs that fall below the state’s PPS rate, federal law requires states to issue supplemental wraparound payments at least every four months to make up the difference. In states that have opted in to reimburse CCBHCs, MCOs are generally required to provide the full PPS rate for all covered behavioral health services. Some MCOs may cover additional benefits beyond those required by the state. Learn more about Medicaid managed care, types of Medicaid managed care arrangements, and your state’s Medicaid managed care organizations.
• Accountable Care: Many states are adopting alternative, value-based payment models for Medicaid through accountable care organizations (ACOs). States define which behavioral health services, if any, are included in ACO contracts and establish cost and quality performance benchmarks. At the end of the performance period, ACOs that meet cost and quality performance benchmarks earn shared savings or capitated (per patient) payments, and those that do not may face financial penalties. Learn more about Medicaid accountable care organizations.
• Telehealth and Telemedicine: States have broad flexibility to define how behavioral health services may be provided through telehealth (telebehavioral health). States set their own parameters—such as coverage policies, billing codes, modifier requirements, reimbursement rates, originating sites, eligible services, provider types, and technology platforms—so long as the underlying services comply with Title XIX of the Social Security Act, federal regulations, and the state’s approved Medicaid state plan or amendments.¹⁵ States may offer reimbursement comparable to in-person care and may also reimburse any additional costs, such as technical support, transmission charges, and equipment, linked to a Medicaid-covered service.16 Learn more about state telehealth laws and Medicaid program policies. Find reimbursement rates for telebehavioral health services on your state’s Medicaid website.
• Waivers: States may use federal waivers such as Section 1115 demonstrations, Section 1915(b) managed care waivers, and Section 1915(c) Home and Community-Based Services waivers to pilot new service delivery or payment models, expand eligibility, or cover services not otherwise allowed under Medicaid law (e.g., short-term residential treatment). These waivers often include additional reporting or evaluation requirements, but can create opportunities for new funding streams or enhanced reimbursement to finance IBH services that would otherwise be excluded. Learn more about Medicaid waivers. Find your state’s active Medicaid waivers, including approved and pending Section 1115 Waivers.
• “No Supplanting” Rule: Federal grants and programs administered by the Centers for Medicare & Medicaid Services must supplement—not replace—existing state funding. States are required to use new federal dollars to expand or enhance services rather than offset state spending.^17–19 Providers using funds from Medicaid waivers or temporary initiatives (e.g., Section 1115 waivers), managed care plans, or other initiatives impacted by special or time-limited federal funding to launch, improve, or expand IBH services may need to demonstrate that those funds are not substituting existing funding streams. Learn more about key federal legislative provisions for Medicaid and CHIP. 

Key considerations for financing IBH with private payers include:

• Coverage Requirements: The Affordable Care Act requires that all Health Insurance Marketplace plans cover mental health and substance abuse services as essential health benefits, and depression, anxiety, and substance use screenings must be covered with $0 cost-sharing.^21,22 The Mental Health Parity and Addiction Equity Act also mandates private payer plans to provide mental health and substance use disorder benefits that are comparable to medical and surgical benefits. However, compliance is not universal.^23,24 The scope of covered behavioral health services, payment for those services, and the resulting availability of in-network behavioral health providers vary greatly by private payer and plan.²⁵ Effective January 1, 2026, under the 2026 One Big Beautiful Bill Act, all Bronze and Catastrophic plans are now considered High-Deductible Health Plans (HDHPs). This allows patients to use Health Savings Accounts to pay for behavioral health copays and deductibles with pre-tax dollars.²⁶ Learn more about federal and state requirements for private payers and the behavioral health policies and procedures of the largest private payers.
• Behavioral Health Carve Outs: Some private payers subcontract behavioral health services management to third-party “carve-out” entities referred to as managed behavioral health organizations, which may impose separate credentialing, utilization management, or billing systems.²⁷ Learn more about the contracts private health plans have with managed behavioral healthcare organizations.
• Prior Authorization: Private payer plans often require prior authorization for behavioral health services, including therapy visits, psychological testing, and psychiatric medications. Under the Mental Health Parity and Addiction Equity Act, commercial insurers, employer-sponsored plans, and managed care organizations (including Medicaid MCOs) must document and justify the use of prior authorization for both medical and behavioral health benefits, including a comparative analysis of all nonquantitative treatment limits. Compliance, however, is inconsistent, and authorization criteria and turnaround times vary widely by payer and plan.^23,24 Learn more about prior authorization laws in your state (PDF – 641 KB) and the prior authorization requirements of the largest private payers.
• Fee-For-Service: An increasing number of private plans are reimbursing providers for Medicare-established Behavioral Health Integration and Psychiatric Collaborative Care Model billing codes,²⁸ though payment levels and billing rules vary by insurer, plan, and provider contract (e.g., in- vs. out-of-network).⁹ Learn more about the behavioral health payment policies for the largest private payers and how much providers are paid for services by commercial payers relative to Medicare. The National Council for Mental Wellbeing’s Decision Support Tool and Billing Modules also provide estimated commercial payer rates based on what private insurers tend to pay for services relative to Medicare.
• Alternative Payment: Many commercial health plans are adopting alternative payment models—such as prospective payment, capitation, bundled payments, and value-based arrangements—to finance IBH.^28,29 These models may include per-member-per-month care management fees, quality incentives, shared-savings bonuses, or bundled payments for behavioral health services delivered as part of primary care. To participate in these payment models, providers must thoroughly monitor and report cost and quality performance metrics. Get examples of the types of alternative payment models private payers are using for IBH and primary care (PDF – 562 KB).
• Telehealth and Telemedicine: Coverage of telehealth and telemedicine services under commercial health plans is far less consistent than under Medicare. However, nearly all states now have telehealth laws, and some include payment-parity rules for behavioral health services delivered via telehealth and telemedicine (telebehavioral health).^30–33 What private payers are required to cover and reimburse varies by state, and each insurer may apply its own policies, such as limiting payment parity to certain conditions, patient locations, or visit types, or excluding specific behavioral health services. Effective January 1, 2026, under the 2026 One Big Beautiful Bill Act, telehealth services, including telebehavioral health services, are now a permanent pre-deductible benefit. HDHPs can pay for patient telebehavioral health visits even before the patient meets their annual deductible.²⁶ Learn more about telehealth laws and regulations for private payers in your state or jurisdiction.