Implementing Parity for Mental Health and Substance Use Treatment in Medicaid

Medicaid has proven to be an important means through which low-income, vulnerable adults access mental health and substance use disorder (MHSUD) treatment, which can improve functioning, productivity, and reduce criminal activity. However, many Medicaid programs have historically had treatment limits for MHSUD care, which may reduce access and any associated societal benefits. The 2008 Mental Health Parity and Addiction Equity Act requires that coverage for MHSUD treatment be equivalent to coverage for medical/surgical care if an insurance plan provides any MHSUD benefits. The Act’s provisions were fully extended to most Medicaid beneficiaries after passage of the Affordable Care Act and publication of regulations in March 2016.

While the effects of parity laws have been extensively studied in privately insured populations, there is no empirical research on parity’s effects in Medicaid. Parity among the privately insured has demonstrated relatively modest average changes in access, but has been important for the financial burden and service use of those with the most severe illness. The effects of parity on Medicaid beneficiaries’ use of MHSUD care may differ from the experience of privately insured adults because of the population’s relatively higher prevalence of MHSUDs, greater psychosocial challenges, and lesser ability to access care through out-of-pocket spending. Isolating the effects of providing parity-consistent coverage in a continuously Medicaid-enrolled population will yield decision-relevant estimates for states that continue to weigh the value of extending federal parity provisions to all Medicaid beneficiaries. It will also advance understanding of how Medicaid may influence mental health by isolating the effect of expanded MHSUD coverage on treatment use.

In this paper, we evaluate the effects of implementing parity for MHSUD services in the Medicaid program for the newest group of beneficiaries, non-elderly non-disabled adults without dependent children (“childless adults”), using a natural experiment. On April 1, 2014 the State of Wisconsin abruptly transferred all childless adult Medicaid beneficiaries from a plan with limited MHSUD coverage (only outpatient psychiatrist visits and generic prescription drugs) to a parity-consistent plan. The key benefits added were coverage for MHSUD outpatient visits to non-psychiatrists, brand name prescription drugs, and inpatient MHSUD care. Using a difference-in-differences design, we compare the change in on total and MHSUD-related health care use for childless adults one year before and after this plan change with the change in health care use for parents, a beneficiary group that had continuous coverage under the parity-consistent plan. We use Wisconsin administrative Medicaid enrollment, claims and encounter data to estimate the effect of benefit parity on outpatient, emergency department (ED), inpatient, and prescription drug use.

Preliminary findings show that providing parity-consistent benefits increased the probability of any MHSUD outpatient and ED service use in the month by 11% and 7% respectively compared to parents. These estimates reflect an upper bound because our data do not capture MHSUD care use paid by sources other than Medicaid that may have differed between study groups in the pre-period.