Medicaid Strategies for Integrating Care

Strategies for Integrating Care

A National Association of State Mental Health Program Directors (NASMHPD) study found that persons with serious mental illness (SMI) are now dying 25 years earlier than the general population.[i] Medicaid is attempting to reverse this trend by addressing one of the most prevalent causes: the lack of proper integration/coordination between primary and behavioral health.

Among individuals eligible for Medicare and Medicaid (also known as dual eligible individuals), 44 percent have at least one mental health diagnosis[ii]. To reduce the level of fragmented care that these individuals receive, states are increasing their efforts to develop managed and integrated care models for this complex needs population. To support these initiatives, Medicaid released an analysis of state options for integrating physical and behavioral health services within managed delivery systems[iii].

In determining which integration model to pursue, states can either leverage existing capacity or pursue new care delivery systems to support the goal of fully integrated, patient-centered care. Medicaid reviewed four options for integrating the management and financing of physical and behavioral health services, with a focus on individuals with serious behavioral health needs. But the agency was quick to point out that just because a particular model was covered in this review does not mean that it is endorsed by CMS, nor do these models necessarily meet the criteria for integrated care under the financial alignment models introduced by CMS’s Medicare-Medicaid Coordination Office in July 2011. The four integration models include:

Managed Care Organization as Integrated Care Entity

This model integrates physical and behavioral health by including both benefits in managed care contracts, rather than carving out behavioral health care from MCO contracts and providing it separately. By combining the benefits and financing for physical and behavioral health services in a comprehensive managed care arrangement, states can ensure greater accountability for managing a more complete range of beneficiary needs. For individuals with serious mental illness (SMI), a contract with a more “specialized” MCO or Medicare special needs plan (SNP) might be necessary to offer the behavioral health capacity required to effectively manage populations with significant behavioral health needs.

Primary Care Case Management Program as Integrated Care Entity

For states that do not wish to require MCOs, the state can either contract directly with providers, or procure services through a Primary Care Case Management (PCCM) subcontractor. Integration can be achieved through several options. These include paying primary care providers (PCPs) enhanced fees to support care coordination/care management functions, supporting the development of community-based care teams to extend the reach of practice-based care, investing in health information technology to support electronic health information exchange, population management, and performance measurement, and the final option is to develop incentives designed to promote integration. A combination of these methods is also a popular way to move forward. This model is provider-focused, which makes it a nice fit with the development of Accountable Care Organizations (ACOs).

Behavioral Health Organization as Integrated Care Entity

Another alternative is to focus on the organizations that have the qualifications to deliver the right care to individuals with mental illness: Behavioral Health Organizations (BHOs). To integrate care through MCOs, BHOs can be contracted to provide both physical and behavioral health services for individuals. In this case, the state, through partnership between the Medicaid agency, the state mental health agency, and other relevant purchasers of mental health services would contract with one or more BHOs to manage both sets of services and associated provider networks.

MCO/PCCM and BHO Partnership Facilitated By Financial Alignment

This option retains the existing separation in many states between medical and behavioral health care, but strives to more properly align payment in each program to enhance care coordination. Specifically, many states carve out behavioral health services to a BHO, either for all beneficiaries or for the subset with SMI or other significant behavioral health needs. Although carve-outs can present obstacles to effective physical/behavioral health integration, states can create aligned financial incentives across systems by implementing shared savings models or other performance-based incentives that reward integration. Shared savings models allow all relevant parties to realize financial improvements by improving care coordination across systems.

There are strengths and weaknesses to each model, but a state’s selection may be driven based on their existing managed care capacity. A mix of the above models might also work, as well as combining these models with a health home or ACO approach.

[i] Joe Parks, MD, Dale Svendsen, MD, Patricia Singer, MD, Mary Ellen Foti, MD, Barbara Mauer, MSW, CMC, “Morbidity and Mortality in People with Serious Mental Illness,” National Association of State Mental Health Program Directors (NASMHPD) Medical Directors Council, (October 2006),

[ii] J. Kasper, M. O’Malley-Watts, B. Lyons, “Chronic Disease and Co-Morbidity Among Dual Eligibles: Implications for Patterns of Medicaid and Medicare Service Use and Spending,” Kaiser Commission on Medicaid and the Uninsured, (July 2010),

[iii] Allison Hamblin, Center for Health Care Strategies, James Verdier and Melanie Au, Mathematica Policy Research, “State Options for Integrating Physical and Behavioral Health Care,” Centers for Medicare & Medicaid Services, Technical Assistance Brief, (October, 2011),


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