Current and Future Funding Sources for Specialty Mental Health and Substance Abuse Treatment Providers

Objectives

Goals were to describe funding for specialty behavioral health providers in 1986 and 2005 and examine how the recession, parity law, and Affordable Care Act (ACA) may affect future funding.

Methods

Numerous public data sets and actuarial methods were used to estimate spending for services from specialty behavioral health providers (general hospital specialty units; specialty hospitals; psychiatrists; other behavioral health professionals; and specialty mental health and substance abuse treatment centers).

Results

Between 1986 and 2005, hospitals—which had received the largest share of behavioral health spending—declined in importance, and spending shares trended away from specialty hospitals that were largely funded by state and local governments. Hospitals’ share of funding from private insurance decreased from 25% in 1986 to 12% in 2005, and the Medicaid share increased from 11% to 23%. Office-based specialty providers continued to be largely dependent on private insurance and out-of-pocket payments, with psychiatrists receiving increased Medicaid funding. Specialty centers received increased funding shares from Medicaid (from 11% to 29%), and shares from other state and local government sources fell (from 64% to 46%).

Conclusions

With ACA’s full implementation, spending on behavioral health will likely increase under private insurance and Medicaid. Parity in private plans will also push a larger share of payments for office-based professionals from out-of-pocket payments to private insurance. As ACA provides insurance for formerly uninsured individuals, funding by state behavioral health authorities of center-based treatment will likely refocus on recovery and support services. Federal Medicaid rules will increase in importance as more people needing behavioral health treatment become covered.