Medicaid Basics: Q & As for Psychologists

by Government Relations Staff

October 26, 2004 — Many state Medicaid plans have reduced benefits or limited eligibility in recent years due to reduced program funding from their state legislature. Psychological services remain at risk of being decreased or eliminated when states consider Medicaid cutbacks.

About one-half of state Medicaid plans now include psychological services for individuals over the age of 21. Of the states that do so, several set restrictions such as limiting the number of psychotherapy visits or hours of diagnostic testing.

Many state psychological associations are actively working with, and in some cases challenging, their legislators and governors in order to protect psychological services under Medicaid. Understanding how the program works is the first step in individual psychologists supporting organized psychology's efforts to ensure that low-income beneficiaries have access to the psychological services they need.

This set of frequently asked questions and answers (Q-and-As) provides basic information to help you understand Medicaid program benefits and eligibility, as well as national and state-level actions related to Medicaid. A link to a more extensive Q-and-A document appears at the end of this material.

Medicaid is a voluntary federal program that provides participating states with matching funds to offset some of the costs of health care for eligible individuals.

Medicaid provides health care for certain low-income individuals. The three primary groups enrolled under Medicaid are low-income parents and children, the elderly and the disabled. To determine eligibility, an individual's income is compared to a specified percentage of the federal poverty level. In some cases, individuals with incomes too high to qualify for Medicaid may become eligible by "spending down", meaning they incur large medical, hospital, or long-term care expenses.

Benefits under Medicaid fall into two categories: mandatory and optional. States must provide the mandatory benefits in order to receive the federal matching funds. Mandatory benefits include, for example,

• Inpatient and outpatient hospital services

• Physicians' services (MDs and DOs)

• Laboratory and X-ray services

• Services through Federally qualified and rural health care centers

• Nurse midwife and nurse practitioner services

• Early and periodic screening, diagnostic, and treatment (EPSDT) services for individuals under 21

• Nursing home services

Optional services are benefits that a state may choose to include under its plan. Optional benefits are also eligible for federal matching funds. Some examples of optional benefits are:

• Dental services

• Chiropractic services

• Vision screening

• Psychological services

• Home health care

• Physical therapy

• Podiatry

No. As an optional benefit, states are not required to include psychological services in their Medicaid plans. About half of the states offer services by a psychologist in independent practice as a benefit for adults. While the remaining states may cover psychological services offered through a clinic, hospital, or community health center, they do not allow psychologists to directly bill Medicaid.

No. States that offer psychological services may have varying coverage limitations. Massachusetts and Washington cover psychological evaluations but not treatment. Other restrictions that states have placed on psychological services include:

• Kansas: Only 4 hours of psychological testing over 2 years

• New Hampshire: Psychotherapy limited to 12 sessions per year

Children covered by Medicaid have access to psychological services as part of the Early and Periodic Screening, Diagnostic and Treatment (EPSDT) benefits. EPSDT services, which include screening and treatment for mental conditions, are mandatory. States must offer EPSDT services to all Medicaid-eligible children under age 21.

Definitely. Over the last three years, numerous States have reduced optional benefits, including mental health and psychological services. To illustrate, psychological services were severely reduced last year under Medicaid plans in Ohio and Texas. In Maine, the legislature rejected a proposal to eliminate independent psychological services and instead limited the number of visits to 16.

Yes. Just because your state currently offers psychological services as an optional benefit doesn't mean it always will. If states need to cut or limit the costs of their Medicaid plans, optional benefits will continue to be at risk. To reduce the risk of cutbacks, psychologists need to support state psychological association efforts to educate policymakers about the importance of psychological services for Medicaid beneficiaries.

The Practice Organization is addressing Medicaid in several ways. The Government Relations Office will monitor federal legislative proposals and alert its Federal Advocacy Coordinators to significant developments appropriate for grassroots advocacy. Government Relations will also review actions by CMS, including approval of waiver applications and proposed changes to Medicaid regulations.

The Practice Organization's Office of State Advocacy will track Medicaid legislation at the state level and research access under Medicaid to psychological services for children. State Advocacy will also consult with the State and Territorial Psychological Associations and facilitate grants from the APA Committee for the Advancement of Professional Practice (CAPP) to respond to proposed eliminations of optional Medicaid services.

For additional information, see this more detailed set of questions and answers about Medicaid.