Less Spending on Drugs for Mental Disorders in States with Medicaid Managed Care

May 31, 2016

States with higher Medicaid managed care penetration spend less on medications for patients with serious mental illness, according to a new study in The American Journal of Managed Care.

Researchers are unsure, however, whether the finding suggests less use of ineffective drugs and better care coordination for people with serious mental illness (SMI) or if the SMI population is experiencing barriers to effective medications. They suggested future studies investigate the issue. 

“From a policy perspective, the implications of lower Medicaid drug utilization and spending for SMI beneficiaries are unclear without knowing the corresponding impact on healthcare outcomes,” they wrote. “On the one hand, if managed care is associated with less use of ineffective drugs, then this lower utilization can be viewed as cost-effective, with state Medicaid programs achieving similar outcomes at a lower cost.

“However, if managed care is associated with less use of effective drugs, then this decreased utilization may not be cost-effective due to the increased likelihood of negative health outcomes, such as emergency department visits, hospitalizations, homelessness, incarcerations, and death.”

Between 1999 and 2011, Medicaid managed care penetration across the nation rose from 54.5% to 74.9%, according to researchers. The study aimed to gauge the expansion’s effect on beneficiaries with serious mental illness, a population researchers consider vulnerable because its pharmaceutical spending is often carved out from its managed care benefit.

Although cross-sectional analyses of state Medicaid programs for the years 1999 to 2011 suggested carve-out states with higher penetrations of Medicaid managed care spent significantly less on SMI pharmaceuticals per beneficiary, panel-data analyses failed to find statistically significant results. Furthermore, researchers are unaware whether the association between higher managed care and lower SMI drug spending is causal.  

They did note, however, that the tendency for states to carve out behavioral health services from managed care benefits has a potential downside for people with serious mental illness who likely receive other medical services: fragmentation of care.

“Recently, some states have moved to carve in behavioral health into an integrated Medicaid managed care benefit,” they wrote. “This shift has the potential for states to better integrate mental health with other health care services by making a single organization accountable for all of a beneficiary’s medical care.”—Jolynn Tumolo



Schwartz AL, Pesa J, Doshi D, et al. Medicaid managed care penetration and drug utilization for patients with serious mental illness. The American Journal of Managed Care. 2016;22:346-353.