Pediatric Behavioral Health Providers Brace for Medicaid Cuts

This is an exclusive BHB+ story

Medicaid is the No. 1 payer for youth mental health care in the nation. Yet, with proposed cuts on the chopping block as part of the Trump administration’s budget reconciliation, behavioral health providers face an uncertain path ahead.

Possible cuts to the federal health coverage program could exacerbate staffing impacts in an industry already fatigued by workforce shortages and lead to an increase in youth inpatient and emergency room treatment for behavioral conditions, industry insiders told Behavioral Health Business.

Medicaid expansion that took place between 2014 and 2023. Expansion efforts are associated with improvements in mental health. A growing number of adolescents between 12-17 have received mental health treatment in recent years, according to the 2023 National Survey on Drug Use and Health, and Medicaid expansion has played a part in increasing access.

Medicaid requires pediatricians to engage in periodic screening and diagnostic treatment of behavioral health conditions and ensures coverage of this care. Medicaid has also been leveraged to increase school-based mental health services across the nation to address what the American Academy of Pediatrics has deemed an ongoing “national emergency in child and adolescent mental health.”

These tumultuous policy and funding shifts are also happening right on the heels of what had been bipartisan progress in youth mental health policy with the passage of the 2022 Safer Communities Act. It expanded access to pediatric mental health grants, community mental health programs and mental health services in schools. June 25 will mark three years since its passage.

“For someone working in this space, it just feels like such a whiplash going from such a bipartisan effort with new investments in Medicaid to really support this area to the conversation that’s happening now,” Anne Dwyer, associate research professor at the Georgetown University Center for Children and Families, McCourt School of Public Policy, told BHB. “This will lead to devastating cuts for state Medicaid programs. About half of all children are covered by Medicaid and the Children’s Health Insurance Program (CHIP), so this will ultimately impact them. I’m concerned about how these types of cuts could really reverberate across systems.”

Dwyer previously worked on the U.S. Senate Finance Committee for nearly eight years as senior health counsel, overseeing the Medicaid and CHIP portfolios for the committee.

If the proposed policies move forward, Dwyer said they will present challenges for providers, states and advocacy efforts.

“I think it’s very hard to do proactive policymaking when you’re having to spend so much time doing reactive policymaking,” Dwyer said. “How can you really focus on moving the needle forward?”

What providers can control

Youth behavioral health providers are approaching their work through a different lens than before, centered around what is within their control, as they look ahead at what may change under the new administration.

“We’re facing this paradox: demand for youth mental health services is skyrocketing as public support and public funding for it are lagging,” Natalie Schneider, CEO of Fort Health, said. “We can’t wait for policy fixes.”

New York City-based Fort Health is a virtual provider of therapy and psychiatry services for children aged 4-24.

Anticipating Medicaid cuts, companies providing mental health services should take, Schneider explained: utilizing AI tools to enhance efficiency and care coordination to reduce costs, also diversifying their payer mix to mitigate overexposure to Medicaid and collaborating with pediatricians who play a significant role in behavioral health diagnoses for youth.

Lydia Rudy, chief development officer at Eating Recovery Center and Pathlight Mood and Anxiety Center, underscored similar strategies in care partnership and integration that providers can look to amid ongoing uncertainties.

“It’s important for providers to be realistic about what they can and cannot control,” Rudy told BHB. “Where can energy be best spent? I think this is going to require our providers to be more creative within the models that remain intact in our community, like care coordination models.”

Examining where partnerships can happen between community providers, behavioral health experts, school-based mental health professionals, nonprofits and other local organizations will be key, she explained.

“I think you’ll see a lot of partnerships built between these entities and they’ll form these pots that can pool resources for providers to tap into and understand what’s available in their communities, so that they can be part of a safety network,” Rudy said.

The Eating Recovery Center and Pathlight Mood and Anxiety Center is headquartered in Denver and operates throughout 17 states. It provides inpatient, residential, intensive outpatient, partial hospitalization and virtual care for eating disorders and a range of mental health conditions.

Doing more to leverage early detection and early intervention for youth can also be a way for providers to mitigate costs downstream, she added, allowing funds in other areas to go further.

Liz Woike, president and CEO of BestSelf Behavioral Health, a mental health provider in Buffalo, New York, said, despite the uncertainty around Medicaid, as a provider, it is staying “focused on what we can control — delivering high-quality, accessible care to the youth and families who rely on us.”

She noted that the company still plans to expand services and resources for youth, where possible, “no matter the funding landscape.”

Vulnerable areas and what’s worth watching

Section 1915(b) and 1115 waivers, which respectively allow states to implement managed care programs for Medicaid beneficiaries and to test novel health care delivery and payment models, could be first on the chopping block, Schneider warned, along with school mental health funding.

Cutting these programs due to constrained budgets will effectively keep demand for services on an upward trajectory, while supply and access decline, ultimately adding strain to pediatricians.

“It’s such a shame because we were just kind of starting to round the corner on reducing things like stigma and improving access for youth. It really felt like there was light at the end of the tunnel,” Schneider said. “There’s a reason it’s called a ‘youth mental health crisis.’ It’s one of the nation’s most significant healthcare problems. We haven’t solved it yet, and these cuts could stunt progress before we are really able to get over the hump.”

Ultimately, the most important thing to consider in the context of pending Medicaid cuts and sustaining youth mental health services is for providers to ask themselves, “How do you stretch very limited resources while still delivering impact?” Schneider said.

Being mindful of resources and leveraging more affordable care professionals like unlicensed therapists, in addition to exploring new care models or parent training programs, can assist with filling the gaps in youth mental health care caused by Medicaid cuts, Schneider explained.

However, even those efforts may not fill all the gaps created if the cuts to Medicaid come to fruition. It could also severely impact optional services like home and community-based services, which will have a big effect on the mental health of youth, Dwyer said.

“Children with severe mental health needs do rely on home and community-based services, and again, those are optional services,” she said. “That’s often a category of services that get cut, or we might see a waiting list increase for. That’s an area I would be watching carefully if this level of cuts were to go into effect.”

Medicaid’s Early and Periodic Screening Diagnostic and Treatment (EPSDT) benefit for pediatric behavioral health could also be at risk, Dwyer noted.

“I think now it’s just a question of whether states will have the resources to make the changes many would like to see to make the promise of EPSDT a reality,” Dwyer said. “Are they going to have the type of support from HHS to do that? I don’t know. I think that EPSDT space is something to be thinking about.”

The pending cuts also leave open-ended, unanswered questions about improving mental health parity, Dwyer said. Particularly given that there is currently a pause from the Trump administration on next steps for mental health parity enforcement.

Rudy echoed these remarks.

“If Medicaid funding pulls back and the number of providers gets cut, my suggestion would be to go to your local hospital and health systems and become embedded in a part of their continuum of care somehow,” Rudy said. “I think there is a responsibility, if I dare say, for the payer networks and the major commercial payers to evaluate their ability to contribute to a solution, and make it easier for folks to be paneled in and credentialed. Parity is a really big thing. It’s really hard to put all the burden on the providers of mental health care if we aren’t as a whole recognizing the rules around parity and reimbursement.”

While providers may not be able to control HHS priorities, Medicaid cuts or other policy shifts that occur in 2025, continuing to work with payers toward value-based models and demonstrating quality outcomes will prove to be a worthy path forward, Schneider agreed.

“We’re seeing increased receptivity from payers to talk about ‘pay for performance’ models whereby, if we can demonstrate improved clinical quality, they would be more receptive to doing value-based care and those sorts of things,” she said. “I think we also need to consider other models, which is hard given how difficult traditional therapy is to scale.

Despite the difficulty that pivoting to new models and reassessing resources may present for providers, failing to look to other tactics and not advocating for continuity of mental health care for the youth Medicaid population will ultimately lead to “an increase in inpatient treatment and ER visits,” Schneider said. From a population health standpoint, that will reverse progress by beginning to show up in metrics down the line, like increased youth suicide rates and other negative outcomes.