Medicaid’s role in purchasing and delivering substance abuse services is changing dramatically. Prior to the implementation of the Affordable Care Act (ACA), most state Medicaid programs did not cover childless adults and covered only a limited number of parents. Moreover, coverage of substance abuse services has traditionally been an optional Medicaid benefit and, as a result, many states have provided only limited substance abuse service coverage. Twenty-five states plus Washington, DC, are expanding Medicaid in 2014 and will collectively cover as many as 5 million adults with incomes up to 133 percent of the federal poverty level (FPL).1 Benefits extended to these newly covered adults must include mental health and substance abuse services that meet the requirements of the Mental Health Parity and Addiction Equity Act (MHPAEA). Taken together, these changes are a major catalyst for transformation of substance abuse service coverage and delivery in Medicaid.

This issue brief explores state strategies with respect to purchasing substance abuse services for adult Medicaid beneficiaries, with a particular focus on states that use managed care for the purchase and delivery of physical health services. The brief reviews the current landscape of substance abuse coverage in Medicaid managed care states and the paradigm shift created by the ACA Medicaid expansion in terms of substance abuse eligibility, benefits, and provider capacity.

Originally published in Medicaid Managed Care Information Resource Center on May 12, 2014.