TRENDS IN BEHAVIORAL HEALTH:

THE 2017 EDITION TRENDS IN BEHAVIORAL HEALTH: A Reference Guide on the U.S. Behavioral Health Financing & Delivery System Brought to you by 2017 Otsuka America Pharmaceutical, Inc., Rockville, MD September 2017 00US17EUB0001

FOREWORD Over 43 million people in the United States suffer from a mental illness and more than 20 million Americans have an addictive disorder. 1,2 The incidence of co-occurring mental illnesses and addictive disorders is high, requiring specialized treatment approaches. In 2014, behavioral health treatment expenditures totaled $220 billion. 3 While treatment of these disorders is less than eight percent of total health care spending, the impact of these illnesses is far greater. 3 Individuals with a behavioral disorder use at least two times more total health care resources than individuals without a behavioral disorder. 4 And, behavioral health disorders also have a large socioeconomic and human impact on the nation as a whole. Improving the behavioral health delivery systems, in terms of care coordination, consumer access, and quality, is a critical component in improving the overall effectiveness and efficiency of the U.S. health care system. To contribute to the work of the thousands of dedicated professionals in the health care field focused on issues related to behavioral health disorders, Otsuka America Pharmaceutical, Inc. (OAPI) and Lundbeck are pleased to share with you this first annual reference guide, Trends in Behavioral Health: A Reference Guide on the U.S. Behavioral Health Financing & Delivery System. OAPI and Lundbeck are engaged in a collaborative long-term global alliance agreement based on a shared heritage of research and development in neuroscience. We believe this collaboration will lead to new products that will have a positive impact on a broad range of behavioral health conditions improving the lives of millions of people. Lundbeck and OAPI always want to be at the cutting edge of the health care field. We empower our people to push the boundaries of creativity and convention. Our goal with this reference guide is to make a positive contribution to the national conversation among key stakeholders, including commercial and government payers, integrated delivery networks, and providers, about the disproportionate effect of behavioral health disorders on the U.S. health care system, and the trends shaping the field. The guide includes an update on key national policies, a state-by-state landscape analysis, key metrics on behavioral health service delivery capacity and quality metrics, and a national survey of health plans on population health management approaches specific to individuals with complex support needs with behavioral disorders. In this guide, you will discover that it is a vastly different landscape than prior to the implementation of the Affordable Care Act 3, shaping the care for individuals with behavioral disorders. And, each year, our goal is provide an update on the complex equation that encompasses health care coverage and financing, care management options, and the availability and quality of services being delivered. We hope you find the information in this reference guide valuable in advancing your good work, and we welcome your comments. Sincerely, Sean Phillips, Pharm. D. Otsuka, Vice President Managed Markets Brian McCarthy Lundbeck, Vice President Managed Markets

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TABLE OF CONTENTS I. Executive Summary 6-7 II. National Behavioral Health System Landscape 8-15 Executive Summary 8 U.S. Health Care Coverage Trends 8-9 Federal Behavioral Health Policy Initiatives 10-12 Veterans and Behavioral Health Care 12-15 III. State Behavioral Health Financing and Service Delivery Systems 16-23 Executive Summary 16 State Behavioral Health Systems Typology Chart and Medicaid Behavioral Health Financing Arrangements 16-17 State Behavioral Health Care Coverage and Reference Chart 19 State Medicaid Financing Systems for the SMI Population 19 State Innovation Initiatives and Reference Chart 20-23 IV. Health Plan Population Health Management 24-29 Executive Summary 24 Health Plan Current and Future Use of Analytics in Identification and Early Intervention of High Risk Consumers 24 Health Plan Current and Future Use of Innovations in Improving Consumer Access to Behavioral Health Treatment Strategies 25-26 Health Plan Current and Future Use of Behavioral Health Consumer Engagement Strategies 26 Health Plan Current and Future Use of Models to Improve Coordination of Care for Consumers With Behavioral Health Conditions 27 Health Plan Current and Future Use of Behavioral Health Strategies For Ensuring Quality of Care 28 Health Plan Current and Future Use of Behavioral Health Provider Partnership Models 29 V. Consumer Access and Delivery of Care 30-37 Executive Summary 30 Consumer Access to Behavioral Health Care 30-33 Behavioral Heath Care Quality 34-37 The Centers for Medicare and Medicaid Services Quality Measures 37 VI. Additional Resources 38 VII. Sources 39-46 5

EXECUTIVE SUMMARY EXECUTIVE SUMMARY This 2017 first edition of Trends in Behavioral Health: A Reference Guide on the U.S. Behavioral Health Financing & Delivery System (The Guide) provides information and insights into the multi-layered United States behavioral health system. The Guide includes a snapshot of current statistics, current issues, and emerging trends in order to inform the discussions, debates and decision-making of policy-makers, payers, providers, advocates and consumers in today s dynamic health care environment. It begins with the national policy context that is shaping the U.S. health and human services market and by extension the behavioral health market. The Guide then focuses on the unique state behavioral health delivery systems that were created by a combination of historical practices, federal and state policy, and market factors over the past years. It also examines the practices of health plans that now manage the health care and behavioral health care for over 75% of the U.S. population. Finally, The Guide looks at behavioral health from the consumer perspective in terms of access to inpatient services, quality of care and the performance of the health plans in managing these services. Overall, there are several trends that are having a profound impact on behavioral health financing, service system delivery and outcomes that are worth noting: National health care policy, specifically as related to Medicaid and Medicare, as well as current market trends establish the parameters for behavioral health financing and the behavioral health service delivery. With the majority of consumers with serious mental illness (SMI) covered by public payers, Medicaid and Medicare policy initiatives have the largest impact for this population. The national mental health market is moving towards a more comprehensive, value-based system of care. Federal policy is focused on developing better and more cost-effective use of available behavioral health funding to manage access, quality, and thus value of care. Alternative payment models, the end of the Institutions for Mental Disease (IMD) exclusion, coordination of care codes, and delivery system reform and modernization all seek to improve the delivery, integration, and reimbursement of care. Overall, health insurance coverage nationally has turned to managed care models to address cost, access, and quality of care. Virtually all individuals with commercial coverage and over 70% of individuals with coverage through Medicaid are in managed care plans. Currently, only about 30% of individuals with Medicare have opted into Medicare Advantage managed care plans. Medicaid is the primary payer for behavioral health services, and as the main payer serving the SMI population, state Medicaid programs serve as an important barometer for the behavioral health market. An examination of state-level policy finds two important trends an increase in behavioral health financing integration into health plans and the emergence of consumer specific specialty health plans focused on the medical and behavioral health needs of the SMI population. State Medicaid programs have adopted a number of care coordination and integration initiatives that serve not only consumers with complex medical conditions, but also consumers with behavioral health conditions. There are 41 states with at least one behavioral health care coordination initiative including patient-centered medical home, health home, accountable care organization (ACO), dual demonstration, and certified community behavioral health clinic (CCBHCs) models. 6 TRENDS IN BEHAVIORAL HEALTH

Behavioral health integration is becoming a greater priority as the health care system improves consumer access, customer satisfaction, and consumer engagement. Payers and providers are increasingly managing high-cost and high-risk groups through population health management innovations that close the gap between members medical and behavioral needs through evidence-based practices and technologies that increase access to care and empower active individual participation in attaining health goals. It is clear that national and state policies and practices have surpassed the initial efforts to advance behavioral health, underscoring a greater understanding of its effects on not just the cost of treatment, but more broadly on population health and wellness. The emergence of technology and evidentiary treatment models enable health systems to tailor value-based service delivery models that focus on the access and engagement needs of varying demography and chronic conditions. With these new provisions and innovations, there is more opportunity for person-centered and integrated high-quality health care to be placed firmly at the center of the new value equation. 7

NATIONAL BEHAVIORAL HEALTH SYSTEM LANDSCAPE The United States (U.S.) system for the financing and delivery of behavioral health services is in a state of flux. The market factors contributing to the concurrent developments in behavioral health are a complex combination of national policy, the unique effects of state governance and regulation in the United States, and the many organizations participating in the health and human services industry. This opening section looks at the key U.S. policy issues and national trends in the health care system that are the framework for the financing and delivery of behavioral health services. Among these many factors, there are a few with direct and significant impact on behavioral health. Over the past five years, we have seen a shift in the population distribution among payers at the national level, with a 40% reduction in the uninsured population and an increase in the Medicaid population as a direct result of the Patient Protection and Affordable Care Act of 2010 (PPACA). 1,2 The past five years have also seen a shift in the financial models being utilized by payers. The use of managed care financing models has increased in the nation by 24% across all payer types between 2011 and 2016 with 76% of the total U.S. population enrolled in some form of managed care. 3 While a number of factors have contributed to changes in the overall landscape of health care, many provisions of U.S. legislation and subsequent federal rules and regulations have had a large impact on the behavioral health care system in particular. 4 These policy initiatives are designed to promote better coordination of care, a more value-based system, and more comprehensive treatment options for consumers. U.S. HEALTH CARE COVERAGE TRENDS The Patient Protection and Affordable Care Act of 2010 (PPACA) has shaped the health care system over the past decade. While a change in the political climate may result in changes to the health care system in the short-term future, the system has already been irrevocably shaped by the PPACA. Over the past five years, we have seen a shift in the population health insurance coverage distribution among payers at the national level, as well as a change in the financing delivery models being utilized by payers. 1,5 Health Insurance Coverage Three major provisions of the PPACA legislation have influenced health care coverage throughout the country, and thereby changed the coverage map for consumers: the first was the option for states to expand their Medicaid programs to cover adults with income below 138% of the federal poverty level (FPL); the second was the creation of the health insurance marketplace, which allowed individuals and small businesses to shop for coverage; and third was the health insurance Figure 1 U.S. Health Care Coverage, 2011 and 2016 1 15% 12% 15% 3% 3% 9% 15% 20% 3% 3% Uninsured Military Medicare Dual Eligibles 52% 54% Medicaid Commercial U.S. Population 2011: 309,348,193 U.S. Population 2016: 323,127,513 * Numbers may not add to 100%, as some consumers may have more than one type of health care coverage. For example, an individual may have primary commercial coverage from a private health plan and receive secondary coverage through Medicare. 8 TRENDS IN BEHAVIORAL HEALTH

mandate, which required all adults to have health insurance or pay a penalty. 6,7 As a result of these three major system changes, there has been significant change in how Americans receive health insurance coverage. The uninsured population has decreased by 40% between 2011 and 2016, while Medicare, Medicaid, and commercial populations have all seen an increase in covered populations. Medicaid has seen the single largest increase in the population covered with enrollment increasing 38% in between 2011 and 2016. 1 Figure 2 Figure 3 Dual Eligibles with SMI, 2009 10 70% 30% Dual eligible population with SMI Dual eligible population without SMI U.S. Health Insurance Coverage For Consumers With SMI, 2014 3 13% 11% 3% 10% 23% 20% 32% 29% Consumers with SMI 56% All Consumers 2% Uninsured Military Medicare non-dual Medicaid Commercial *Numbers may not add to 100%, as some consumers may have more than one type of health care overage. For example, an individual may have primary commercial coverage from a private health plan and receive secondary coverage through Medicare. Health Care Coverage and SMI Population The health care coverage map for consumers with serious mental illness (SMI) differs from that of the general population. Consumers with SMI are defined as consumers age 18 and older with a diagnosable mental, emotional, or behavioral health disorder; meet the criteria specified in the Diagnostic and Statistical Manual of Mental Disorders; and the disorder results in serious functional impairment. A majority of mental, emotional, or behavioral disorders have the potential to be categorized as SMI; however, schizophrenia and bipolar disorder are most commonly associated with the term. 8 Consumers with SMI are disproportionately served by public health care systems. As of 2014, the latest year SMI estimates are available, 58% of consumers with SMI were served by public insurance, 29% were served by private insurance, and 13% were uninsured. As a single payer, Medicaid has the largest proportion of SMI consumers at 32%. This percentage includes dual eligibles as Medicaid is the main payer of behavioral health services. 9 Among different groups of consumers, the dual eligible population has the highest prevalence of SMI an estimated 30% of the population has a diagnosis of SMI. 10 Managed Care Financing Models Between 2011 and 2016, the use of managed care financing models has increased in the U.S. by 24% across all payer types with 76% of the total U.S. population enrolled in some form of managed care. The use of managed care has increased most substantially among public payers, increasing almost 60% between 2011 and 2016. Comparatively, private payer use of managed care increased 13% over the same period. 3 This increase in managed care is due to a combination of factors, including a push to shift more services and populations to managed care financing models - and a desire from payers to delegate the management of care. 11 Medicaid programs have seen the single largest increase (78%) in the number of consumers enrolled in managed care between 2011 and 2016. In 2011, 50% of the Medicaid population was enrolled in managed care, by 2016, 68% of the population was enrolled in managed care. 3 The use of Medicaid managed care has increased for a number of reasons including the need to stabilize state Medicaid costs, the shift to cover high-need and high cost populations through managed care, and the expansion of Medicaid to adults with income below 138% of the federal poverty level (FPL). 7,11 Medicare has seen a 52% increase in the use of managed care for enrollees, while the military population has actually seen a decrease of 17% in the use of managed care. 3 9

Figure 4 Managing Care Financing Models Payer Type 2011 Percent of U.S. 2016 Percent of U.S 2011 Percent of Population 2016 Percent of Population Population Covered 3 Population Covered 3 Enrolled in Managed Care 3 Enrolled in Managed Care 3 Commercial 52% 54% 93% 98% Medicaid 18% 23% 50% 68% Medicare 16% 18% 25% 33% Military 3% 3% 57% 49% Uninsured 15% 9% N/A N/A Total 105% 107% 64% 76% * Numbers may not add to 100%, as some consumers may have more than one type of health care coverage. For example, an individual may have primary commercial coverage from a private health plan and receive secondary coverage through Medicare. FEDERAL BEHAVIORAL HEALTH POLICY INITIATIVES While a number of factors have contributed to changes in the overall landscape of health care, many provisions of U.S. legislation and subsequent federal rules and regulations have had a large impact on the behavioral health care system. 4 There are five major policy initiatives that will shape the mental health market over the next few years; these policy initiatives are designed to promote better coordination of care, a more value-based system, and more comprehensive treatment options for consumers. Medicare Coordination of Care Codes In January 2017, Medicare implemented a new coding and reimbursement system for behavioral health services integrated into primary care settings that are furnished via the Medicare psychiatric Collaborative Care Model (CoCM). 12 The psychiatric CoCM allows for interprofessional consultation between a psychiatrist or behavioral health specialist and the primary care clinician. Previously, care coordination activities between a psychiatrist or behavioral health specialist and the primary care clinician were bundled into the evaluation and management visit codes used by all specialties. 13 Provider organizations using psychiatric CoCM will bill using three G-codes (G0502, G0503, and G0504) until Current Procedural Terminology (CPT) codes are established possibly by 2018. 14 Although, these new codes are unlikely to change the way provider organizations operate, it does signal an emphasis by Medicare on integration of behavioral and physical health. Alternative Payment Models in Medicaid and Medicare In January 2015, the federal Department of Health and Human Services announced a goal of tying 90% of Medicare fee-forservice payments to quality by 2018 and 50% of payments to cost and quality by 2018. 15 Examples of advanced alternative payment models (APMs) currently being implemented by Medicare include Next Generation Accountable Care Organizations (ACOs), Comprehensive Primary Care Plus, and the Oncology Care Model. Additionally, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) ended the sustainable growth rate for the Medicare physician fee schedule and replaced it with the Quality Improvement Program (QIP). Under QIP, clinical professionals will be required to participate in either advanced alternative payment models or the meritbased incentive program, which requires clinical professionals to report on quality in order to receive adjustments to their Medicare payments. 16 At this time, QIP does not include behavioral health provider organizations; however, participating clinical professionals may choose to report on behavioral health measures including anti-depressant medication management and depression remission at 12 months. 17 The Centers for Medicaid and CHIP Services has also issued encouragement to state Medicaid programs to implement alternative payment models. Examples of alternative payment models in Medicaid include ACOs, health homes, and episodes of care. 18 In 2011, Missouri implemented a health home initiative for adults and children with SMI. Community mental health centers receive a per member per 10 TRENDS IN BEHAVIORAL HEALTH

month (PMPM) rate to provide the six health home model care coordination functions. 19 As of January 2016, the program s cost savings were $98 per member per month (PMPM) and emergency room visits per 1,000 were down 34%. 20 Institutions for Mental Disease (IMD) Medicaid Exclusion In April 2016, the Centers for Medicare and Medicaid Services (CMS) finalized new managed care rules for the Medicaid program. Under the new rules, Medicaid health plans are able to care for consumers of any age in an Institution for Mental Disease (IMD) for up to 15 days as an in lieu of service. Prior to this, state Medicaid programs were prohibited from receiving federal funding for the provision of services in a facility with more than 16 beds where beds are primarily used to serve those with a mental illness or substance use disorder. Adoption of this new rule is dependent upon whether the state utilizes health plans or behavioral health organizations. To enact the rule, states must include IMDs as an in lieu of of service in the health plan contract. Health plans are not required to provide the service and consumers may refuse service in an IMD. 21 Parity Legislation In 2008, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) required private group plans to provide parity for mental health and substance use disorder benefits. Two years later, the Patient Protection and Affordable Care Act (PPACA) required parity for individual and small group plans, and in 2016, both the Department of Defense (DoD) and the Centers for Medicare and Medicaid Services (CMS) released final rules extending mental health and substance abuse parity to the TRICARE and Medicaid populations respectively. Parity does not require plans to cover mental health and substance abuse benefits. Parity requires that when a health plan offers mental health and substance abuse benefits, those benefits may not be more restrictive than medical/surgical benefits. Restrictiveness is measured through financial requirements, quantitative treatment limits, and non-quantitative treatment limits. Although parity has been implemented fairly recently, it has been suggested that parity has improved treatment rates for mental health and substance use. 22 Public Health Care Safety Net For individuals with SMI who are uninsured, the public health safety-net also serves as an important resource for receiving care. 2 The majority of care to the uninsured is provided in hospital based settings, followed by publicly supported community provider organizations, and then office-based physicians. 23 Under the PPACA and other federal initiatives, key changes are being made to how services are financed and delivered to individuals with SMI who are uninsured. First, under the PPACA, Disproportionate Share Hospital (DSH) payments to hospitals that serve a large number of low-income individuals are set to be reduced in fiscal year 2018. State Medicaid programs are statutorily required to make DSH payments to hospitals that serve a high proportion of Medicaid and lowincome patients. These payments are limited by annual federal allotments and funding differs greatly by state. States may make DSH payments to IMDs covering unpaid costs of care for uninsured individuals age 21 to 64. While the DSH reductions have been postponed in the past, these Medicaid program funds represent an important funding source for hospitals, which total $18 billion in 2014. 24 At the community-based provider level, the Substance Abuse and Mental Health Services Administration (SAMHSA) has implemented a demonstration program in eight states that creates Certified Community Behavioral Health Clinics (CCBHCs) authorized under Section 223 of the Protecting Access to Medicare Act (PAMA), which are required to serve all individuals on a sliding scale regardless of their ability to pay. 25,26 CCBHCs are also eligible to receive enhanced Medicaid funding for reimbursable behavioral health services through the Prospective Payment System (PPS). Drawn from requirements on federally qualified health centers and other Medicaid programs, the CCBHCs are an important signal towards a nationally recognized mental health community-based provider system. 27 Looking Forward at the Health Care Landscape There are ongoing attempts to repeal or replace parts of the PPACA. Upon going to press with this report, the future of these legislative attempts is uncertain. Possible changes to the PPACA might include ending the Medicaid expansion, moving Medicaid financing to block grants or per capita funding, giving states more flexibility in running their marketplaces, imposing penalties on those who do not maintain continuous coverage, and substitute aged-based subsidies for means-based subsidies on the marketplace. 28 In addition to reforms enacted by Congress, the federal Department of Health and Human Services (HHS) also has the opportunity to make smaller regulatory reforms that alter the PPACA. On February 17, 2017, the HHS released a proposed rule on the health insurance marketplace that truncates the 11

open enrollment period, amends standards for the special enrollment period, returns network adequacy standards to the states, and increases the de minimis variation between some health plan medal levels. 29 A letter from the Secretary of HHS and the CMS Administrator also indicate changes to state Medicaid programs including, a faster more transparent process for waivers and state plan amendments, supporting innovative approaches to increase employment and community engagement, and aligning Medicaid and private insurance policies for non-disabled adults. 30 Figure 5a 20 VETERANS AND BEHAVIORAL HEALTH CARE The Veterans Administration (VA) provided health care services to 6.0 million veterans in 2015 or 69% of the total 9.6 million veterans eligible to receive health care services. 31 The gap in coverage is due to the fact that many veterans have other forms of coverage, such as private insurance, TRICARE, Medicare, etc. 32 The VA is an integrated health care system providing the majority of health care services in VA operated medical centers and outpatient sites. 33 The system breaks the country into Veterans Integrated Service Networks (VISNs), which oversee the operation of VA facilities in its defined geographic region. 34 The VA provides a full continuum of mental health services including inpatient, outpatient, and specialized treatment for post-traumatic stress disorder (PTSD). 35 In the past ten to 15 years, the VA has increased the number of facilities offering outpatient care. In 1995, the VA issued a directive to expand the number of community-based outpatient clinics (CBOC). The clinics could either be operated by the VA or contracted to a private clinic, group practice, or single practitioner. At the time of the directive there were 172 hospitals and 175 CBOCs. The majority of clinics were opened between 1998 and 1999 when 124 new CBOCs were opened. 36 In 2016, there were over 755 CBOCs and 144 hospitals. 37 Over the past ten years, the number of veterans receiving mental health care through the VA has increased from 900,000 in 2006 to 1.52 million in 2015. This is an increase of 69%. The majority of that increase in mental health care came between 2006 and 2010, when care increased by 74%. After 2010, the number of veterans receiving mental health care stabilized around 1.55 million. 38 In 2012, the VA found that there were longer than acceptable wait times for accessing mental health services and that VA tracking of wait times was inaccurate. VA standards state that veterans must be seen for an initial evaluation within 24 hours and a comprehensive diagnostic and treatment planning evaluation within 14 days. 39 In the past two years, the VA has made very little progress in lowering mental health wait times. As of October 2014, when the VA began publicly reporting wait times, the average wait for mental health treatment was 4.11 days and in March 2017, the average wait time was 4.06 days. 40 In order to alleviate staffing problems, the VA implemented a mental health hiring initiative in 2012. The initiative s goal was to bring all facilities up to the VA average of 7.72 full-time clinical mental health staff (FTE) per 1,000 patients. 41 As of 2016, some facilities are still working to reach this goal. By 2021, VA analysis finds that an additional 3,712 FTE mental health clinical staff will be needed. 42 In order to address these issues, the VA implemented the Veterans Choice Program, which allows veterans who are not able to schedule an appointment within 30 days of their preferred date, within the clinically appropriate time frame, or on the basis of their residence to schedule an appointment with a provider organization outside of the VA. 43 12 TRENDS IN BEHAVIORAL HEALTH

Figure 5a Veterans Integrated Service Network Map 44 21 WA 20 OR NV CA ID AZ UT MT WY 19 CO 22 NM ND SD 23 NE KS 19 OK MN WI 12 IA IL 15 MO AR 16 MS IN TN MI AL 10 9 KY 7 OH GA 4 WV 5 6 SC PA MD DC VA NC NY 2 NJ 1 VT NH DE ME MA CT RI 21 TX 17 LA 8 FL HI Philippines Islands American Samoa Guam 8 Puerto Rico US Virgin Islands VISN 1: VA New England Healthcare System VISN 2: New York/New Jersey VA Health Care Network VISN 4: VA Healthcare VISN 5: VA Capitol Health Care Network VISN 6: VA Mid-Atlantic Health Care Network VISN 7: VA Southeast Network VISN 8: VA Sunshine Healthcare Network VISN 9: VA MidSouth Healthcare Network VISN 10: VA Healthcare System VISN 12: VA Great Lakes Health Care System VISN 15: VA Heartland Network VISN 16: South Central VA Health Care Network VISN 17: VA Heart of Texas Health Care Network VISN 19: Rocky Mountain Network VISN 20: Northwest Network VISN 21: Sierra Pacific Network VISN 22: Desert Pacific Healthcare Network VISN 23: VA Midwest Health Care Network 13

Figure 5b Veterans Health Administration 45 VISN 1 2 4 5 6 7 8 9 States Served* CT, MA, ME, NH RI, VT NJ, NY, PA DE, NJ PA, WV MD, VA, DC NC, SC VA, WV AL, GA, SC FL, GA PR, VI AL, AR, GA IN, KY, OH TN, VA, WV Number Users with Possible Mental Illness 88,075 98,657 100,875 44,927 135,044 158,283 190,943 113,451 Medical Centers 11 14 10 8 7 9 7 7 Outpatient Clinics 4 1 1 2 7 8 14 7 Community-based Outpatient Clinics 40 59 44 27 28 47 51 39 Psychiatrists 239 249 150 120 221 256 379 147 Mental Health Nurse Practitioners 10 13 2 8 3 5 25 7 Number of Veterans who Accessed Mental Health Services 65,291 31,521 74,434 40,864 107,157 124,304 154,116 82,494 Average Wait Time for Mental Health Care (days to appointment) 3.24 2.97 4.07 4.73 5.34 5.5 3.61 3.86 * AL Alabama, AK Alaska, AZ Arizona, AR Arkansas, CA California, CO Colorado, CT Connecticut, DE Delaware, FL Florida, GA Georgia, HI Hawaii, ID Idaho, IL Illinois, IN Indiana, IA Iowa, KS Kansas, KY Kentucky, LA Louisiana, ME Maine, MD Maryland, MA Massachusetts, MI Michigan, MN Minnesota, MS Mississippi, MO Missouri, MT Montana, NE Nebraska, NV Nevada, NH New Hampshire, NJ New Jersey 14 TRENDS IN BEHAVIORAL HEALTH

10 12 15 16 17 19 20 21 22 23 IN, KY, OH IA, IL, IN MI, WI AR, IL, KS KY, MO AL, AR, FL LA, MO, MS TX OK, NM, TX CO, ID, KS MT, NE, NV UT, WY AK, ID, MT OR, WA CA, NV, HI PH, GU, AS AZ, CA CO, NM IA, IL, KS MN, MO, ND NE, SD, WI WY 154,019 90,848 82,721 183,057 136,834 69,013 101,185 91,135 185,406 91,240 12 8 9 9 5 3 6 8 4 2 2 38 5 1 19 20 11 26 12 2 59 8 52 49 30 51 34 23 58 59 251 176 99 196 205 133 147 193 312 146 21 1 6 6 1 1 17 8 9 6 64,899 62,448 60,945 143,119 91,581 53,345 70,960 74,565 101,437 64,626 3.18 3.79 3.78 3.87 4.93 4.21 3.07 4.42 5.23 3.22 NM New Mexico, NY New York, NC North Carolina, ND North Dakota, OH Ohio, OK Oklahoma, OR Oregon, PA Pennsylvania, RI Rhode Island, SC South Carolina, SD South Dakota, TN Tennessee, TX Texas, UT Utah, VT Vermont, VA Virginia, WA Washington, WV West Virginia, WI Wisconsin, WY Wyoming, AS American Samoa, DC District of Columbia, GU Guam, PH Philippines Islands, PR Puerto Rico, VI Virgin Islands 15

STATE BEHAVIORAL HEALTH FINANCING AND SERVICE DELIVERY SYSTEMS Medicaid is a primary payer for behavioral health services, accounting for 25% of the $186 billion spent on mental health (excluding addiction) in 2014. 1 Consumers with serious mental illness (SMI) are disproportionately served by the public health system, with Medicaid serving a large portion (32%) of those consumers, including dual eligibles. 2 As a primary payer for behavioral health services, and as the main payer serving the SMI population, state Medicaid programs serve as an important barometer for the behavioral health market. Since each state s Medicaid program is unique with different benefits and coverage options, different populations eligible for benefits, and different financing and delivery systems examining the similarities and variation in state-level financing and delivery systems offers better insight into the initiatives shaping the behavioral health market. Since 2011, state Medicaid programs have increasingly moved toward integrated financing models for behavioral health services. Between 2011 and 2017, the number of states with primary behavioral health carve-outs either to governmental entities or private managed care entities decreased. Conversely, during that time period, the percentage of states with behavioral health financing integrated in private health plans increased from 25% to 40%. 3 Financing arrangements for services for consumers with SMI have also moved toward integrated managed care. In 2017, 28 states required consumers with SMI to enroll in a Medicaid managed care program; 18 states required these consumers to enroll in a Medicaid fee-for-service (FFS) plan; and in three states, the population was split between managed care and FFS. 4 In addition to greater integration in financing models, states have also looked for better ways to coordinate benefits and services for consumers. In 2017, there were 41 states with at least one behavioral health care coordination initiative. In total there were 33 states with patient-centered medical homes (PCMHs) 5, 21 states with health homes 6, 12 states with dual eligible demonstration programs 7,8, 11 states with Medicaid accountable care organizations (ACOs) 9,10, and eight states participating in the Certified Community Behavioral Health Clinic (CCBHC) demonstration. 11 STATE BEHAVIORAL HEALTH SYSTEMS TYPOLOGY CHART There are two key factors that characterize the Medicaid behavioral health market who is being served and how behavioral health services are financed. All states are required to cover children, parents/caretaker relatives, pregnant women, and the disabled and aged populations. 12,13 States have the choice under the Patient Protection and Affordable Care Act (PPACA) to expand Medicaid to non-disabled adults with income below 138% of the federal poverty level (FPL). In states that have adopted Medicaid expansion, this population is served by Medicaid, in non-expansion states this population is most likely uninsured. 14 How behavioral health services (excluding pharmacy) are financed determines how consumers receive care, how provider organizations are contracted, and how states pay for these services. There are five behavioral health financing arrangements that states typically use, and often states use more than one arrangement to serve different populations. Those five arrangements include: behavioral health services in primary carve-outs to behavioral health organizations (BHOs), behavioral health services in primary carve-outs to governmental/regional BHOs, behavioral health services in private health plans, behavioral health services in the Medicaid FFS system, and behavioral health services in consumer-specific specialty health plans (medical and behavioral). 3 When taken together, the Medicaid expansion option and the five behavioral health financing alternatives result in ten overarching behavioral health system typologies. The most common model is Medicaid expansion and integration of behavioral health financing into Medicaid health plans. The second most common arrangement is Medicaid expansion with behavioral health financing remaining in the Medicaid FFS plan. 3 16 TRENDS IN BEHAVIORAL HEALTH

Medicaid Behavioral Health Financing Model Definitions 3 A carve-out is a managed care financing model where some portion of benefits dental services, pharmacy services, behavioral health services, etc. are separately managed and/or financed. 15 1. Primary carve-out to private BHOs State Medicaid program delegates some or all behavioral health benefits to a separate private behavioral health organization (BHO) that is at-risk for this subset of services. 3 2. Primary carve-out to governmental/regional BHO State Medicaid program delegates some or all behavioral health benefits to a separate governmental or BHO that is at-risk for this subset of services. 3 3. Behavioral health service financing in private health plan Medicaid program contracts with private health plans who are responsible for all behavioral health services, as well as, physical health services. 3 4. Behavioral health in Medicaid FFS plan The state Medicaid program retains responsibility for some or all behavioral health benefits without delegation to a separate management entity. Other Medicaid services may also be delivered through the Medicaid FFS plan or through a health plan. 3 5. Consumer-specific specialty health plan State Medicaid program delegates responsibility for all benefits (physical health and behavioral health) for consumers with behavioral health disorders (or other specific disorders or needs) to a specialty Medicaid health plan. 3 There are two key factors that characterize the Medicaid behavioral health market who is being served, and how behavioral health services are financed. MEDICAID BEHAVIORAL HEALTH FINANCING ARRANGEMENTS Although states often use more than one carve-out arrangement to serve different populations and these arrangements shift over the years, there is a clear trend showing the decline of primary carve-outs to both private entities and regional/governmental entities. Between 2011 and 2017, the number of states with primary carve-outs to governmental/regional entities and to private managed care entities decreased. During the same period, the percentage of states with behavioral health financing integrated into private health plans increased from 25% to 40%. 3 One other major change occurring in state Medicaid behavioral health financing arrangements is the use of the consumer specific carve-out. In a consumer-specific carve-out, the state delegates care of a specific population to a specialty Medicaid health plan rather than delegating specific services. 18 There are three states with this model Arizona, Florida, and New York. An example of this is the Magellan Complete Care in Florida, which finances services and coordinates care for the SMI population. 4,19 Figure 6 51% 25% 11% 13% 2011 39% 32% 11% 19% Medicaid Behavioral Health Financing Models, % of States, 2011-2017 3 5% 41% 36% 9% 9% 37% 40% 8% 10% 2013 2016 2017 *Numbers may not add to 100% 5% Behavioral Health In Consumer- Specific Specialty Health Plans (Medical & Behavioral) Behavioral Health In FFS Medicaid Plan Behavioral Health Services In Private Health Plans Behavioral Health In Primary Carve-Outs To Governmental/ Regional Entities Behavioral Health In Primary Carve-Out To Private Entities 17

Behavioral Health Financing Arrangement* 3 Medicaid Expansion (32 states) 16 Non-Medicaid Expansion (19 states) 16 Behavioral Health In Primary Carve-Out To Private BHOs Behavioral Health In Primary Carve-Outs To Governmental/Regional BHOs Behavioral Health Service Financing Integrated Into Private Health Plans Behavioral Health Financing In FFS Medicaid Plan Behavioral Health In Consumer-Specific Specialty Health Plan 4 States 1 State 1. Arizona - Acute Care Program 2. Colorado 3. Hawaii - SMI Population 4. Massachusetts Primary Care Case Management Program 1. California 2. Michigan 3. Pennsylvania 4. Washington - All Counties, except Clark & Skamania 1. Arizona Acute Care Dual Eligibles Program 2. Arizona Long-Term Care 3. Hawaii 4. Illinois 5. Iowa 6. Kentucky 7. Louisiana 8. Massachusetts Managed Care Program 9. Minnesota 1. Alaska 2. Arkansas 3. Connecticut 4. Delaware 5. District of Columbia 6. Indiana 7. Maryland 1. Arizona - SMI Population 2. New York - SMI Population 1. Idaho 4 States 2 States 5. North Carolina 6. Utah 18 States 7 States 10. Nevada 11. New Hampshire 12. New Mexico 13. New York 14. North Dakota Medicaid Expansion Population 15. Oregon 16. Rhode Island 17. Washington Clark and Skamania Counties 18. West Virginia 1. Florida 2. Georgia 3. Kansas 4. Nebraska 5. South Carolina 6. Tennessee 7. Texas 12 States and DC 10 States 8. Montana 9. New Jersey 10. New York Long-Term Care 11. North Dakota 12. Ohio* 13. Vermont 1. Alabama 2. Florida Long-Term Care 3. Maine 4. Mississippi 5. Missouri 2 States 1 State 1. Florida - SMI Population 6. Oklahoma 7. South Dakota 8. Virginia 9. Wisconsin 10. Wyoming *States are italicized to denote that they are listed more than once because the state utilizes multiple financing arrangements. STATE BEHAVIORAL HEALTH PHARMACY FINANCING ARRANGEMENTS Some states use different financing arrangements for behavioral health benefits and behavioral health pharmacy. Financing arrangements for behavioral health pharmacy differ slightly than those for behavioral health benefits. Pharmacy behavioral health financing arrangements include, managed FFS by state, integration into the private health plan, and primary carve-out to the BHO. Like behavioral health benefits, mental health pharmacy benefits can be delivered through multiple financing arrangements in each state. In total, there are 34 states with behavioral health pharmacy integrated into the private health plan, 24 states with FFS, and two states with a primary carve-out to a BHO. 17 18 TRENDS IN BEHAVIORAL HEALTH

Figure 7 State Medicaid Behavioral Health Pharmacy Financing Arrangements, 2017 17 Managed FFS By State WA OR NV CA ID AK VT NH MA CT RI NJ DE MD DC AZ UT MT WY NM CO ND SD NE TX KS OK HI MN IA MO AR LA WI IL MS IN MI TN AL KY OH GA WV SC FL FFS financing PA VA NC NY Integrated into private health plans Multiple arrangements ME 1. Alabama 2. Alaska 3. Arkansas 4. Colorado 5. Connecticut 6. Idaho 7. Maine 8. Massachusetts Primary Care Case Management Program 9. Montana 10. North Carolina 11. North Dakota 12. Oklahoma 13. South Dakota 14. Vermont 15. Wyoming 16. California 17. Maryland 18. Michigan Primary Carve-Out To BHO 19. Oregon 20. Utah 21. Florida Long-Term Care 22. Missouri 23. New York Long-Term Care 24. Tennessee 25. Wisconsin 1. Arizona Acute Care Program 2. Hawaii SMI Population 1. Arizona Acute Care Dual Eligibles 2. Arizona Long-Term Care 3. Arizona SMI Population 4. Delaware 5. District of Columbia 6. Florida 7. Florida SMI Population 8. Georgia 9. Hawaii 10. Illinois 11. Indiana 12. Iowa Carve-In To Private Health Plan 13. Kansas 14. Kentucky 15. Louisiana 16. Massachusetts Managed Care Program 17. Minnesota 18. Mississippi 19. Nebraska 20. Nevada 21. New Hampshire 22. New Jersey 23. New Mexico 24. New York 25. New York SMI Population 26. North Dakota Medicaid Expansion Population 27. Ohio 28. Pennsylvania 29. Rhode Island 30. South Carolina 31. Texas 32. Virginia 33. Washington 34. West Virginia 35. Michigan STATE HEALTH CARE COVERAGE Health care coverage varies across the country based on the characteristics of the state s population including unemployment rates, socioeconomic status, and other demographic factors and on state-level policies. In particular, the Patient Protection and Affordable Care Act of 2010 (PPACA) has affected how many Americans receive health insurance coverage, through the federal essential health benefit, parity requirements, state-based heath insurance marketplaces, and Medicaid expansion. In general, states that have expanded Medicaid have a lower uninsured population and a higher percentage of their population enrolled in Medicaid. Among the 32 states that have expanded Medicaid, in 2015 the average uninsured rate is 7%, with Massachusetts having the lowest uninsured rate at about 3% of the state population and Alaska having the highest uninsured population at about 15%. Among the 19 states that have not expanded Medicaid, the average uninsured rate is 11%, with Wisconsin (which has a partial Medicaid expansion) having the lowest uninsured rate at about 6% of the state population and Texas having the highest uninsured population at about 18%. 16 Medicaid coverage across the country ranges from a high of 25% of the population in New Mexico (a state that expanded Medicaid), to a low of 7% of the total population in Utah (a state that did not expand Medicaid). Across most states, the largest percentage of the population has commercial insurance coverage (employer-sponsored or other private insurance). Utah, one of the state s with the lowest rate of Medicaid coverage, has the highest percentage of their population enrolled in commercial coverage at about 69%. 16 19

Figure 8 State Health Care Coverage Reference Chart 16 State Medicaid Expansion Total Population Medicaid % Dual Eligibles % Medicare % Military % Commerical Insurance % Uninsured % Alabama Yes 4,863,000 13% 4% 14% 3% 57% 9% Alaska No 741,894 12% 2% 8% 9% 54% 15% Arizona Yes 6,931,071 17% 3% 13% 2% 52% 11% Arkansas Yes 2,988,248 18% 4% 14% 2% 53% 9% California Yes 39,250,017 21% 4% 9% 2% 56% 8% Colorado Yes 5,456,574 16% 2% 12% 4% 58% 8% Connecticut Yes 3,576,452 16% 5% 11% 1% 61% 6% Delaware Yes 952,065 16% 3% 13% 2% 61% 5% District of Colombia Yes 681,170 24% 4% 6% 2% 61% 3% Florida No 20,612,439 13% 4% 15% 3% 52% 13% Georgia No 10,310,371 13% 3% 11% 3% 56% 14% Hawaii Yes 1,428,557 15% 3% 12% 9% 57% 4% Idaho No 1,683,140 12% 3% 14% 2% 57% 11% Illinois Yes 12,801,539 16% 3% 12% 1% 62% 7% Indiana Yes 6,633,053 15% 3% 14% 1% 58% 10% Iowa Yes 3,134,693 13% 3% 15% 1% 63% 5% Kansas No 2,907,289 10% 2% 14% 3% 32% 9% Kentucky Yes 4,436,974 19% 4% 15% 3% 53% 6% Louisiana Yes 4,681,666 17% 5% 12% 2% 52% 12% Maine No 1,331,479 15% 7% 15% 2% 53% 8% Maryland Yes 6,016,447 13% 2% 11% 3% 64% 6% Massachusetts Yes 6,811,779 15% 4% 11% 1% 66% 3% Michigan No 9,928,300 15% 3% 15% 1% 61% 6% Minnesota No 5,519,952 13% 3% 14% 1% 65% 5% Mississippi No 2,988,726 18% 5% 13% 3% 48% 13% Missouri No 6,093,000 11% 3% 15% 2% 59% 10% STATE MEDICAID FINANCING SYSTEMS FOR THE SMI POPULATION Federal law requires Medicaid programs to cover certain populations including those receiving Supplemental Security Income (SSI), pregnant women, low-income children, and low-income families. 12 Many consumers with serious mental illness (SMI) are eligible for SSI. Based on 2015 data from the Social Security Administration (SSA), about 34.8% of the 10.2 million consumers eligible for SSI benefits qualified on the basis of a mental health diagnosis (substance use disorders are not a qualifying condition). 20 How a consumer qualifies for Medicaid determines what financing arrangement they receive health care services through fee-forservice (FFS), managed care, or a choice of the two. Some states exclude the aged, blind, and disabled (ABD), or SSI population from managed care. No state excludes consumers from managed care based on a specific behavioral health diagnosis. In 2017, 18 states required consumers eligible for disability benefits, including persons with SMI, to enroll in a Medicaid FFS plan; 28 states required enrollment in the Medicaid managed care program; and in three states the population was split between managed care and FFS. The split between managed care and FFS programs may be due to voluntarily enrollment for the SMI population or the geographic availability of managed care. Within the managed care program, consumers may be enrolled in a specialty managed care program that exclusively serves the SMI population or a specialty managed care program that serves the ABD population. In 2017, there were three states Arizona, Florida, and New York that enrolled consumers in a consumer-specific specialty plan for SMI and five states with a specialty plan for the ABD population Indiana, Minnesota, Rhode Island, Texas, and Wisconsin. 4 20 TRENDS IN BEHAVIORAL HEALTH

State Medicaid Expansion Total Population Medicaid % Dual Eligibles % Medicare % Military % Commerical Insurance % Uninsured % Montana Yes 1,042,520 12% 3% 16% 3% 54% 12% Nebraska No 1,907,116 9% 2% 14% 3% 65% 8% Nevada Yes 2,940,058 13% 2% 12% 3% 58% 12% New Hampshire Yes 1,334,795 10% 3% 16% 2% 63% 6% New Jersey Yes 8,944,469 13% 2% 13% 1% 63% 8% New Mexico Yes 2,081,015 25% 4% 13% 3% 43% 11% New York No 19,745,289 21% 4% 11% 1% 56% 7% North Carolina Yes 10,146,788 14% 3% 14% 4% 53% 11% North Dakota Yes 757,952 8% 2% 13% 3% 67% 7% Ohio No 11,614,373 17% 3% 14% 1% 59% 6% Oklahoma Yes 3,923,561 15% 3% 14% 3% 51% 14% Oregon Yes 4,093,465 19% 3% 15% 1% 55% 7% Pennsylvania No 12,784,227 14% 3% 15% 1% 61% 6% Rhode Island No 1,056,426 18% 4% 14% 2% 57% 6% South Carolina No 4,961,119 14% 3% 16% 4% 52% 11% South Dakota No 865,454 10% 2% 15% 3% 60% 10% Tennessee No 6,651,194 16% 4% 13% 2% 56% 10% Texas Yes 27,862,596 12% 3% 10% 3% 55% 18% Utah No 3,051,217 7% 1% 10% 2% 69% 11% Vermont Yes 624,594 21% 5% 15% 2% 54% 4% Virginia Yes 8,411,808 8% 2% 12% 7% 62% 9% Washington No 7,288,000 17% 3% 13% 4% 57% 7% West Virginia Yes 1,831,102 21% 5% 18% 2% 49% 6% Wisconsin No 5,778,708 13% 3% 15% 1% 63% 6% Wyoming No 585,501 8% 2% 14% 3% 61% 12% *The sums in the tables and charts may equal more than 100%, due to consumers enrolled in multiple plans. Figure 9 Primary Financing System for the SMI Population, 2017 4 FFS Managed Care Split Between Managed Care and FFS Specialty Managed Care for SMI Population Specialty Managed Care for ABD Population 1. Alabama 2. Alaska 3. Arkansas 4. Colorado 5. Connecticut 6. District of Columbia 7. Georgia 8. Idaho 9. Maine 10. Missouri 11. Montana 12. North Carolina 13. North Dakota 14. Oklahoma 15. South Dakota 16. Vermont 17. West Virginia 18. Wyoming 1. Delaware 2. Hawaii 3. Iowa 4. Kansas 5. Kentucky 6. Lousiana 7. Maryland 8. Michigan 9. Mississippi 10. Nebraska 11. New Hampshire 12. New Jersey 13. New Mexico 14. Ohio 15. Oregon 16. Pennsylvania 17. South Carolina 18. Tennessee 19. Utah 20. Virginia 21. Washington 1. Illinois 2. Massachusetts 3. Minnesota 4. Nevada 1. Arizona 2. Florida 3. New York 1. Indiana 2. Rhode Island 3. Texas 4. Wisconsin 21