National Alliance on Mental Illness
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December 19, 2005

Details on the State Option for a Reduced Alternative Benefit Package

Note: This page provides background information to NAMI E-News, 12/19/2005.

The final legislation maintains portions of a provision in the House passed version of S 1932 that will allow states to offer a reduced alternative Medicaid benefit package that can exclude certain mandatory and optional services that states have previously been required to provide to all eligible populations (both mandatory and optional eligibility populations).

This alternative package option for states would leave most screening and early intervention services for children in poverty at extreme risk. Currently, Medicaid EPSDT services ensure that low-income children receive the comprehensive mental illness and physical illness treatment services they need. EPSDT (Early Periodic Screening Diagnosis and Treatment) is an early intervention focused program that targets at-risk children

The final version of the bill will allow states to replace EPSDT for 28 million Medicaid children with potentially far fewer benefits under the State Childrens Health Insurance Program (SCHIP). Congress enacted SCHIP as an add-on to EPSDT, not as a substitute. SCHIP benefits standards in the legislation are much weaker than EPSDT coverage. States are permitted to determine services to be covered, so long as the State's plan meets or is actuarially equivalent to a benchmark plan or a plan approved by HHS. Some benchmark plans could result in significantly reduced coverage if adopted.

The final agreement will erode the Medicaid safety net by creating an incentive for states to provide less than comprehensive coverage as provided through EPSDT. Children's services will now be vulnerable to State fiscal pressures. Children with mental illness are particularly vulnerable in this process. For example, in 2003, Texas severely limited mental health coverage for SCHIP children (recently rescinded by the legislature). New Hampshire limits inpatient mental health services to 15 days per year. Colorado limits outpatient mental health services to 20 annual visits. Families with children who need more coverage will not be able to pay for it.

The alternative package would have to meet certain standards and be at least equivalent to other health plans in the market place such as the largest HMO in the state or the plan offered to state employees. Further, states would NOT be allowed to offer this alternative scaled back plan to specific categories of Medicaid beneficiaries including:

  • Individuals deemed "blind or disabled" (regardless of whether the state follows the federal SSI definition or not),
  • Children in mandatory categories (including children on SSI),
  • Pregnant women,
  • Individuals dually eligible for Medicare and Medicaid,
  • Terminally ill in hospice care,
  • Most institutionalized individuals (i.e. recipients in nursing homes, ICF-MRs, long-term psychiatric hospitals),
  • Individuals who qualify for long-term care (as defined by the state), and
  • Individuals deemed “medically frail” or “special needs.”


Back to NAMI E-News, 12/19/2005