Medicare Coverage for Mental Health Services & Substance Use Disorder

Once upon a time, you couldn’t talk about mental health or substance use without heavy stigma.

Thankfully, Americans are having more open and honest conversations about mental health and substance abuse. And thanks to buy-in from those who have the power to change laws, coverage of these conditions is more accessible than ever.

In fact, Medicare covers services for mental health and substance use disorders. Having a good understanding of the basics of coverage is essential, so you can properly and succinctly explain it to your clients seeking help.

To hear the full episode and learn more about Medicare’s coverage, listen here:

Overview of Benefit Periods

Because benefit periods come into play with mental health coverage, here’s a reminder of what a benefit period is in Medicare.

A benefit period starts the day a Medicare beneficiary goes inpatient — the day they’re admitted to the hospital or skilled nursing facility — and ends when the beneficiary has not received inpatient care, or skilled care in a skilled nursing facility, for 60 consecutive days.

If a client goes into the hospital or skilled nursing facility 61 days after leaving from a previous stay, a new benefit period begins, and the requirements of the benefit period must be met again. It’s important to note, there’s no limit on the number of benefit periods for a Medicare beneficiary.

Medicare Part A Coverage for Mental Health Services

Although there aren’t limits on the number of benefit periods a Medicare beneficiary can utilize, there are limits to how many days your client can be covered beyond the 60 days.

Medicare coverage for an inpatient stay in a psychiatric hospital is limited to 190 lifetime days. After that, the beneficiary would need to receive mental health services in a general hospital to be covered.

Costs Under Part A

The costs your client can expect for inpatient services includes the Part A deductible and copayments. Beneficiaries are subject to a $1,632 deductible per benefit period in 2024.

Should a beneficiary have an extended inpatient hospital stay, Medicare Part A charges a daily copayment. For days 61 through 90, the copayment is $408 per day in 2024. For lifetime reserve days, days 91 through 190, Medicare charges a copayment of $816 per day in 2024. Those amounts change yearly, just like the inpatient deductible.

Not all treatment options for mental health or substance use disorder require an inpatient hospital stay, though. There are also outpatient options that Medicare Part B covers.

Medicare Part B Coverage

Likely, much of the treatment and services your client would seek for mental health and substance abuse would fall under Part B, since it casts a much broader coverage net than Part A. Let’s explore what help your clients could get for mental health.

Mental Health Services

Medicare Part B coverage of mental health services spans prevention to treatment. Here are some services your clients can have covered:

Prevention:

• One-time “Welcome to Medicare” appointment, which comes with a built-in review of depression risk factors
• Annual depression screening
• Annual wellness visit during which beneficiaries can talk about mental health

Treatment:

• Individual and/or group psychotherapy (with a doctor or, depending on the state, other licensed mental health professionals)
• Family counseling (if deemed helpful to treatment by a provider)
• Psychiatric evaluation and management of medicine
• Telehealth mental health services

Coverage for Partial Hospitalization

Partial hospitalization, which is sometimes used as an alternative to an inpatient stay, also falls under the purview of Medicare Part B. While not considered an inpatient admission, partial hospitalization is a more regimented treatment program than outpatient services. Care is typically personalized and may consist of a few different methods of psychiatric treatment.

Consolidated Appropriations Act of 2023 Changes

There were some distinctions and changes to partial hospitalization rules that occurred for the 2024 coverage year, thanks to the Consolidated Appropriations Act of 2023.

Partial hospitalization can be used for beneficiaries requiring services for a minimum of 20 hours per week, and that treatment must be confirmed monthly by a doctor.

For enrollees who need more care than what outpatient services typically offer, there’s now a new intensive outpatient service category. Enrollees in this category consist of those who need similar services to those in the partial hospitalization category, but at a lower frequency — a minimum of nine hours per week. The intensive outpatient service treatment must also be confirmed by a doctor each month.

Substance Use Disorder Services

Part B coverage of substance use disorder is similar to that of mental health services and includes coverage of prevention and treatment.

Prevention:

• Annual alcohol misuse screening
• Annual wellness visit during which beneficiaries can talk about substance use issues of concern

Treatment:

• Opioid use disorder counseling, individual group therapy, medication, and drug testing
• Four alcohol misuse counseling sessions per coverage year (if found to be misusing alcohol through the annual screening)
• Eight tobacco cessation counseling sessions per year
• Telehealth substance use disorder treatment

Costs Under Part B

When utilizing Medicare Part B coverage, your clients can expect to pay the annual deductible of $240 in 2024. For most Part B services, beneficiaries will also pay a coinsurance of 20 percent, including doctor visits.

Drugs that fall under Medicare Part B are also subject to the Part B deductible and 20 percent cost-sharing. Part B drug coverage is limited and usually applies to drugs administered by a doctor during an outpatient visit.

Some Part B services might have different cost-sharing amounts, depending on whether the provider accepts Medicare assignment. While only around one percent of non-pediatric level doctors do not accept Medicare assignment, 42 percent of that one percent are psychiatrists. Overall, in the United States, 7.5 percent of psychiatrists do not accept Medicare assignment, so it’s important to remind your clients to check whether a potential psychiatrist accepts assignment before seeking care.

What happens when those treatments lead to a prescription? Enter Part D.

Medicare Part D Coverage

Medicare Part D is required to cover all or substantially all antidepressant medications, antipsychotic medicine, and anticonvulsants like benzodiazepines. Each of these groupings fall under one of the six protected categories of prescription drugs in Medicare.

Despite being protected categories, coverage still depends on a Part D plan’s formulary, so do your homework before signing your client up for a new plan. Beneficiaries might be subject to prior authorization, step-therapy requirements, and even quantity limits, depending on the plan and its formulary.

Costs Under Part D

With Medicare Part D coverage, your clients can first expect to pay their monthly plan premium. Second, Medicare Part D has an annual deductible, which is $545 for 2024 ($590 for 2025). This is the maximum deductible a carrier can set, so a plan could have a lower deductible or even none at all.

Part D enrollees may also be subject to cost-sharing, so they must pay a portion on their covered drugs. According to KFF, in 2023, most Part D beneficiaries paid less than $10 for generic prescription drugs. For brand-name drugs, most enrollees paid between $40 and $100, or a coinsurance of 40 to 50 percent.

Enrollees who qualified for a low-income subsidy on Medicare Part D in 2023 paid $1.45 per generic prescription drug and $4.30 for brand-name prescriptions.

You clients may see shifts in their Part D costs with both higher premiums and lower out-of-pocket costs in 2025, when new changes go into effect from the Inflation Reduction Act of 2022.

Medicare Advantage Mental Health Coverage

Medicare Advantage (MA) plans cover the same basic services as Original Medicare. This includes mental health and substance abuse services. Where they differ is in cost-sharing, networks, and access to physicians.

For MA coverage of mental health and substance use disorder services, plans can require provider referrals or prior authorization. Usually, MA plans have networks and require using in-network providers. Using out-of-network providers will typically cost more.

Remember that MA plans must meet network adequacy requirements and have a certain number of provider and facility options for their members. This elevates the chance that your clients can choose the providers they want.

Remember that MA plans must meet network adequacy requirements and have a certain number of provider and facility options for their members. This elevates the chance that your clients can choose the providers they want.

Mental health benefits are likely to have a cost-sharing requirement. Original Medicare beneficiaries might fill in that gap with a Medicare Supplement plan, but MA plans have flexibility to modify cost-sharing.

Finally, the biggest difference between Original Medicare and MA, just like with a regular hospitalization, MA plans will often charge a daily copayment for an inpatient psychiatric hospital stay beginning on day one. In Original Medicare, the deductible and benefit period take care of hospitalization until day 60.

For MA plans, cost-sharing and length-of-stay requirements vary from plan to plan, so consider pairing an MA plan with a hospital indemnity plan for clients who don’t have the ability to cover hospitalization costs outright.

The good news is there’s help for your clients suffering from mental health issues or substance use disorder. Make sure you can explain Medicare coverage for substance abuse and mental health treatment to help them improve their quality of life.

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