Medicare’s Discriminatory Coverage Policies For Substance Use Disorders

Medicare covered about 62 million lives in 2020. While often the standard setter for other health care financing systems, Medicare falls far behind the coverage standards of most private and employer-based insurers and Medicaid plans when it comes to substance use disorder services. Medicare essentially covers the least and most intensive services—office-based outpatient counseling and inpatient hospitalizations—for substance use disorder treatment, leaving beneficiaries who need intermediate levels of care without the services they need to recover. This antiquated and discriminatory financing system imposes tremendous burden on beneficiaries and the health care system.

What If Medicare Covered Other Conditions Like It Covers Substance Use Disorder Treatment?

Imagine if Medicare only covered cancer treatment for stage 1 or stage 4, but nothing in between. Or type 2 diabetes coverage only included nutrition counseling—and perhaps insulin—and no other treatments until the disease progressed to the point of catastrophic medical complications such as a diabetic coma or loss of limb. The outcomes of such glaringly inadequate coverage would not be difficult to predict; morbidity and mortality would increase significantly, people would suffer unnecessarily, and the overall costs to treat the illness would soar as “late stage” treatment is more complex and expensive. Neglecting to cover more intensive care for people with these chronic and progressive illnesses would defy all clinical, economic, and basic humanitarian sense. And yet, that is precisely how Medicare covers substance use disorder treatment.

Substance use disorder (SUD), like cancer and type 2 diabetes, is a chronic and progressive disease. Decades of scientific and clinical research have clearly shown that SUD is best treated with a continuum of care. This continuum—delineated with increasingly intensive levels of care by the American Society of Addiction—ranges from early intervention (Level 0.5) and office-based outpatient counseling (Level 1) to medically managed intensive inpatient services (Level 4), with services in between—including intensive outpatient, partial hospitalization, and residential treatment—to meet a patient’s holistic treatment needs. A recent review of the federal public health insurance program found that Medicare’s coverage of substance use disorder care is effectively limited to the bookends of the continuum of care—the least and most intensive services. Medicare’s limited coverage of SUD not only defies clinical recommendations of medical associations and federal health agencies, it is also costly from a human and economic perspective, and discriminatory from a civil rights perspective.

A Growing Unmet Need For SUD Care Among Older Americans

In the past several years, the Medicare-eligible population has had a growing, yet unmet, need for SUD services. More than 1.2 million adults ages 65 and older had a SUD diagnosis in 2019, and yet only 23 percent of this population was receiving any SUD treatment. Moreover, while overdose death rates across the US declined in 2018 in other age groups, the rates of hospitalization and overdose continued to rise among older adults. Overdose mortality rates have risen for Black Americans, Asian Americans, Latinx Americans, and Indigenous Americans, which are making up increasing segments of the population of older adults and people younger than 65 with chronic conditions who are enrolling in Medicare.

Many factors contribute to the increased demand for SUD care among Medicare beneficiaries, including the COVID-19 pandemic. A recent Government Accountability Office study found that more people are seeking SUD and mental health services as a result of stressors from the COVID-19 pandemic, but that these services have become less available as COVID-19 exacerbated the behavioral health workforce shortages across the country.

Individuals with a history of SUD newly enrolled in Medicare due to age or disability may find that the appropriate level of treatment services they received through private insurance or Medicaid are no longer covered until they are sick enough to be hospitalized. Resulting gaps in care continuity can destabilize a person’s recovery, leading to escalation of symptoms and a need for more intensive and costly levels of care.

The Missing Middle: SUD Coverage Gaps In Medicare

Medicare beneficiaries who need SUD care lack access to care that is available for other medical conditions. These intermediate levels of SUD care are more intensive than office-based outpatient counseling but less intensive than inpatient hospitalization. This includes intensive outpatient, partial hospitalization, and residential treatment. Such care is often used as a step down for people who no longer need to be hospitalized but cannot be discharged safely, or as a step up for those who need more services and supports. These significant coverage gaps reflect Medicare’s antiquated approach to SUD treatment and prevent hundreds of thousands of beneficiaries from getting the appropriate care they need.

Intensive Outpatient Programs

Even though most Medicaid and commercial insurance plans cover intensive outpatient services (American Society of Addiction Medicine [ASAM] Level 2.1), Medicare is missing this critical benefit. In 2019, approximately 130,000 patients were receiving intensive outpatient SUD care on any given day. Intensive outpatient programs (IOPs) are designed for patients whose SUDs and potential co-occurring disorders require close monitoring and 9–19 hours of structured, skilled treatment services each week to promote treatment progress and prevent further deterioration. These services typically include individual and group counseling, medication management, family therapy, education groups, occupational and recreational therapy, and other therapies. Most Level 2.1 intensive outpatient programs are offered at community-based facilities and are staffed by an interdisciplinary team of credentialed addiction treatment professionals.

Medicare does not cover the community-based settings at which IOP services are primarily delivered nor does it authorize the providers who deliver the bulk of these treatment services—including licensed professional counselors, certified alcohol and drug counselors, and peer specialists. Furthermore, Medicare regulatory requirements and billing standards render this benefit effectively unavailable for patients with SUDs because Medicare does not have a daily, weekly, or monthly payment rate for the full mix and number of services patients need in an IOP to facilitate billing and to ensure that claims are not denied as duplicative. Even though some of these discrete services could be billed by Medicare-authorized facilities or physicians, Medicare’s failure to cover the full scope of treatment, the settings where IOPs are delivered, and the practitioners who provide these services render Level 2.1 unavailable to Medicare beneficiaries.

The discrimination in Medicare’s lack of coverage for IOP services is readily apparent. Medicare does cover comparable rehabilitation programs for beneficiaries with other medical conditions, such as Comprehensive Outpatient Rehabilitation Facility (CORF) services. Covered CORF benefits are comparable to those in ASAM Level 2.1, including physician services, occupational therapy, social and psychological services, nursing care services, and drugs and biologicals. Yet, CORFs do not provide services to treat psychiatric disorders, so this Medicare benefit could not be delivered to patients with SUDs, even if the appropriate facilities were covered under the same rules and fee structures.

Partial Hospitalization Programs

Most Medicaid and commercial insurance plans also cover partial hospitalization services (ASAM Level 2.5) for patients with SUDs, while Medicare fails to do so. In 2019, approximately 20,000 patients were receiving partial hospitalization SUD services on any given day. Partial hospitalization programs (PHPs) are medically necessary for patients whose SUDs are severe enough to detract from recovery efforts and require medical monitoring at a more intensive level than IOPs or other outpatient services. These programs involve at least 20 hours of structured, skilled treatment per week, including the same services and therapies that patients would receive in an IOP. PHPs are offered in the same community-based settings and by the same providers as IOPs, making it easier for patients to step up or step down in treatment intensity as their needs change.

Unlike IOPs, Medicare covers PHP services with a bundled payment rate for individuals with mental disorders. The benefit is not available, however, for patients with a primary diagnosis of SUD, even though about half of the patients in PHPs have co-occurring SUDs. Moreover, the Medicare PHP benefit can only be delivered in hospital outpatient departments and community mental health centers, thereby excluding the community-based settings where these services are rendered to patients with SUDs and the appropriately credentialed addiction treatment professionals who staff them.

Residential Treatment

Care in subacute residential settings is common for medical conditions, but it is not available in Medicare for SUD treatment (ASAM Level 3). In 2019, approximately 91,500 patients were receiving residential treatment for SUDs on any given day. When patients with SUDs need 24-hour care and safe and stable living environments due to the severity of their condition and functional limitations, they are best served in residential treatment programs. Types of residential programs range in intensity from clinically managed low-intensity residential services (ASAM Level 3.1) to medically monitored high-intensity inpatient services (ASAM Level 3.7), based on the functional limitations and needs of the patients. These programs are delivered in facilities where patients can reside safely, and they are staffed by addiction treatment, mental health, and general medical personnel to provide clinical services. Such services typically include withdrawal management; individual, group, and family therapy; medication management; psychoeducation; daily clinical services including physician monitoring, nursing care, and observation; and other support services for building the skills and tools necessary for maintaining recovery.

Similar to IOPs and PHPs, comparable subacute services are available to patients with other medical conditions. Medicare covers post-hospital residential rehabilitation for patients in skilled nursing facilities (SNFs) and inpatient rehabilitation facilities. Both benefits have similar payment models and services that would be needed for patients with SUDs, but the service requirements are not aligned with the ASAM criteria definition of a Level 3 program; eligible patients must need either physical or occupational therapy as a primary treatment goal. In addition, the facilities that offer residential treatment for patients with SUDs, and the practitioners that provide these services, are not authorized under Medicare. And patients who need post-hospital care for a medical condition and also need or take medications for an opioid use disorder often cannot access SNFs. In many states, SNFs have been found to exclude patients who take medications for opioid use disorder, frequently citing their lack of capacity to provide this “specialty care.”

As a result, Medicare patients with SUDs who need treatment that is more intensive than outpatient services and less intensive than hospital care are left without options. In addition to being clinically negligent, the yawning gaps in Medicare’s SUD coverage is patently discriminatory, as evidenced by the comparable services available to patients with other medical conditions.

Consequences Of Medicare’s Failure To Cover Intermediate Levels Of SUD Care

Lack Of Access In The Community

Medicare’s failure to cover community-based facilities and providers not only exacerbates the workforce shortages for SUD treatment but also leaves many individuals without access to any culturally or linguistically appropriate services, let alone the services that would be the appropriate level of care based on their diagnosis. People with lived experiences report that making treatment easier to access and using individualized treatment approaches would allow them to achieve better recovery results and stay alive. By increasing the availability of treatment in the community, people with SUDs can stay more connected to services and supports and remain engaged in their recovery process. By limiting the types and locations of practitioners, Medicare also limits the racial, ethnic, and linguistic diversity of the behavioral health workforce, which contributes to biases in the health care system and perpetuates distrust and disparate health outcomes.

A Discriminatory Benchmark For Other Insurance

Most Medicaid and private insurance plans are subject to the Mental Health Parity and Addiction Equity Act, which requires coverage of SUD and mental health services to be on par to coverage of other medical conditions. While the Parity Act has begun to address discriminatory gaps in the scope of services, providers, and care settings in those plans, Medicare is not subject to this federal anti-discrimination law. Nonetheless, Medicaid and private insurance plans often use Medicare as a benchmark, most significantly for setting reimbursement rates. When Medicare has embedded discriminatory practices, such as disparate reimbursement standards, it enables ongoing discrimination in the insurance models that use Medicare as their baseline.

Making Medicare’s SUD Coverage ‘Good And Modern’

As policy makers contemplate expanding access to health care through Medicare for All proposals or public options based on Medicare, they must first eliminate discrimination within Medicare against people with SUDs.

Congress and the Centers for Medicare and Medicaid Services (CMS) must expand covered benefits to meet the full continuum of care, authorizing the full range of addiction practitioners and treatment facilities, and applying the Parity Act standards to protect beneficiaries with SUDs from discriminatory financial and other treatment limitations.

Congress should amend the Social Security Act to authorize reimbursement for the providers, settings, and services consistent with evidence-based practices. But CMS does not need an act of Congress to make some changes necessary to bring Medicare’s coverage to the level of a “good and modern benefit” for SUD care. Although Medicare is exempt from the Parity Act requirement that it cover addiction and mental health services at the same level as other medical conditions, nothing prevents Medicare from requiring more equitable coverage. For example, CMS could create bundled reimbursement rates for SUD for intermediate services such that they could be delivered in already authorized Medicare facilities, including opioid treatment programs (OTPs) and federally qualified health centers; require tracking with greater granularity for psychiatric providers who specialize in addiction treatment and OTPs in network adequacy standards for Medicare Advantage plans; eliminate utilization management practices that limit access to care in Medicare Advantage and Part D plans; and require use of the ASAM criteria for medical necessity determinations in Part C plans.

CMS and Congress should work together to better align Medicare with the Parity Act non-discrimination standards. People with SUDs need and deserve the full continuum of care, access to practitioners with addiction expertise, and programs in their communities, just like people with cancer or diabetes. Medicare’s failure to address these gaps amounts to institutional discrimination that perpetuates the disparities we see today across all health care financing and delivery systems.