The behavioral health funding landscape is ever-changing as America grapples with increasing demands for mental health and substance use disorder services. Third Horizon Strategies (THS) is a strategic advisory firm focused on helping stakeholders improve systems so that all individuals can access the services or care they need, when and where they need them. We provide facilitation services, research, policy analysis, strategy, and data analytics that promote behavioral health, increase quality, and improve outcomes. Two issues are continually top of mind for our clients: 1) Where will the funding come from to meet the behavioral health needs of communities, and 2) How can we attract and retain the workforce needed to provide services?
This year, there are simultaneously new tools to address these challenges and new reasons to be concerned about the strength of the community safety net for people with behavioral health disorders. In this blog, I outline some of the important trends and policy issues related to the first issue we are watching: Where will the funding come from?
Medicaid is the single largest payer of behavioral health services in the country, yet despite state and federal efforts to improve accessibility and quality, 35 percent of Medicaid-covered individuals with significant mental health concerns report not receiving treatment. In recent years, many new funding streams have been made available at the federal level to meet growing demands for behavioral health care. Yet many of these are time-limited, leaving communities uncertain about how to sustain needed programs. Below, I discuss four of the main funding streams and potential developments.
The American Rescue Plan Act (ARPA) provided states and local governments with flexible funds designed to mitigate the effects of the COVID-19 pandemic and subsequent economic downturn. The ARPA bill passed in 2021, and the first money went out the door in May 2021. State and local government recipients could use the funds to cover costs incurred by Dec. 31, 2024. Many are prioritizing behavioral health—including mental health issues, substance use disorder treatment and prevention, and suicide prevention—in ARPA fund allocations. For example, my home state of Colorado used ARPA funds to create a $550 million behavioral health cash fund. The legislature also appropriated money for various behavioral health-related programs. Yet these funds will run out this year, leaving many programs without sustainable funding streams.
ARPA also contains several provisions that provide funding states can use to support the mental health needs of children and youth. For example, the Elementary and Secondary School Emergency Relief Fund (ESSER) provided state education agencies (SEAs) with $122.8 billion in grants to support schools and school mental health systems.
Will the end of ARPA funding late this year mean the end of much-needed community-based programs? Congressional action to renew ARPA is not expected. Will states and local governments have the resources to step up and fill in these holes? This is something THS will be watching in 2024.
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Another important funding stream is opioid abatement dollars, flowing to states and local governments that have agreed to the various settlements. According to the Global Settlement Tracker, there is $54.45 billion dollars of opioid settlements reached between U.S. state and local governments and the 14 major pharmaceutical opioid manufacturers, distributors, and retailers. This may only grow, as the Supreme Court rules on the Purdue Pharma case. On Monday December 4, 2023, the Supreme Court heard oral arguments on the bankruptcy reorganization and has stated that a decision should be expected at the end of June. As noted by the Rand Corporation, settlement funds could save lives and mitigate lifelong harms from opioid misuse if they are allocated to the most effective interventions. THS is watching opioid abatement efforts unfold in 2024 and is engaged with clients working on several local and national initiatives working to ensure these funds are allocated effectively through data-informed, transparent, and equitable processes. For example, the firm partnered with the Duke-Margolis Center for Health Care Policy to create the Opioid Abatement Needs and Assessment Tool. While opioid settlement dollars are time-limited, they have a longer event horizon than many funding streams (18 years). States and local governments can use the tool to assess and strengthen their local opioid use disorder and substance use disorder infrastructure.
Another vital source of funding for behavioral health THS is watching in 2024 comes from the Substance-Use Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act. The SUPPORT Act provided a comprehensive federal response to the opioid crisis public health emergency by directing federal resources toward prevention, education, coverage, treatment, and law enforcement programs. Programs funded by the SUPPORT Act are currently unfunded, as the act was not renewed before the sunset of September 2023. Fortunately, on December 12, 2023, the U.S. House of Representatives passed their version of the bill (H.R.4531 – Support for Patients and Communities Reauthorization Act) with a bi-partisan 387 to 37 vote. It reauthorized funding and made some positive changes to the IMD exclusion. In the Senate, the Finance and Health, Education, Labor, and Pensions Committees both advanced the Senate version of the act (S. 3393 SUPPORT Act). The Senate bill makes changes in how the FDA reviews and approves opioid painkillers. It also requires HHS to study if it’s appropriate to exclude peer support individuals with criminal backgrounds since some states screen them out. That eliminates a segment of people in recovery. THS will watch as the full Senate considers its version of the Support Act reauthorization and the two congressional bodies reconcile the two bills.
Lastly, in 2024, THS will be watching the expansion of Certified Community Behavioral Health Clinics (CCBHCs) and the prospective payment system (enhanced Medicaid payment) made available to clinics that meet the required criteria and are certified by participating states. CCBHCs were created to transform mental health and substance use treatment across the country and provide sustainable funding for robust community outpatient services, including crisis care. In 2022, the Bi-partisan Safer Communities Act (BSCA) expanded opportunities for states to enter the Medicaid demonstration. The BSCA made other investments in mental health funding, many of which are only authorized through 2025.
Starting in July 2024, up to 10 states will be added to the CCBHC demonstration every two years. In addition, the BSCA extends the program timeline for states in the original demonstration and provides funding for two rounds of state planning grants. THS will be watching which states apply and are selected and any states that may develop CCBHC models through a Medicaid State Plan Amendment or 1115 waiver.
Still in question, however, is if SAMHSA will make grant funding opportunities available to clinics in 2024 to develop and implement the CCBHC model. As of this writing, the SAMHSA NOFO forecast did not include any CCBHC grants as the agency awaits funding authorization. SAMHSA grants play an important role in helping prepare clinics to adopt the full scope of services, rigorous data collection and reporting, and quality standards of CCBHCs.
Given the time-limited nature of many of these funding streams, it is no wonder so many of THS clients, including providers, associations, and state and local governments are concerned about identifying long-term, sustainable funding models. The Biden Administration’s push to increase parity enforcement and continued expansion of alternative funding models such as the Addiction Recovery Medical Home may offer some of the needed solutions. THS will continue to monitor these funding streams and publish additional blogs as new developments occur. Check back next month as I dig into the behavioral health workforce crisis, including some promising solutions we are watching in 2024. In the interim, please reach out to me with any questions about how THS can help you navigate the evolving behavioral health funding landscape in 2024 and beyond!