Op-Ed: Managed Care Carve Out Urgently Needed for New Yorkers with Behavioral Health Needs

Over a decade ago as part of the Medicaid Redesign Team, New York made a fateful decision to move behavioral health services “in” to the Medicaid managed care program. The promise was better care coordination, primary care and mental healthcare integration, new payment arrangements like value-based payments and cost savings. The reality has been total system failure, and New Yorkers struggling with mental health and substance use disorders are paying the price and so are New York taxpayers.

We’re proposing a solution: S8309A/A8055A, legislation that would return most outpatient mental health and substance use disorder services to Medicaid Fee-for-Service reimbursement. This isn't just a policy adjustment—it's a necessary course correction that could save lives and the state four hundred million dollars per year.

The evidence of managed care's failure is overwhelming. Despite spending over a decade with this model, 43% of mental health clinics still maintain waiting lists., and youth suicide rates have increased 9.9% since these services were carved into managed care. Meanwhile, New York Attorney General James found that 86% of behavioral health provider directories were inaccurate "ghost networks" filled with practitioners who don't actually see patients, or don’t exist at all.

The financial picture is equally troubling. Since 2019, managed care plans have received over 320 citations for violations, including noncompliance with mental health parity laws, delayed and denied payments owed to providers for services rendered, and failure to spend allocated funds on actual care. The state has been forced to recover over $500 million from insurers who hoarded money instead of paying for services to date. An independent analysis shows that when New Yorkers substance use disorder denials to external appeal, they prevail 64% of the time, proving insurers were wrong nearly two-thirds of the time.

Here's what most New Yorkers don't understand about this system: the state pays insurance companies to serve as middlemen between Medicaid and behavioral health providers. These companies keep at minimum 11% for "administrative expenses" and profit which totals approximately $400 million per year—while adding no measurable value to patient care. In fact, managed care plans subcontract with other entities, behavioral health organizations, to provide these services which only adds more bureaucracy and barriers blocking client access to care.

Community-based providers report spending between $200,000 and $1 million annually just managing managed care—employing full-time staff whose sole job is chasing reimbursement, appealing denials, and navigating insurer red tape. These are resources that should be hiring clinicians, opening clinics, and reducing waiting lists. Instead, they're funding compliance with a system that systematically obstructs care.

Our legislation offers a straightforward solution. By returning these services to Fee-for-Service Medicaid we eliminate the middleman. Providers get paid directly and on time. Administrative burdens decrease dramatically. The $400 million currently going to insurer profits gets reinvested in actual behavioral health services. And the current Fee-for-Service (FFS) program has the right checks and balances, so residents get the services to address their serious needs, nothing more. FFS includes utilization review and thresholds to ensure care is evidence-based and appropriate for what clients need.  The denial rate in FFS is approximately 20%, as compared to the over 60% in managed care.

We already have proof this model works. In 2023, New York carved pharmacy benefits out of managed care, saving hundreds of millions of dollars while improving access and eliminating network restrictions. Our legislation simply applies that successful approach to behavioral health care for some of our most vulnerable residents for whom managed care plan delays and denials can be the difference between life and death, literally.

The timing is especially urgent, federal support is evaporating, New York must step up—but the current Medicaid managed care system is failing to meet the moment.

Our proposed legislation would require that savings realized from this transition be reinvested directly into community-based behavioral health services overseen by the Office of Mental Health (OMH) and the Office of Addiction Services and Supports (OASAS). This creates an efficient and streamlined process for New Yorkers to receive essential mental health and addiction care while ensuring that every taxpayer dollar goes directly to care, not corporate profit.

We strongly urge our colleagues in the Legislature, many of whom have joined us as cosponsors on our bill, to prioritize the needs of New Yorkers with serious mental illness and substance use disorders over health insurance plan profits by demanding that we include the behavioral health carve out in one-house budget bills and the final State Budget. After a decade of system failure, New Yorkers in crisis deserve better.

The managed care experiment has had ten years to prove its value. It has failed on every metric that matters—access, quality, fiscal responsibility, and outcomes. It's time to move to something different. It's time to invest in care, not insurance company profits.

New Yorkers are watching, and they're counting on us to make the right choice.

State Senator Samra Brouk represents the 55th Senate District and the Chair of the Senate Committee on Mental Health Assemblymember Jo Ann Simon represents the 52nd Assembly District and serves as the Chair of the Assembly Committee on Mental Health.