States, health plans and providers are beginning to develop value-based payment (VBP) arrangements to pay for Medicaid behavioral health care services. VBP approaches shift the focus from traditional fee-for-service (FFS) systems that pay for volume of services to alternative payment models that reward high-quality, cost-effective care. Many state Medicaid programs have developed VBP approaches to improve quality and slow cost growth for physical health services, but these advances have been slower to emerge in Medicaid behavioral health programs.

This brief, produced with support from the California Health Care Foundation, describes how innovative states and Medicaid managed care organizations (MCOs) are building on models developed for physical health services and incorporating VBP arrangements into behavioral health programs. It profiles innovative approaches in five states — Arizona, Maine, New York, Pennsylvania, and Tennessee — and focuses on key implementation challenges related to quality measurement, provider capacity, oversight considerations, and privacy and data-sharing constraints. Lastly, it highlights considerations to help states advance these models, including suggestions to support MCOs and providers with more effective program implementation.