State governments have a critical opportunity to address the interconnected challenges of unmet mental health and substance use disorder (SUD) needs. Nearly one in three people in the United States experience these conditions, yet only about half of adults with mental illness — and fewer than one in four with SUD — receive the care they need. Co-occurring disorders are common: approximately one-third of adults with a mental illness also have an SUD, yet 38 percent go untreated for either condition.

Medicaid members, in particular, are disproportionately affected by mental health and SUD needs, but often encounter additional barriers, including smaller provider networks and longer wait times, challenges exacerbated by the widespread behavioral health workforce shortage.

When timely behavioral health care is out of reach, the consequences ripple across communities and strain public systems. The result is increased emergency department (ED) visits, hospitalizations, homelessness, incarceration, and costly crisis interventions — many of which might have been avoided with earlier support.

As the nation’s largest payer of behavioral health services, Medicaid offers states a powerful lever for change. By coordinating efforts across Medicaid, behavioral health agencies, and other key partners, states can expand access to timely, evidence-based care where it’s needed most. This blog post outlines three key opportunities for states seeking to strengthen behavioral health systems and improve outcomes:

1. Elevating the expertise of people with lived experience
2. Increasing behavioral health workforce capacity
3. Expanding access to community-based care

1. Elevating the Expertise of People with Lived Experience

People with firsthand experience of mental health and SUD needs can contribute valuable perspectives in designing more responsive behavioral health policies. Individuals who have navigated these systems have important insight about what works, what doesn’t, and how to reach communities that have historically faced barriers to accessing care.

Beyond informing policy and program design, their involvement can help foster greater trust in behavioral health systems — increasing engagement in care, strengthening community partnerships, and creating the conditions for sustained progress.

Promising practices can guide states to deepen member engagement over time — from informing to empowering individuals in decision-making. States have several opportunities to embed engagement with people with lived experience (PWLE) across behavioral health system reform, including:

• Involving PWLE in shaping and providing input on behavioral health crisis services. Oregon  incorporated the perspectives of PWLE into the design and oversight of its 988 crisis system.
• Establishing formal advisory councils or leadership roles for PWLE within state behavioral health structures, as seen in Pennsylvania’s Behavioral Health Commission for Adult Mental Health.
• Incorporating PWLE perspectives in creating behavioral health quality measures. Doing so can help ensure that what is measured reflects what matters most to those receiving care.

2. Increasing Behavioral Health Workforce Capacity

States are pursuing a range of strategies to address behavioral health workforce shortages and strengthen access to care. These include expanding provider types and exploring alternative payment approaches.

Expanding Provider Types and Scope. Regulatory reforms — such as reducing scope-of-practice restrictions, streamlining licensure requirements, and recognizing a broader range of provider types — can increase behavioral health workforce capacity. For example:

• Reimbursing peer support specialists and community health workers (CHWs) can expand workforce capacity and build trust with patients through shared experience and culturally responsive care. Their support can help improve treatment engagement and other clinical outcomes, support critical transitions (such as reentry following incarceration), and help address social needs. Many states now reimburse peer support specialists and CHWs through Medicaid, prioritizing people with behavioral health needs for these services.
• Reducing barriers to workforce entry for behavioral health professionals can further expand workforce capacity. Some states have streamlined licensure recognition, simplified continuing education requirements,  allowed remote supervision to count toward required clinical supervision hours, and/or eliminated licensure exam barriers.
• Participating in interstate licensure compacts like the Psychology Interjurisdictional Compact can enable behavioral health professionals to provide telehealth or in-person services across state lines — expanding access, particularly in underserved areas.
• Permitting nurse practitioners to practice independently is linked to better access to opioid use disorder medications and fewer ED visits. Similar reforms for physician assistants and licensed marriage and family therapists could further strengthen the behavioral health workforce.

Payment policy reform. Payment reforms and other direct investments in the behavioral health workforce can support provider recruitment and retention and encourage more providers to accept Medicaid. Increasing behavioral health provider rates is one approach, but states are increasingly turning to other creative, targeted solutions. For example:

• Enhanced payments for providers serving individuals with complex behavioral health needs or practicing in underserved areas can incentivize care for populations that often face access barriers.
• Workforce development investments, such as loan forgiveness programs and professional development opportunities, can help attract and retain behavioral health providers.

3. Expanding Access to Community-Based Services

Historically, the behavioral health system has prioritized high-intensity settings — such as inpatient units and EDs — often at the expense of community-based services, creating a gap between people’s behavioral health needs and the system’s capacity to respond. When people can access care in their own communities from providers who understand their needs, they are more likely to engage in treatment and stay connected to care.

Policymakers have an array of promising opportunities to prioritize strategic investments in evidence-based services delivered in community settings, including:

Certified Community Behavioral Health Clinics (CCBHCs). CCBHCs deliver comprehensive services, including 24/7 crisis care, evidence-based mental health and substance use treatment, integrated physical health care services, and care coordination — with promising results in expanding access to treatment while reducing ED visits and hospital admissions. Opportunities for states include:

• Enhanced payment options are being explored by many of the 18 states participating in the CMS and SAMHSA’s Medicaid CCBHC demonstration, including policies to maximize impact for populations with greater health and social needs. The model also includes quality-based bonus payments to reward high performance on key measures.
• Alternative funding strategies are gaining traction as enhanced federal funding for CCBHCs winds down for demonstration states, with many seeking new funding mechanisms to ensure CCBHC sustainability. Promising strategies include braiding funding across different sources, aligning CCBHC payments with broader Medicaid payment reform, and pursuing a state plan amendment to make CCBHC services a full Medicaid benefit.

The Clubhouse Model. This evidence-based approach to psychosocial rehabilitation engages adults with serious mental illness as “members” rather than patients. Members voluntarily participate in daily clubhouse operations while receiving peer support, vocational and educational assistance, and connections to mental health care and other community-based services. Research shows participation in clubhouse models is associated with reduced Medicaid expenditures, improved quality of life, and other positive outcomes. Opportunities for states to support this model include:

• Medicaid reimbursement. States can support clubhouses and similar community-based psychosocial rehabilitation models through Medicaid. Michigan has championed this approach, with all 39 of its clubhouses primarily funded through Medicaid. California’s BH-CONNECT initiative, approved under a Section 1115 waiver, also supports clubhouses through Medicaid, along with other evidence-based community-based services.

Other Community-Based Approaches. States are also implementing additional evidence-based strategies to expand access to care:

• Integrated behavioral health in primary care. Models like Collaborative Care improve outcomes while maximizing limited resources. While Medicare covers Collaborative Care, many state Medicaid programs have yet to cover these models.
• Mobile crisis response services. These provide community-based alternatives to ED and law enforcement interventions, and are increasingly reimbursed through Medicaid.
• Medications for addiction treatment (MAT). These programs are a critical component of substance use treatment, particularly for individuals with opioid and alcohol use disorder. States are expanding access to MAT through integration in primary care settings, CCBHCs, mobile services, and partnerships with correctional facilities.
• Tailored mental health and SUD care for pregnant and postpartum individuals. With Medicaid covering more than 40 percent of births, states are increasingly prioritizing care for pregnant and postpartum women covered by Medicaid, who face heightened risk of SUD and mental health challenges. Promising strategies include expanding access to doula services and peer supports, streamlining connections between perinatal care and psychiatric services, and integrating outpatient maternity and addiction care programs.

Support for States: ACCESS in Behavioral Health Learning Collaborative

States have an opportunity to advance these and other evidence-based strategies for adults with mental health and/or co-occurring substance use disorders through CHCS’ 18-month Advancing Community-Based Care and Expanding Support Systems (ACCESS) in Behavioral Health Learning Collaborative. This initiative offers state technical assistance, peer learning, and access to subject matter experts, including people with lived experience of behavioral health needs. State applications are due July 18, 2025. Learn more and apply.