Considering Diving Into Youth Mental Health? Medicaid Is Ripe For Innovation

Written by: Caren Howard, a mental health advocate and political strategist

BHT Impact is a fiscally sponsored project of  Moore Impact, a 501(c)3 public charity. 

Please note: All policy-related examples in this brief are presented for educational and informational purposes, to support research, learning, and nonpartisan analysis of innovation work in Medicaid. 

The Medicaid Program

Legislation creating Medicaid, enacted in 1965, was designed to provide health coverage to groups with a wide range of health care needs, especially populations that had been excluded from the private health insurance market, like individuals with disabilities. 

Today, Medicaid is the largest payer of behavioral health services and covers health costs of nearly half of children and adolescents in rural communities and over 40% of children in urban and suburban communities. The services paid for through Medicaid are funded through a combination of state and federal funding but are administered through state Medicaid agencies. Thus, if you’ve studied one Medicaid program, you only know one Medicaid program. Every state is different. Variations of payment models, coverage models, and program design within a state’s application could even use a waiver (i.e., 1115, 1915(c), 1915(b), etc.) to have more flexibility. 

One thing is critical to know: Medicaid helps children and adolescents with mental health and complex health needs access mental health care. And even through this paragraph, we can see how the nuance and complexity can stall innovators from entering the space. 

Ongoing Youth Mental Health Needs - Key Facts 

• High Need: According to the Centers for Medicare and Medicaid, one-third of children and adolescents with coverage through Medicaid or the Children’s Health Insurance Program (CHIP) were reported to have a mental, emotional, developmental, or behavioral problem in 2023. Of those who needed mental health care, over 40 percent of families reported it somewhat or very difficult to obtain care. 

• Declining Supply: Provider shortages for children and adolescents are expected to worsen over time as ratios of psychologists, psychiatrists, and school counselors are projected by the Health Resources and Services Administration to decrease over the next ten years. 

• Reimbursement Deficits: Medicaid reimbursement rates to providers for care are typically lower than care paid for by commercial or Medicare plans. Thus, providers are less likely to accept Medicaid or CHIP beneficiaries unless they have a number of private paying clients to help offset the lower reimbursement rates that result in profit losses. 

• Limited Access: Even with modest improvements since record-high mental health challenges in teenagers during the 2020 coronavirus pandemic, adolescents are not always offered annual preventive health visits, often the only time a mental health screening is delivered to determine if further care is needed to address a mental health concern. 

• Increased Need Balanced with System Challenges:

  • Wellbeing promotion is prevention and there is currently ample opportunity for systems to better integrate prevention and earlier intervention. Technologies can facilitate closing this gap.

  • Medicaid/CHIP-covered youth across geographic locations and demographic characteristics have higher prevalence and diagnosis rates of mental health conditions compared with commercially covered children. This is actually a positive and can help drive needed care and support where it is needed most.

  • Yet three out of four congressional districts face serious youth mental health challenges due to major system failures including provider shortages, barriers to care including preventive care, familial socioeconomic hardship, and minimal support networks. 

Founders should consider these challenges and design platforms that increase access to early intervention and prevention activities.

Opportunities for Innovators

While Medicaid law requires Early Periodic Diagnostic Screening and Testing (EPDST) for children, a key tool to determining mental health challenges early, significant behavioral workforce shortages, especially in rural and Southern states, and other barriers to care can leave families without care for long periods of time. These shortages are projected to increase in the future as population needs increase. As adolescents lose in person connection to online interest, feel more pressure to compete for higher education, and feel the impact of familial economic uncertainty (youth homelessness increased nearly 20% in 2024) there is plenty of opportunity for innovators to drive mental health solutions for young people through Medicaid.  

Platforms

Platforms that help extend providers so their services have further reach, as well as platforms that support families and assist in coordinating care or offering crisis are all important opportunities. New technologies are helping mental health and addiction providers with automatic digital notetaking through scribing or dictation which frees time up for more thoughtful responses to patient needs in the moment and to quickly determine diagnoses and establish treatment plans for billing in follow up. Technologies can also evaluate provider responses during a session to drive higher quality care with some companies utilizing artificial intelligence to offer real-time feedback to providers and collectively analyzing sessions to offer bonuses to those deemed to be offering the highest quality care.

School-Based

School-based mental health is one option to reach young people where they spend most of their time. Medicaid is funding school-based mental health services, supporting trauma-informed care, sustaining the few providers, and enabling digital and hybrid models where location and transportation issues exist. While Medicaid could initially only cover services for students with formal disability accommodations, the Centers for Medicare and Medicaid lifted this restriction in 2014 and allowed Medicaid to pay for care in schools for any eligible student. If a service is covered in a state’s Medicaid plan, it can be provided through schools directly or through a school partnership with a community-based provider. Partnerships with school districts are a key way innovators can directly support student mental health.

State Specific Opportunities

Outside of schools, state models are creative and diverse. For instance, Ohio received recognition from the National Association of Medicaid Directors for its highly specialized intensive home-based treatment, the OhioRISE program for children. The state also modernized and centralized its data systems to speed transactions and formalized a partnership between the state government, all Medicaid managed care plans, and all children’s hospitals for improved care coordination for children and families. Illinois created the Screening, Assessment, Support Services program to assist adolescents experiencing a behavioral crisis with mobile crisis response. The partnership brings together community mental health clinics, the state crisis telephone CARES line, and the Medicaid agency to pay for three months of care. 

Peer Support

One of the most promising investments gaining traction is youth peer support as stated in a state policy report by Mental Health America. As states formalize youth peer support as a Medicaid-covered service to respond to substance use and mental health challenges, youth with lived experience can engage their peers effectively and expand the capacity to reach individuals in need without relying solely on licensed clinicians. Structured peer roles are shown to improve access, engagement, and improve feelings of belonging as social isolation increases. 

Involvement as Part of Advocacy

Federal and state government agencies and policymakers are still figuring out how to advance technology and build more innovative systems. Challenges include complex billing and documentation, multiple regulators, slow procurement cycles. 

However, they will listen to those who sit at their tables or take time to share ideas, challenges, and questions through formal public requests. Policymakers understand they aren’t the most knowledgeable in the room and want to invite those who are more experienced to help them achieve their goals. 

Public-private partnerships are instrumental to progress to transform systems. So, as innovators might be finding creative ways to engage with Medicaid systems, they can also set aside time to educate agencies and policymakers about challenges that impede their ability to serve desired populations. 

In July 2025, CMS announced a goal to create a more robust digital health care system, the Food and Drug Administration opened a comment period to receive input from creators, which ended in December 2025, and state agencies are discussing ways to modernize their systems while improving outcomes and saving costs. 

Key players that innovators may dialogue with include these agencies as well as state Medicaid innovation teams, school Medicaid administrators, managed care organizations covering youth, youth mental health advocacy coalitions, and community health clinics that are already billing Medicaid.

Call to Action

Data demonstrates the youth mental health need and great areas for opportunity in Medicaid whether it is prevention, care coordination, crisis response, and more. Medicaid is already absorbing a lot of the pressure, especially in schools and high-need communities. 

While no state is the same, innovators who successfully integrate their platforms with Medicaid systems won’t be able to wait for Medicaid to become easier. They need to build and design for the existing system and help policymakers make incremental improvements that keep in mind accessibility (language, disability, broadband constraints), privacy, and user feedback loops. 

Agencies have begun to request proposals and direction from external voices. Now is the right time to join the conversations and aid better outcomes for children and families.

Resources:

Waivers

• What is a Waiver?

• Medicaid Waivers 101

• KFF Waivers by State

• 1115 Demo

• 1915 Waiver

State policy 

• National Academy for State Policy Report on State Medicaid Coverage of Behavioral Health Therapy for Children and Youth

• Impact of Immigration Changes on Student Mental Health 

• The Bipartisan Safer Communities Act created the School Medicaid Technical Assistance Center

• 2023 Medicaid and CHIP Beneficiaries at a Glance

• Protecting Children’s Access to Health Care in Schools: The Impact of Medicaid Cuts on School Health Services