Carving-out mental health benefits to Medicaid beneficiaries: a shift toward managed care

Several states have designed and implemented innovative programs for Medicaid beneficiaries that carve-out the provision of mental health from general health care. This paper describes several such programs and outlines the choices states face in designing these services. Major decisions include the selection of a public or private agency, how that agency is chosen, reimbursement schemes, eligibility criteria, and benefits to be covered. While carve-out programs have yielded initial savings, more research is needed on their effect on quality of care and general health care costs.