Medicaid Psychotherapy Spending Up 156%
Impact on your practice
This data demonstrates significant Medicaid investment in psychotherapy, but also reveals access and equity gaps. Therapists should understand that while overall Medicaid spending is up, reimbursement increases may not be evenly distributed, and access barriers persist—particularly for pediatric care. This context matters for contract negotiations and network participation decisions.
Key facts
Medicaid spending on core psychotherapy services increased 156% from 2018 to 2024, reaching $6.68 billion
Growth driven primarily by increases in average payments per code, secondarily by more providers billing
Top 20 payment recipients are predominantly nonprofit organizations, with only 5 for-profit entities represented
HHS OIG research shows only slim majority of behavioral health providers offer timely Medicaid access, especially for pediatric populations
Therapy Companion analysis
The 156% increase in Medicaid psychotherapy spending from 2018 to 2024 masks a troubling reality for independent and small-group practitioners: the money is concentrating in large nonprofit and government-operated organizations, not flowing to solo practitioners or small firms. Of the top 20 payment recipients, only five are for-profit entities, and these are regional powerhouses with 84+ locations or multi-state networks. If you operate independently or in a small group, this data suggests you're competing for a shrinking share of Medicaid dollars relative to your market presence. The average payment per claim increased 65% over seven years, which sounds positive—but this masks a bifurcated market. Large organizations negotiated better rates and volume commitments with state Medicaid programs, while individual providers and small practices likely saw more modest increases or faced pressure to accept lower rates to maintain network participation. Your reimbursement trajectory depends heavily on whether your state's Medicaid program prioritizes direct contracting with individual providers or channels payments through managed care organizations and large provider networks. Additionally, the data shows 60-minute sessions grew 201% in spending while family therapy grew only 14.5%—meaning your payer mix matters enormously. If your practice relies on family therapy or shorter sessions, your revenue growth has lagged the overall trend significantly.
Background
Medicaid spending on psychotherapy has accelerated since the pandemic, driven by both increased utilization and rate increases negotiated by large provider organizations. The 2020-2021 period saw volume spike 13-14% year-over-year as telehealth expanded access and mental health demand surged, but since 2022, volume growth has plateaued while rate increases have become the primary driver of spending growth. This shift is critical: it suggests state Medicaid programs have moved from expanding access (volume-driven) to managing costs through selective rate increases for preferred providers. The data also reveals a structural advantage for large, nonprofit organizations with government relationships and infrastructure to manage Medicaid's complex prior authorization, documentation, and reporting requirements. Solo practitioners and small firms lack the administrative scale to negotiate favorable rates or absorb the compliance burden, making them increasingly dependent on managed care intermediaries that take a cut of reimbursement. The HHS OIG finding that only a slim majority of behavioral health providers offer timely Medicaid access—particularly for pediatric populations—indicates that despite overall spending growth, access barriers persist, likely because reimbursement rates for certain populations or service types remain inadequate for smaller providers to serve them profitably.
What you should do
Audit your current Medicaid reimbursement rates by CPT code and session length against your state's published fee schedules and managed care contracts. If your 60-minute individual therapy rate has not increased by at least 65% since 2018, or if you're seeing family therapy reimbursement stagnate, request rate reviews with your payers immediately—cite the national spending trend data as justification for negotiation.
Evaluate whether your practice should shift service mix toward 60-minute individual sessions and away from family therapy, given the 201% vs. 14.5% spending growth differential. Model your revenue impact if you reallocate 20-30% of family therapy slots to individual sessions, accounting for patient demand and clinical appropriateness.
If you operate independently, assess whether joining a larger provider network or group practice would improve your Medicaid contracting power and administrative efficiency. The data shows large organizations (84+ locations, multi-state reach) are capturing disproportionate Medicaid revenue; small practices may need scale to remain competitive.
Document your Medicaid access barriers and timely appointment availability by population (especially pediatric) and submit this data to your state Medicaid program and managed care plans. Use the HHS OIG finding that access gaps persist to advocate for rate increases or streamlined prior authorization for your practice, positioning yourself as a solution to the documented access problem.
Review your Medicaid enrollment status and network participation agreements. Confirm whether you're contracted directly with your state Medicaid program or only through managed care organizations. Direct contracts typically offer better rates; if you're MCO-only, explore direct enrollment options or renegotiate MCO rates using the 65% average payment increase as a benchmark for your minimum acceptable rate.
Notable excerpts
Overall spending across all providers increased by 156% across the seven-year span to $6.68 billion. Additional spending was largely driven by increases in average payments across a core bundle of psychotherapy codes analyzed and, to a lesser degree, by increases in provider entities billing for those codes.
Of the top 20 payment-getters, only five organizations fit that description [for-profit]: Nystrom & Associates (now known as Sagent Behavioral Health), Transformations Care Network, Thrive Behavioral Health, Advanced Behavioral Health and BTST Services.
Separate federal research by U.S. Department of Health and Human Services' (HHS) Office of the Inspector General (OIG) finds that only a slim majority of behavioral health providers are able and willing to provide timely access to patients with Medicaid. In that research, pediatric populations especially faced timely access challenges.
Sixty-minute sessions are the fastest-growing and the code that saw the largest increase in total cumulative payments. Spending in 2024 had increased by 201% compared to 2018.
Policy changes drive denial patterns
Therapy Companion tracks both: the policy shifts on this page and the denial patterns hitting your claims.
Related policy changes
[MN] HF3904: Reimbursement rate parity for clinical trainees providing alcoholism, mental health, and chemical dependency services required.
This MN bill directly addresses trainee reimbursement parity, a critical issue for training programs and supervisors. It could ensure trainees are reimbursed at rates comparable to licensed clinicians, improving program economics and trainee compensation.
[NJ] S3556: Establishes initiatives related to behavioral health care, including increasing reimbursement rates, providing cost-of-living adjustments, establishing grant programs for facility upkeep and provider training, and relaxing clinical supervision requirements.
This comprehensive behavioral health bill directly addresses therapist compensation through rate increases and COLA provisions—a top-tier concern for practice sustainability. The supervision relaxation could also expand scope and autonomy for licensed clinicians. Early committee stage suggests active legislative momentum.
[LA] SCR61: Requests the Louisiana Department of Health and Louisiana commercial health insurance payors to increase reimbursement rates for behavioral health crisis centers operating under a crisis receiving center license.
This resolution, though non-binding, signals strong state legislative support for higher reimbursement of crisis services in Louisiana. For therapists, this may lead to improved rates for crisis-level care and could establish precedent for broader behavioral health reimbursement advocacy. The dual targeting of Medicaid and commercial insurers suggests potential for meaningful rate movement.
[CA] AB1032: Coverage for behavioral health visits.
California's AB1032 on behavioral health visit coverage has an unclear status after veto consideration was removed from the file. Therapists should monitor California legislative tracking to determine if this bill ultimately becomes law and what coverage mandates it imposes.