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While Medicare covers a broad array treatment services for those with mental illness and substance abuse disorders, special rules limit coverage and reimbursement. Medicare’s coverage of services for mental health, behavioral health and substance abuse disorders is not as extensive as its coverage for other services.

Treatment for Alcoholism and Substance Use Disorders

Medicare will pay for treatment of alcoholism and substance use disorders in both inpatient and outpatient settings. Medicare Part A pays for inpatient substance abuse treatment; individuals will pay the same co-pays as for any other type of inpatient hospitalization. Likewise, Medicare Part B will pay for outpatient substance abuse treatment services from a clinic or hospital outpatient department.

Covered items and services for the treatment of alcoholism and substance use disorders include:

  • Psychotherapy
  • Patient education regarding diagnosis and treatment
  • Post-hospitalization follow-up
  • Out-patient prescription drugs though Medicare Part D
  • Inpatient prescription drugs including Methadone
  • Structured Assessment and Brief Intervention (SBIRT)

SBRIT is an early intervention approach that targets individuals who have not yet reached the severity of a diagnostic level substance use disorder. SBRIT services are provided in outpatient settings, like a primary care physician’s office, or outpatient hospital department and are covered by Medicare when patients show early signs of drug abuse or dependency. This public health approach to treat substance abuse consists of three major components:

  • Screening: Assessing a patient for risky substance use behaviors using standardized screening tools
  • Brief Intervention: Engaging a patient showing risky substance use
  • Referral to Treatment: Providing a referral to brief therapy or additional treatment to patients who need additional services.

Medicare likewise covers a new preventive benefit that offers screening and counseling for people who show signs of alcohol misuse but are not alcohol dependent and do not necessarily show signs of abuse.


Medicare covers care in specialized psychiatric hospitals that only treat mental illness when in-patient care is needed for active psychiatric treatment. As with care in a general hospital, Medicare pays for necessary in-patient hospitalization for up to 90 days per benefit period. Medicare beneficiaries who need to be in a hospital for more than 90 days are entitled to 60 lifetime reserve days which can be used only once in a life time.

Unlike care in a general hospital, care in a specialized psychiatric hospital is limited to a total of 190 days in a lifetime. Once this maximum has been reached, Medicare coverage of psychiatric hospitalization is exhausted and cannot be renewed. This limitation can be harsh for individuals who need frequent and/or lengthy in-patient treatment in a specialized hospital. If they require lengthy hospitalizations for treatment of physical ailments, no such limitation would be placed on the number of covered hospitalizations to which they would be entitled.

It should be noted, the 190 day limit applies ONLY to treatment in specialty psychiatric hospitals. Individuals who require an in-patient level of care for the treatment of a psychiatric condition may receive such treatment at a general hospital and coverage rules follow that of general Part A hospital stay requirements.

Partial Hospitalization

Partial hospitalization programs offer intensive psychiatric treatment on an outpatient basis to psychiatric patients.  For these patients, there is an expectation that their psychiatric condition and level of functioning will improve and thus prevent relapse and inpatient hospitalization. Partial hospitalization programs are located in hospital outpatient departments or community mental health centers. These programs include diagnostic services; individual and group therapy; therapeutic activities; family counseling regarding the patient’s condition; patient education; and the services of social workers, psychiatric nurses, and occupational therapists. Medicare does not cover transportation and meals provided to partial hospitalization patients, but, as discussed below, it does cover other partial hospitalization services.

Partial hospitalization services must be provided under the direct supervision of a physician pursuant to an individualized treatment plan, and the services must be essential for treatment of the patient’s condition. If the supervising physician “rides circuit” between the hospital and its outpatient services department, Medicare will sometimes deny claims on the grounds that no direct supervision is present. An individual must show that his or her treatment is under the direct, personal supervision of a physician, and that treatment is being provided in accordance with his or her individualized care plan. (Medicare Intermediary Manual § 3112.4.)

Clinician Coverage and Outpatient Mental Health Services

Medicare covers medically necessary diagnostic and treatment services provided by physicians, including psychiatrists, as well as clinical psychologists, social workers, psychiatric nurse specialists, nurse practitioners and physicians’ assistants.  Medicare does not cover treatment by licensed professional counselors.  Clinicians must be enrolled in the Medicare program as a provider in order to bill and be reimbursed by Medicare.

Brief visits for the purpose of monitoring the efficacy of prescribed medications are Medicare-covered. Medicare also covers necessary outpatient mental health services including individual and group therapy, therapeutic activity programs, family counseling and patient education services, drugs that a patient generally cannot self-administer and diagnostic tests, including laboratory testing.

The Medicare statute itself places no limits on clinician coverage as long as the services provided are medically necessary.  However, many Part B carriers have Local Medical Review Policies (LMRPs, also known as Local Coverage Determinations, or LCDs) setting out the number of visits Medicare will cover for mental health services. As a result of these policies, an individual may be told Medicare will not pay for doctor and other visits his or her providers consider to be medically necessary. The individual should appeal any denial of coverage that he or she believes is based on a LMRP rather than on his or her individual medical needs.

Home Health Services

Medicare pays for home health services for individuals who require skilled care on a part-time or intermittent basis and who are confined to the home. People with mental health needs who meet these eligibility criteria are eligible for care in their home, even if they have no physical limitations. An individual can be considered “homebound” if their illness is manifested in part by a refusal to leave the home or is of such a nature that it would not be safe for the individual to leave the home unattended.  The Medicare Benefit Policy Manual highlights that home health psychological nursing would only be considered medically reasonable and necessary if the evidence demonstrates that the patient is a danger to self or others.[1] A home health record should document the need for home health psychiatric services and treatments. The record must also reflect the response of patients and caregivers to “any interventions provided.”[2]

Telehealth Services

Medicare pays for a limited number of Part B services furnished by a physician or practitioner to an eligible beneficiary via telehealth.  This includes certain mental health services (e.g., individual psychotherapy and pharmacologic management, behavior assessment and intervention, psychiatric diagnostic interview exam, annual depression screening, psychoanalysis, family psychotherapy) as well as a number of specific behavioral health and substance abuse disorder services (e.g., smoking cessation services, alcohol and/or substance abuse structured assessment and intervention services, annual alcohol misuse screening, brief face-to-face behavioral counseling for alcohol misuse)

To be eligible for telehealth services, the originating site (location of the beneficiary) must be in a rural health professional shortage area (HPSA) located either outside a metropolitan statistical area (MSA) or in a rural census tract; or a county outside of a MSA.[3]

Limitations on Reimbursement

Prior to 2010, reimbursement for certain psychiatric services differed from the usual Medicare reimbursement rules. .Pursuant to the Medicare Improvements for Patients and Providers Act of 2009, beginning in 2010, Medicare began to increase the percentage that it will cover for mental health services. In 2014 and after Medicare will reimburse for mental health services at 80% of the approved rate, the same as for any other Part B claim.

Supplemental Insurance Coverage

Individuals should carefully consider their need for supplemental insurance coverage that will help pay for Medicare cost sharing and services that Medicare does not cover.

  • Medicaid

For Medicare beneficiaries with low income and assets, Medicaid can help pay for Medicare co-insurance and may “wrap-around” Medicare to provide mental health benefits Medicare does not. For more information on how Medicare works with Medicaid, see: (site visited September 22, 2015)

Note: The Medicaid program requires that rural health clinics and federally qualified health center services include the services of a clinical psychologist and a clinical social worker. Coverage of other mental health services is not required. For more information on state coverage of mental health and substance use services, visit (site visited September 22, 2015)

  • Medicare Supplemental Insurance (Medigap)

A Medigap plan can help beneficiaries afford costs associated with treatment for mental illness and substance use disorders. For more information on Medigap,see: visited September 22, 2015).

Medicare Advantage and Special Needs Plans

While the majority of people with Medicare get their health coverage from Original Medicare, some people choose to get their benefits from a Medicare Advantage plan, sometimes called a Medicare private health plan.

Medicare Advantage plans contract with Medicare and are paid a fixed amount to provide Medicare benefits. They are generally managed care plans. The most common types are Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), and Private Fee-For-Service (PFFS) plans. For more general information on Medicare Advantage, visit:

Medicare Advantage plans must cover the same services as Original Medicare described above. A Medicare Advantage plan requires individuals see an in-network mental health care provider. Medicare Advantage enrollees should contact their plan to find in-network providers for the treatment of mental illness, alcoholism and substance abuse.

There are specific Medicare Advantage plans created for people with chronic disease, including mental illness and/or chemical and substance abuse disorders. There is evidence that these Special Needs Plans for people with mental and behavioral health conditions perform well on quality measures and may provide an enhanced level of care. However, these plans do not exist all over the country and the quality of each individual plan will vary. To learn more about Special Needs Plans, visit: (site visited September 23, 2015) or (site visited September 23, 2015) to see if there are Special Needs Plans for mental illness in your area.

Returning to Work

Though some individuals are close to retirement and are considering health coverage options, some younger people with mental illness who are already on Medicare need to know their rights to continue Medicare if they return to work. These rights were expanded by the passage of the Ticket to Work and Work Incentives Improvement Act of 1999 (Pub. Law 106-170). Under this law, people who return to work, and therefore lose their Social Security disability benefits, can continue to receive Medicare coverage for 8½ years after returning to work. As with most other Medicare beneficiaries, they will not have to pay Part A premiums, but they will need to pay Part B premiums. At the end of the 8½ years a disabled worker may continue to receive Medicare by paying premiums under both Parts A and B. For more information on Ticket to Work, visit: (site visited September 23, 2015).

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[1] CMS. “Medicare Benefit Policy Manual: Chapter 7 – Home Health Services.” Section 30.1.1. 11 May 2015. (site visited September 24, 2015).
[2] CMS. “Medicare Benefit Policy Manual: Chapter 7 – Home Health Services.” 11 May 2015. (site visited September 23, 2015). P. 57.
[3] CMS. “Telehealth Services: Rural Health Fact Sheet Series.” December 2014. (site visited September 24, 2015). P. 2. “Center for Medicare and Medicaid Services (CMS) Approves New Telemental Health CPT Codes.” Telemental Health Institute. 13 November 2014. (site visited September 24, 2015). “Update on CMS Proposal for Telemental Health CPT Codes.” Telemental Health Institute. 21 July 2014. (site visited September 24, 2014).