Cost and Utilization Impacts of a Medicaid Managed Care Organization’s Behavioral Health Wraparound Program

Wraparound programs that provide comprehensive evidence-based outpatient treatment, transportation, social services, and housing supports have shown promise for improving clinical behavioral health-related outcomes to reduce the need for institutionalized care; however, the majority of evidence is based on wraparound programs for children. This study examined the impact of a wraparound program for adult Medicaid managed care organization members with serious mental health or substance use disorders on health care costs and utilization. This retrospective observational study used 2013–2018 claims data collected from a large Medicaid managed care organization operating in multiple states. We used an intention-to-treat difference-in-difference study design to examine the association of the wraparound with costs and utilization. Adult Medicaid members with an emergency department (ED) or inpatient visit for a behavioral health condition (index visit) were eligible for the study. Outcomes included all-cause and behavioral health-related costs and utilization during follow-up after the index visit’s admission date. Outcomes were calculated overall, as well as separately by inpatient, ED, and outpatient/wraparound settings. We found that during the first post-admission month, the wraparound program was associated with 27.6 percentage points (PP) and 27.2 PP reductions in the number of behavioral health-related inpatient nights and costs, respectively. However, during subsequent months (median follow-up ranging from 7 to 10 months) there were no associations with per-member-per-month total all-cause or behavioral health-related costs. Nonetheless, the wraparound program was associated with 12.3 PP reduction in all-cause cost during the entire study period among a subset of members who were high cost at the baseline. Reduced hospital utilization and costs during the first month of wraparound services were fully counteracted by outpatient, housing, and other wraparound services costs during the following months. This indicates the importance of proper payment arrangements with value-based contracting or performance targets with wraparound services providers to align the objective of reducing inpatient use. Future wraparound programs may consider a more focused recruitment from high-cost members with complex care needs. However, our estimates were conservative given that it’s from a single Medicaid managed care organization’s perspective and some benefit from investing in addressing social needs may be realized in longer term (beyond our study period). States’ Medicaid programs may consider the longer-term cost and broader, societal benefit of wraparound investment.