States that pay psychiatrists more see lower costs for Medicaid patients

A new study led by Associate Professor Onur Baser found that Medicaid patients with serious mental illness had lower hospital, emergency, and overall costs in states that paid psychiatrists more. The results suggest higher reimbursement may support better care continuity and reduce costly acute care use.

For the study, Dr. Baser and colleagues compared Medicaid patients with serious mental illness in states with high versus low reimbursement for psychiatric services, using claims data from 2021 to 2023. The analysis included more than 250,000 patients across both cohorts.

After adjusting for patient and state factors, the high-reimbursement states had 19% lower psychiatric-specific costs and 24% lower total annual costs. These states also had lower odds of psychiatric-specific inpatient and emergency department visits, as well as lower all-cause inpatient and emergency department use.

The findings point to reimbursement policy as a possible lever for improving access and reducing avoidable spending in mental health care.

The association is not proof of causation, but it may reflect better provider participation and continuity of care,” says Dr. Baser.

Baser, O., Waters, H. C., Yapar, N., Samayoa, G., Han, X., Freedman, D., Isenman, L., & Patel, R. (2026). The effect of Medicaid reimbursement for psychiatrists on the health care burden of serious mental illness. The American Journal of Managed Care, 32(6), e198–e204.