The digital therapeutics (DTx) industry is rapidly evolving, offering a new approach to managing and treating medical conditions through software-based, evidence-driven interventions. Despite its potential, the industry has historically faced significant reimbursement challenges that have slowed patient access. While DTx products have been available since 2017, securing payment coverage from insurers has often been a major barrier. Now, however, Medicaid digital therapeutics are emerging as a key avenue to expand access for patients, particularly in behavioral health.
Digital therapeutics are particularly focused on behavioral health conditions, an area that continues to experience high demand and limited access. Children and adolescents are especially affected, as mental health services for these populations are often scarce. “Digital solutions are pivotal for the Medicaid market, where a shortage of providers has made access to care difficult, particularly for children and children with mental health issues,” said Dr. Benny Alouf, chief medical officer at Limbix, a DTx company focused on adolescent depression. “A digital therapeutic has no limits on its ability to scale and can be downloaded before even leaving the authorizing provider’s office. Access to care is a top priority in population health, and Medicaid digital therapeutics are among the most effective methods to improve access across a large population.”
Limbix, based in Palo Alto, California, has raised $31 million in funding but has not yet received FDA clearance for its products. Still, the company represents a growing cohort of DTx developers demonstrating the potential of software-based interventions to treat complex behavioral health challenges.
Legislative Developments
The regulatory and legislative environment for DTx has been gradually evolving. In December, the Medicaid and CHIP Access to Prescription Digital Therapeutics Act was introduced to provide guidance to state Medicaid and Children’s Health Insurance Programs (CHIP) on covering digital therapeutics. Though the legislation did not make it into the $1.66 trillion omnibus funding bill, industry experts see it as an important signal for the future of Medicaid digital therapeutics.
Andy Molnar, CEO of the Digital Therapeutics Alliance (DTA), a trade organization representing companies with clinically validated DTx products, explained that the legislation aimed to clarify how states could cover prescription digital therapeutics without major changes to existing Medicaid or Medicare programs. “It [sought to] define prescription digital therapeutics, and not be a massive change to the Medicaid or Medicare program because of cost,” Molnar said.
While the bill missed its immediate window, both Alouf and Molnar highlighted that bipartisan support could create a foundation for future legislation. This incremental progress may ultimately help standardize coverage and expand access across states, which is essential for patients relying on Medicaid digital therapeutics.
Medicaid Adoption and Early Deals
Even without sweeping legislation, DTx companies have been making inroads into the Medicaid market. Pear Therapeutics, a leader in prescription digital therapeutics, has been at the forefront of these efforts. The company received FDA clearance for its addiction treatment software, reSET, in 2017 and has since expanded its offerings to include treatments for opioid use disorder and insomnia.
In 2021, Pear partnered with MassHealth, Massachusetts’ Medicaid program, to reimburse its addiction-focused digital therapeutics. Dr. Corey McCann, CEO of Pear, highlighted the growing adoption across multiple states: “MassHealth has moved to include prescription digital therapeutics and create access for every Medicaid patient. The states of Oklahoma, Indiana, Ohio, Kentucky – we’re up to about 10 different states – have been vanguards in providing access to patients for these products.” These efforts have paved the way for more widespread adoption of Medicaid digital therapeutics, providing much-needed access to underserved populations.
CMS Steps Toward Standardization
Federal agencies are also contributing to progress in DTx reimbursement. The Centers for Medicare & Medicaid Services (CMS) added a Healthcare Common Procedure Coding System (HCPCS) code for “prescription digital behavioral therapy” in 2021. This provides a standardized way for both commercial and Medicaid payers to recognize and reimburse digital therapeutics. While Medicaid adoption can serve as a model for commercial insurers, early movement on the commercial side has also been observed.
In 2022, nonprofit insurer Highmark became the first commercial payer to cover certain FDA-cleared digital therapeutics, signaling that the potential for wider adoption exists. Despite these advances, universal reimbursement remains limited, and many patients are still without access to these transformative tools.
Why Equitable Access Matters
Ensuring equitable access to Medicaid digital therapeutics is critical. Alouf emphasized, “Digital therapeutics are designed to be used by health care providers to improve access and offer solutions to many different disease states. Passing legislation that creates a benefit category with consistent coding and reimbursement will assure that these essential therapeutics are available to everyone rather than in one state but not another, or for a commercial plan member but not a public plan member. We need to make sure there is equitable access to them so all patients can benefit.”
Digital therapeutics can scale to serve large populations, deliver interventions in real time, and provide ongoing monitoring to optimize outcomes. For Medicaid patients, particularly children and adolescents in underserved areas, these tools can be transformative, offering timely and effective treatment options that are otherwise unavailable.
The Future of Digital Therapeutics
As states continue to explore coverage for DTx, Medicaid digital therapeutics could finally overcome one of the biggest barriers: reimbursement. With continued policy support, legislative guidance, and successful early adoption in Medicaid programs, these solutions could reach millions more patients, improving access to care, treatment outcomes, and overall population health.
For behavioral health, where timely treatment can make a profound difference, Medicaid digital therapeutics represent an essential innovation. As the ecosystem matures, both public and private payers are likely to expand coverage, bringing these interventions to the patients who need them most.
