During the 2022 Going Digital: Behavioral Health Tech conference, Chiquita Brooks-LaSure, the Administrator of the Centers for Medicare & Medicaid Services (CMS), delivered a message that resonated deeply with digital health stakeholders: innovators must engage directly with state Medicaid programs to advocate for broader adoption and reimbursement of behavioral health technologies. In a pre-recorded keynote, Brooks-LaSure called on digital health entrepreneurs to not only build transformative products but to participate in the complex, often under-recognized work of policy advocacy. Specifically, she encouraged them to push for state-level expansion of digital behavioral health Medicaid coverage, which remains one of the most influential levers for scaling impact in the behavioral health industry.
Medicaid: A Gateway to Impact for Behavioral Health Startups
For digital behavioral health startups, Medicaid represents one of the most important—and most overlooked—distribution channels. As of February, Medicaid and the Children’s Health Insurance Program (CHIP) together provided health coverage to approximately 87.4 million individuals. That figure represents a staggering 24% increase since February 2020, driven largely by pandemic-related coverage expansions and economic shifts.
When Medicare is added into the equation, CMS oversees the care of roughly 146.7 million people—about 44% of the total U.S. population. And yet, despite the enormous reach of these government programs, many digital behavioral health tools are not yet covered by Medicaid. That leaves millions of low-income Americans without access to potentially life-changing mental health solutions.
Brooks-LaSure emphasized the importance of closing this gap through state-level innovation. “It’s so crucial to really engage with the states to make sure they’re aware of new types of initiatives and really press for those things to be covered in Medicaid and CHIP programs,” she said.
State Medicaid Flexibility Creates Openings for Innovation
Medicaid is jointly funded by the federal and state governments but is administered primarily at the state level. This structure creates a wide range of flexibility in what services each state covers and how they are implemented. While federal regulations set a floor for required benefits, states have considerable authority to determine whether to include newer services and technologies.
This flexibility is where digital health innovators can make the greatest difference. Brooks-LaSure reminded the audience that Medicaid programs are required to cover core mental health services but are not bound to a fixed list of treatment modalities or platforms. “They have a lot of flexibility to cover new ways and new approaches,” she explained.
For entrepreneurs developing mobile mental health tools, teletherapy platforms, AI-driven clinical assessments, and other emerging technologies, this opens up a path to securing digital behavioral health Medicaid coverage by working closely with individual states to show the clinical and financial value of these offerings.
Why Medicaid Coverage Matters for Behavioral Health Companies
There is no bigger opportunity in U.S. health care for behavioral health access than Medicaid. The behavioral health crisis—exacerbated by the COVID-19 pandemic, economic pressures, and an overwhelmed workforce—has created a widespread need for accessible, scalable mental health support.
And most of the funding for behavioral health treatment already comes from public sources. A recent report from the Substance Abuse and Mental Health Services Administration (SAMHSA) estimated that 64% of all U.S. spending on mental health and substance use disorder services—about $179.4 billion of the $280.5 billion total—comes from government programs like Medicaid and Medicare.
That means digital behavioral health Medicaid coverage is not just a matter of access—it’s the financial foundation that makes innovation viable. Without it, even the most effective products may struggle to survive or scale, particularly in the low-income and high-need populations that Medicaid serves.
Waiver Programs Provide a Policy Pathway
In her remarks, Brooks-LaSure pointed to Medicaid waiver programs as one of the key mechanisms through which states can pilot and scale new care models. These waivers—particularly Section 1115 waivers—allow states to go beyond traditional Medicaid rules and test novel approaches to care delivery and payment.
“It has authority to do things differently,” Brooks-LaSure said, describing the role of CMS in enabling states to pursue innovation through waivers.
Many states have used 1115 waivers to address behavioral health needs in creative ways, from implementing crisis response systems to integrating mental health care into primary care. These same waiver pathways can be used to explore and expand digital behavioral health Medicaid coverage—if startups are willing to partner with states, share data, and demonstrate value.
CMS Emphasizes Stakeholder Engagement
In line with CMS’s strategic vision, Brooks-LaSure made clear that the agency is committed to listening to providers, health tech companies, and others on the front lines of care delivery. “We know you’re the ones actually delivering care,” she said. “We really encourage you to give us feedback on the policies that we’re implementing.”
This is an invitation for digital health entrepreneurs to go beyond pitching products and to engage in the regulatory process. By providing data, participating in state and federal pilots, and offering constructive feedback, companies can play a direct role in shaping the future of digital behavioral health Medicaid coverage.
The Power of Public-Private Collaboration
Brooks-LaSure’s vision was echoed by Tequila Terry, Group Director of State Innovation and Prevention and Population Health at the Center for Medicare & Medicaid Innovation (CMMI), which operates within CMS. At the Behavioral Health Business VALUE event, Terry highlighted the need for joint efforts between sectors.
“I think there is an opportunity to bring both the public sector and the private sector together to coordinate, align, and to identify improvement opportunities,” she said.
This kind of alignment will be essential as Medicaid programs seek to modernize. By working with state officials, provider networks, and advocacy groups, digital health companies can become embedded in the systems they seek to improve—ultimately enabling more widespread and sustained digital behavioral health Medicaid coverage.
A Call to Action for Behavioral Health Innovators
For founders and operators in the digital behavioral health space, the message from CMS leadership is clear: it’s time to go beyond building great products. If you want to reach Medicaid enrollees and participate in transforming the nation’s mental health system, you must also be an advocate, a partner, and a policy contributor.
That means:
- Learning about how Medicaid is administered in key states
- Identifying policy champions and decision-makers within Medicaid agencies
- Sharing real-world outcomes and cost data that prove value
- Participating in pilot programs or offering to collaborate on waiver design
- Listening to community needs and adapting technology to meet them
Digital behavioral health Medicaid coverage is the bridge between innovation and equity. It’s the mechanism that ensures the people who need support the most can access it in ways that are scalable, affordable, and effective.
As public demand for mental health services continues to grow and pressure mounts on state and federal systems, the need for innovation has never been greater. With Medicaid serving nearly half the country, the future of behavioral health care will be shaped not just by technology, but by the willingness of innovators to engage in the policymaking process.
Digital behavioral health Medicaid coverage is not merely a regulatory hurdle—it’s a strategic imperative. And for those who seize the opportunity, it could also be the key to building a more inclusive, responsive, and transformative mental health system for all.
