Recommendations for a Standardized State Methodology to Measure Clinical Behavioral Health Spending

Focus Area:
Sustainable Health Care Costs
Mental Health
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Executive Summary

States are facing an unprecedented rise in the rates of behavioral health conditions. To address this health crisis, state officials are increasingly focused on identifying ways to improve access to high quality behavioral health care, including by defining and tracking how much payers spend to treat behavioral health conditions. Understanding how much is spent and on what services is the first step to knowing if spending is sufficient to support a growing workforce need. Several states plan to use the data to set targets for how much payers should spend on behavioral health clinical services. Other use cases include monitoring compliance with laws and regulations such as mental health parity, improving service delivery, and informing state budgeting.

Behavioral health spending includes payments from public and private payers to providers, state funds to support behavioral health service delivery, and payments from patients to providers. Today, 12 states measure how much payers spend on clinical care to treat behavioral health conditions, including three—Maine, Massachusetts, and Rhode Island—that measure across the clinical care continuum, from outpatient therapist visits to inpatient day programs. The three states’ approaches to measurement are largely similar. They typically define spending to treat behavioral health conditions using a combination of diagnosis codes, procedure codes, and provider taxonomy codes. Yet, there is variation across the states’ code sets—for example, the services and care settings included, the categories of non-claims payments used, and the technical specifications for the data. (Non-claims payments, such as prospective, per-patient payments, are not based on individual claims for services.)

Now, several states are calling for a more consistent approach to measurement. A shared definition implemented via a standardized methodology will support comparability, streamline measurement decision-making and implementation, and reduce administrative burden on data submitters. This brief offers recommendations for a definition and standardized methodology supported by a detailed code set to measure how much payers spend on behavioral health clinical services, which includes claims and non-claims spending. The methodology was designed with input from an Advisory Group of state behavioral health leaders and subject matter experts convened by Milbank Memorial Fund and Freedman

Advisory Group Recommendations for a Standardized Definition of Clinical Behavioral Health Spending

Claims Spending


  • Include a specific set of diagnosis codes to identify patients with a primary diagnosis of a behavioral health condition.
  • Include all diagnosis codes for mental health and substance use disorders consistently used in state definitions, as well as dementia, developmental disorders, and poisoning related to self-harm.
  • Assign diagnoses and associated spending to mental health and substance use disorder categories.

Services and Treatments

  • Include a specific set of procedure codes to define behavioral health services.
  • Use a standardized code set to identify and categorize services into inpatient, emergency department/observation, outpatient primary care, and outpatient non–primary care. Include additional categories of long-term care, residential care, and mobile services.
  • Separate spending in each service category into mental health and substance use disorder based on the patient’s primary behavioral health diagnosis.
  • Include services typically covered by Medicaid only.
  • Define behavioral health treatments for those with behavioral health conditions using the National Drug Codes in place in Massachusetts and Rhode Island.


  • Do not restrict by provider type.
  • Track behavioral health services delivered by primary care providers in the primary care setting.

Care Setting

  • Assign services to specific care settings based on place of service and revenue codes.

Non-Claims Spending

  • Measure non-claims clinical spending using a standardized approach.
  • Include only non-claims payments to support behavioral health needs, such as integrated behavioral health, as behavioral health spending.
  • Do not classify non-claims payments to support services with broader impact, such as care coordination and management, as behavioral health spending.

Sinha V, Rourke E, Condon MJ, Brandel W. Recommendations for a Standardized State Methodology to Measure Clinical Behavioral Health Spending. The Milbank Memorial Fund. April 2024.


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