Some of the highest-need patients in the United States have insufficient access to substance use disorder treatment, despite being insured through federal programs. A few evidence-based policy changes could dramatically improve their lives.
Roughly 12 million Americans are enrolled in both Medicare and Medicaid. These ‘dual-eligible’ patients are among the most medically vulnerable and costly patients in the United States, with high rates of chronic illness, psychiatric comorbidity, and disability than individuals enrolled in either program alone. And, they face some of the largest treatment gaps when it comes to substance use disorder (SUD) coverage.
The reason is structural; fragmented coordination between Medicare and Medicaid leaves them navigating a system that often excludes the very services they need the most.
Coverage Gaps Across the Continuum of Care
Nearly 1.5 million dual-eligible beneficiaries have SUD, and addiction treatment is not a ‘one-size-fits-all’ solution. Clinical guidelines from the American Society of Addiction Medicine recommend a continuum of care, from outpatient counseling to intensive residential treatment. But coverage has not caught up with best practice — neither Medicare nor Medicaid consistently covers that full range of care.
Medicaid’s Uneven Coverage
Medicaid is the nation’s primary payer of SUD treatment, covering roughly half of all services. But what it covers, and how easily patients can access care, varies widely by state, often failing to follow clinical guidelines.
A 2021 analysis found that only about half of state Medicaid programs fully covered all types of SUD treatment found in clinical guidelines. Gaps are especially common in residential treatment, in part because these services are more expensive and have historically fallen outside traditional insurance benefit design. Even covered services are limited by prior authorization requirements and visit caps that delay care, uneven coverage of medications like methadone and injectable naltrexone, and low reimbursement rates that discourage providers from participating.
In many areas, particularly rural communities, coverage may also be constrained by network adequacy and provider shortages.
Medicare’s Limited Scope and Slow Uptake
Medicare has historically covered basic outpatient and inpatient hospital services but excludes many intermediate levels of care.
Though a 2024 policy change expanded coverage of intensive outpatient services for behavioral health across multiple settings, including community mental health centers and opioid treatment programs, key gaps remain. For example, access to methadone depends on local opioid treatment programs, which are absent in more than 1,000 counties nationwide. In addition, intensive outpatient services are limited to in-person care, where virtual and other telehealth options are excluded. Meanwhile, awareness of these new benefits and changes remain low among states and providers.
Consequences for Dual-Eligible Beneficiaries
Together, these dual-eligible gaps compound. Patients often encounter discontinued coverage depending on the level of care they need, leading to delays, drop-offs, or no treatment at all.
All of this fragmentation between Medicaid and Medicare translates into measurable treatment gaps for patients and areas for action.
An analysis by RTI International found that only about 11 percent of Medicare beneficiaries diagnosed with SUD received treatment in a given year. Dual-eligible patients also have higher rates of emergency department use and hospitalization than other beneficiaries.
Research consistently shows “treatment deserts,” where no providers accept Medicaid or Medicare for SUD treatment, disproportionately affecting rural and socioeconomically disadvantaged communities.
The result is a costly and ineffective pattern: patients cycle through emergency departments and inpatient units rather than receiving sustained, community-based treatment that matches their clinical need.
What Policy Can Do
The policy solutions are not new, and many are well-supported by evidence.
- Align and expand coverage across Medicare and Medicaid. Setting federal minimum standards tied to standard clinical guidelines would reduce state-level variation and ensure more consistent access to the full range of treatment. Medicare coverage, in particular, should reflect best practices by covering intermediate and residential levels of care and expanding flexible delivery models, including telehealth for intensive outpatient services. Building on bipartisan efforts like the SUPPORT for Patients and Communities Act, policymakers could further standardize benefits and reduce fragmentation across programs.
- Reduce administrative barriers.
Prior authorization and other utilization controls can delay or interrupt treatment. Stronger enforcement of mental health and substance use parity laws, which require equal coverage for mental health, SUD, and physical health services, would help ensure timely access to care. - Strengthen care coordination.
Dual-Eligible Special Needs Plans are designed to integrate Medicare and Medicaid services, but results have been mixed and limited. Some studies suggest these plans can improve outcomes, while findings across other metrics are inconclusive. Stronger accountability and SUD-specific quality measures could improve performance.
Dual-eligible patients face some of the largest gaps in SUD treatment, not because effective treatments do not exist, but because coverage is fragmented across two programs that rarely align. Gaps in benefits, administrative hurdles, and provider shortages reduce treatment use and drive avoidable hospitalizations. Addressing the need will require aligning and expanding care coverage, enforcing mental health and SUD parity laws, and strengthening care coordination across Medicare and Medicaid, so that dual-eligible patients no longer fall through the cracks in SUD treatment.
