Final FY27 Budget Must Carve Out Behavioral Healthcare Services from Medicaid Managed Care
FOR IMMEDIATE RELEASE:
January 21, 2026
A day after Governor Hochul delivered an Executive Budget that did not address the needs of millions of New Yorkers with mental health and/or substance use disorder conditions enrolled in New York’s Medicaid managed care program, several organizations representing clients, families and providers urged state lawmakers to answer the call.
For more than a decade, insurance companies and their middlemen have profited while millions of New Yorkers on Medicaid have struggled to receive the mental health and substance use disorder support they need. Right now, New York State is paying Managed Care Organizations (MCOs) $400 million annually to serve as middlemen for behavioral health. The NYS Council for Community Behavioral Healthcare, alongside a broad group of 20 statewide associations and coalitions are working together to end this failed policy experiment, urging lawmakers to carve out most OMH and OASAS community-based mental health and substance use disorder services from Medicaid managed care. This would improve healthcare, and end the decade of missteps caused by the current system:
- Teen suicide rates increased 9.9%
- Opioid death rates consistently above the national average
- More than 300 state citations to Managed Care Organizations for violations
- 85% “ghost networks” with fake provider directories
- More than $500 million hoarded by insurers instead of spent on care
- 43% of clinics with waiting lists—unchanged
- Value-based payment? Virtually nonexistent for behavioral health
“We won’t give up our fight just because Governor Hochul’s Executive Budget did not meet the needs of millions of New Yorkers with mental health and/or substance use disorder conditions enrolled in New York’s Medicaid managed care program. We need our partners in the state legislature to step in and include a carve out of most behavioral healthcare services from Medicaid managed care,” said Lauri Cole, Executive Director of the NYS Council for Community Behavioral Healthcare.
“New York State cannot afford to sit by as health insurance plans and their middlemen earn hundreds of millions of dollars while New Yorkers in need don’t get the care they deserve. We need our state leaders to be bold, and to transform our behavioral health care delivery system by carving out most OMH and OASAS behavioral health services from the Medicaid managed care. That’s the only way to finally cut waitlists, reduce and remove red tape, improve access to care, enhance program quality, and save New York more than $400 million annually by taking largely for-profit managed care plans out of the equation.”
S8309/A8055 sponsored by Senator Brouk and Assemblymember Simon and several other colleagues in both houses would amend the Social Services Law and eliminate insurance middlemen. We will continue to passionately advocate for this legislation to be included in the final state budget. We and our partners won’t back down until these New Yorkers receive the quality healthcare they deserve.”
“As a network of families and young people impacted by lack of access to behavioral health services, we are extremely disappointed that the Governor’s Executive Budget proposal ignores our pleas to carve out outpatient mental health and substance use services from the state’s Medicaid Managed Care program,” said Paige Pierce, CEO of Families Together in New York State. “This is an opportunity to shift $400 million away from insurer profits towards the beleaguered mental health and substance use service delivery system, but instead, leaves for-profit managed care organizations in control of Medicaid, the biggest payer of behavioral health services in the state while forcing families and providers to fight their deny-and-delay business tactics that obstruct access to care. We must carve out behavioral health this session!”
Laura Isabelle, Director of Policy, Association for Community Living said, “The absence of the carve-out in the enacted budget is not only a missed opportunity to reduce administrative strain on behavioral health providers, but also a missed opportunity to improve access to care for vulnerable New Yorkers.”
Allegra Schorr, President of the Coalition of Medication-Assisted Treatment Providers and Advocates (COMPA), said, “Governor Hochul’s Executive Budget once again ignores the urgent need to remove behavioral health from Medicaid Managed Care. After more than a decade of clear evidence, Medicaid Managed Care has failed New Yorkers who need behavioral health treatment. It has become a costly middleman—wasting state dollars, burying providers in administrative red tape, and denying payment for care that was properly delivered. The result is fewer services, longer waits, and greater difficulty recruiting and retaining staff, all while overdose deaths and mental health crises continue. Returning behavioral health services to Medicaid Fee-For-Service would save hundreds of millions of dollars and expand access to care. With the Executive Budget refusing to act, the Legislature must step in to end this failed experiment and put patients—not insurance bureaucracy—first by passing S.8309 / A.8055.”
“CCC is disappointed that the Executive Budget fails to include critical language to carve mental health and substance use disorder services out of Medicaid managed care,” said Raysa S. Rodriguez, Executive Director of Citizens’ Committee for Children of New York. “The managed care system has failed New York’s children and families, who continue to sit on waitlists for months for mental health services, or be denied care entirely. By supporting a managed care carveout, New York has the opportunity to reduce access barriers for families and reinvest desperately needed savings into the behavioral healthcare system.”
“Carving out behavioral health services from New York’s managed care program will redirect $400 million from administrative to direct service dollars will ensure that hundreds of thousands of New Yorks will get significantly increased access to life-changing, if not life-saving services, said Harvey Rosenthal, Chief Executive Officer of the Alliance for Rights and Recovery.
“Friends of Recovery–New York is disappointed that Governor Hochul’s Executive Budget does not include a Medicaid carve-out for community-based behavioral health services to meaningfully reform how these services are financed and delivered, said Christopher Assini Director of Policy, Friends of Recovery–New York. “As New Yorkers with mental health and substance use disorder needs continue to face persistent waitlists, workforce strain, and unnecessary administrative barriers, the absence of a proposal to remove behavioral health services from Medicaid managed care represents a missed opportunity to strengthen access, accountability, and services. Friends of Recovery–New York believes meaningful reform must prioritize individuals and families over administrative red tape and ensure limited public dollars are reinvested equitably and directly into community-based behavioral health providers.
We remain committed to working with legislative leaders to advance solutions that improve access, reduce inefficiencies, and support sustainable, high-quality services statewide, and strongly supports the legislation (A.8309 Simon / S.8055 Brouk).”
“As with other health conditions, timely access to substance use disorder and mental health care is proven to dramatically alter outcomes. Instead, people at risk of crisis are waiting weeks to months for prior authorizations or coverage denials that are often later reversed. Wait times grow as service providers are forced to divert scarce time and resources from patient care to navigating overly complex insurance processes. These challenges compound as programs are forced to fight for timely payment, threatening their financial sustainability. Rather than reducing costs or improving coordination, Managed Care has exacerbated barriers to life-saving care at a tremendously high cost to our communities and the health care system,” said Sarah DuVall, MPH, Chief Research and Policy Officer, InUnity Alliance.
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