Medicaid is the single largest payer for mental health services in the United States. Although federal law does not contain explicit provisions concerning the exact types of mental health services that can be provided, all State Medicaid programs provide some mental health services to enrollees. There are several vehicles that States can use to support effective community mental health services in Medicaid, including State plan services, managed care, waivers, and the Early Period Screening, Diagnostic and Testing (ESPTD) benefit.

Medicaid reimbursement is available for mental and behavioral health services covered under various service categories: physician's services, inpatient and outpatient hospital services, licensed practitioner's services, clinics, rehabilitative services, inpatient psychiatric hospital services for individuals under age 21, as well as, prescription drugs. Examples of Services in these categories include: Counseling, therapy, medication management, psychiatrist's services, licensed clinical social work services, peer supports, and substance abuse treatment.  

Individuals may receive services in their homes, other residences, in schools, or medical institutions, if necessary. While states have the option to cover some of these services, EPSDT requires that children receive all medically necessary services, including mental health services. In addition to State Plan services, states may offer mental health benefits through home and community-based services (HCBS) waivers.