Many Therapists Don't Accept Medicaid: It's Not About Money Alone

thepayimpact
Oct 27, 2025
2 min read

Updated: Oct 29, 2025

There are over 350,000 therapists treating mental health, behavioral health, and substance use disorders in the United States, yet the majority of these therapists do not accept Medicaid.

Why is this?

The administrative burden associated with accepting Medicaid is a key reason why many therapists favor private insurance or self-pay clients. Initially, therapists must become paneled with each insurance companies, meaning they are recognized as approved providers and are in-network. This process often takes several months and involves extensive paperwork.

Although therapists are able to conduct an initial assessment, they are required to complete essential paperwork such as treatment plans outlining therapy goals. These documents don’t always function as formal prior authorizations, but they can serve a similar role — acting as proof of medical necessity and triggering insurer review before ongoing sessions are approved. Progress summaries are also necessary to justify the continued need for therapy.

Billing carries another layer of complexity. Providers must verify that clients remain covered by the same insurance and follow the specific documentation rules. Additionally, if overpayment or billing errors occur, therapists may have to return funds to the insurance company — a process known as a clawback .

Audits are normally performed randomly when therapists accept Medicaid. An audit is a formal review of the billing, documentation, and service provided. This helps ensure services were medically necessary, claims were submitted properly, and meeting standards.

A significant problem with auditing is providers may face a clawback, being required to pay back previously reimbursed funds if errors are found. However, there is often a 30–60-day window to correct information if problems are found during audits. This can be burdensome and time consuming, especially with smaller practices or individual therapists who lack administrative support.

For Providers:

What is a driving reason behind you or your practice not accepting Medicaid clients?

Administrative Burden
Reimbursement Rates and Delayed Payments
Intense Audits

What does this mean for clients?

These factors are not only influencing providers, but they have a direct impact on clients. When therapists choose not to accept Medicaid or other insurance types, it creates barriers to accessing care and not being able to continuously pay out-of-pocket. This significantly impacts low-income individuals and minorities.

All populations are impacted by the need of mental health therapy whether wealthy, poor, underserved, or educated. While many of the points discussed are valid reasons to not accept Medicaid, it truly hurts those in need of care more than the provider of care. Medicaid reimbursement reform is significantly needed around therapy. Increasing the number of providers accepting Medicaid will remove access barriers. The more providers understand both sides, the more they are able to advocate for themselves and clients.