Policy & oversight
Three States Audited by Federal Watchdog Failed to Ensure Mental Health Parity Rules Were Followed in Medicaid Plans
OIG found Kansas, New York, and Arizona did not ensure their Medicaid managed care plans applied the same prior authorization standards to mental health and addiction care as to physical health services, a compliance failure the watchdog has now documented in nearly every state it has reviewed.
By the Goodsurance editorial teamAugust 26, 2026
Federal law requires health plans that cover mental health and substance use disorder services to apply the same prior authorization rules to those services as they do to comparable medical or surgical care. The principle is known as mental health parity. The Health and Human Services Office of Inspector General has been conducting a series of audits examining whether states are enforcing parity requirements in their Medicaid managed care programs.
In August 2026, OIG released audit findings for three additional states. Kansas did not ensure that its Medicaid managed care organizations complied with parity requirements related to prior authorization, according to a report published August 10. New York did not ensure compliance despite operating a formal parity compliance program, according to a report published August 13. Arizona likewise failed to ensure that selected managed care organizations met parity requirements. Two of the three organizations audited in Arizona could not demonstrate that they had completed a required parity analysis since one the state conducted in 2017.
OIG found Kansas, New York, and Arizona all failed to ensure Medicaid managed care plans followed equal prior authorization rules for mental health and addiction services.
Across OIG's broader audit series, only one managed care organization out of all those reviewed to date has been found fully compliant. Plans in noncompliant states commonly applied more restrictive prior authorization to mental health and addiction services than to comparable physical health care.
The findings are relevant to Medicare because roughly 12 million Americans hold both Medicare and Medicaid. Many are enrolled in the same Medicaid managed care organizations audited here. Barriers to mental health or addiction treatment in those plans can reduce total access to care for dual-eligible beneficiaries.
In plain words
A law says health plans must treat mental health and addiction care the same way they treat regular medical care when it comes to approvals. The federal government has been checking whether states are making sure their Medicaid health plans follow this rule. In August 2026, three states were found to have failed. Kansas, New York, and Arizona did not make sure their Medicaid plans were following the rule. In Arizona, two out of three plans had not even done a required check since 2017. Out of all the plans the government has reviewed so far, only one follows the rules fully. About 12 million people have both Medicare and Medicaid, so this problem can affect their ability to get mental health care.
Understand the basics first
Source: OIG
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