Three States Audited by Federal Watchdog Failed to Ensure Mental Health Parity Rules Were Followed in Medicaid Plans

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.

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.