Does Medicare cover rehab for drug and alcohol addiction? Yes, and here’s exactly what it will pay for

According to the 2022 National Survey on Drug Use and Health (NSDUH), in 2022, about 4 million people aged 65 or older (or 7%) had a substance use disorder (SUD) in the past year, including 2.3 million who had an alcohol use disorder (AUD) and 1.8 million who had a drug use disorder (DUD).

Older adults often feel ashamed about substance abuse and are reluctant to seek help. But help is available through Medicare coverage.

What Medicare covers for rehab

“Medicare pays for the treatment of alcoholism and substance use disorders in both inpatient and outpatient settings, when medically necessary,” says Meredith Freed, Senior Policy Analyst for Medicare Policy at KFF.

Medicare Part A covers inpatient substance abuse treatment. Medicare Part B covers outpatient substance abuse treatment from a hospital outpatient department or clinic.

Expenses covered for the treatment of alcoholism and substance use disorders include:

• Therapy
• Patient education
• Follow-up after hospitalization
• Prescription drugs through Medicare Part D (outpatient)
• Prescription drugs, including Methadone (inpatient)
• Structured Assessment and Brief Intervention (SBIRT)

Without a diagnosis of SUD, but if you are showing early signs of substance abuse or dependency, you may qualify for SBRIT, which is an outpatient early intervention process with these three parts: 

• A screening assessment for risky substance use behaviors
• A brief intervention with a patient who shows risky substance use
• A referral for therapy or additional treatment 

If you need inpatient treatment at a hospital or treatment facility, you will pay the standard deductible for each inpatient hospitalization, which, in 2024, is $1,632. After that, “Medicare covers expenses up to 60 days, then beneficiaries pay a $400 copayment per day for days 61-90 and $800 per day up to the lifetime reserve days available,” says Freed. For inpatient stays in a psychiatric hospital (instead of a general hospital), Medicare coverage is limited to up to 190 days of hospital services in a lifetime.

Medicare Advantage coverage for rehab

Medicare Advantage (MA) plans are required to offer at least the same coverage as traditional Medicare plans.

However, according to Freed, the deductible and copay amounts (see above) are for people in traditional Medicare. MA plans have the flexibility to modify cost sharing for most Part A and B services, subject to some limitations. So if you’re in an MA plan, your cost-sharing requirements may look different. For example, MA plans often charge daily copayments for inpatient hospital stays.

Here are some additional examples of cost savings tools MA plans use:

• Prior authorization requirements. According to KFF analysis, almost all MA enrollees (98%) in 2022 were in plans that required prior authorization for some mental health and substance use disorder services.
• Coverage only for in-network providers. In 2022, roughly 60% of MA plan participants had plans that did not cover out-of-network outpatient mental health and substance use disorder services.
• Referral requirements. About a quarter (26%) of MA participants were in plans requiring referrals for some mental health and substance use disorder services in 2022.

Medigap and Medicaid coverage for rehab

If you have supplemental Medicare insurance (such as Medigap) in addition to your traditional Medicare, you can typically get coverage for deductibles and other addiction treatment expenses not covered under basic Medicare.

Medicaid coverage varies by state. Check with your Medicaid state agencies for more information.

More help for substance use disorder in 2024

One of the biggest challenges in receiving support for mental health challenges such as substance use disorder is the scarcity of mental health providers. Recently passed Congressional action that goes into effect in 2024 may help.

CMS announced that over 400,000 marriage and family therapists and mental health counselors can provide services to people on Medicare and get paid directly. Previously they had to be supervised by a billing physician, says Freed.

CMS also put forth a new requirement that MA plans include an “adequate number of outpatient behavioral health facilities” in their provider networks for therapy and substance use disorder treatment.

Congress and CMS also made progress on closing the gap between inpatient and outpatient SUD treatment, to take effect in 2024.

Previously, Medicare offered a partial hospitalization benefit (PHP), for patients who need at least 20 hours of therapy and other mental health and substance use disorder services in a week instead of requiring inpatient hospitalization.

“In 2024, Medicare beneficiaries will have access to a new program—intensive outpatient (IOP) services,” says Freed. As an alternative to hospitalization, patients can receive 9-20 hours of outpatient SUD services in a larger variety of settings, including hospital outpatient departments, community mental health centers, federally qualified health centers, rural health clinics, and opioid treatment programs (OTPs). Previously, these services were only available for people who needed 20 or more hours of services, which could only be provided in hospital outpatient departments and community mental health centers.