By Ellen Hallsworth
Since 2020, there has been exponential growth in both the need for behavioral health care and options for treatment. As we enter the second half of the decade, the need remains, but the landscape is changing rapidly. What will the next five years of delivering behavioral health care look like?
Background
Growing Demand
In the wake of the pandemic, the need for behavioral health care increased dramatically across all age groups. According to the CDC the presence of depression symptoms among Americans over age 12 has increased by 60% over the past decade. Suicide is now the second leading cause of death for individuals ages 10-24 in the United States, prompting leading professional organizations to declare a national emergency in children’s behavioral health in 2021.
The Rise of Telehealth
Also driven by the pandemic, telehealth emerged as a new way of accessing treatment. Stay-at-home orders, relaxed interstate licensure for clinicians, and changes to reimbursement across all payers increased telehealth visits as a percentage of all healthcare claims from 0.1% in 2019 to nearly 8% in March 2020. Even as we entered a “new normal” and most specialties returned to in-person, behavioral health was an outlier, with over one third of encounters continuing to take place virtually.
New Market Entrants
Startups entered the market, often attracting millions of dollars of venture capital funding. In 2021, investment in digital behavioral health in the United States reached $2.4 billion. Conferences like Behavioral Health Tech emerged as focal points for networking, deals and innovation. The market for behavioral health care diverged between health systems, small providers who struggled to meet growing demand within the confines of traditional reimbursement, and venture-backed startups with a greater emphasis on branding, metrics and patient experience. By concentrating on commercially-insured, technologically-adept, mildly or moderately ill patients, some startups “skimmed” the overall patient population, leaving health systems, community providers, and state agencies to deal with the neediest and least-resourced.
Together, this combination of increased demand, new modes of care delivery and market changes opened up new opportunities, but also placed the behavioral health system under severe strain.
What’s Next?
Looming changes to reimbursement, technology, public investment and patient demand means the market is changing rapidly. Here are four trends to look out for as the dust settles.
1. A Shift in Focus from Access to Quality and Effectiveness
At the start of the decade, concern about unmet need for behavioral health care translated into a focus on increasing access to treatment through telehealth, and by bringing treatment closer to patients through school-based or employer-based behavioral health solutions. Increased enforcement of the Mental Health Parity and Addiction Equity Act, announced in late 2024, reflected this concern in national policy-making.
Increased access translated into spikes in both utilization and cost. For children, behavioral health spending increased to 40% of total medical expenditures. Evidence of a corresponding increase in outcomes has been harder to see. Rarely, increased access via telehealth resulted in questionable prescribing practices for controlled substances.
Growing spending without clear benefits is a source of concern for payers, especially for Medicaid payers facing a $700 billion reduction in funding over the next decade. Increasingly, payers are demanding evidence of demonstrable and sustained outcomes in behavioral health. There’s an increased focus on evidence-based practices and measurement-based care. Especially for value-based care models, evidence of effectiveness is going to be key.
On a patient-level, routine collection of PHQ-9 and GAD-7 data is the new normal. HEDIS measures for behavioral health will also become increasingly important. All providers will need to be readily able to produce data on follow-up after hospitalization, medication management, and depression screening and follow-up. Ideally, this type of measurement should also be accompanied by measures that center lived experience, functioning, and patient priorities.
2. Consolidation
Hundreds of new mental health startups, mostly virtual, were founded in the years after the pandemic. In an area of health care that patients and their families have traditionally found hard to navigate, a proliferation of choice didn’t necessarily help. Payers reported feeling overwhelmed by the number of vendors approaching them, especially those focused on niche solutions. Given the challenges with evidence of efficacy mentioned above, it was tough to know who to contract with in which markets.
With increased pressure from payers, there are already signs of consolidation. In 2025, Lyra Health, an employer-benefits focused company, acquired the pediatric provider bend health; family-focused Little Otter merged with school-based Hazel Health. These mergers and acquisitions have in common the need to provide “platform” solutions that address the needs of wider market segments with the same infrastructure. Consolidation has the potential to make the contracting process easier for payers and care navigation easier for families.
3. Increased public investment and state involvement
Public policy tends to move more slowly than private equity. But states play as crucial a role in behavioral health as regulators, payers, and often providers. In recent years, as unmet need for behavioral health continues, especially in vulnerable populations that are often least served by tech-focused startups, states and local governments have announced significant new behavioral health initiatives and investments.
In New York, Governor Hochul announced a $1 billion multi-year plan to transform the continuum of care in behavioral health. California recently announced BH-Connect, a new Section 1115 Waiver to expand access to community-based services as well as the Behavioral Health Services Act (BHSA) to expand access to care for those most in need, including those with substance use disorder (SUD).
The initiatives in New York and California both focus on the intersection between behavioral health and the provision of secure housing, an area where investment in one type of public spending could reap dividends in another. In its Children & Youth Initiatives, BH-Connect directs resources into an Activity Fund to support families, which is a welcome recognition that behavioral health often depends as much on community as it does on clinical care. Public sector behavioral health initiatives also often stress the need to embed evidence-based practices
4. Technological Shifts
As behavioral health care moved online following the pandemic, it tended to replicate the same types of care (e.g., 50 minute therapy sessions, intensive outpatient programs) delivered via Zoom rather than in-person.
Today, AI and other technological changes mean that the future of how behavioral health care is delivered may be radically different. At recent behavioral health conferences, the exhibit halls have shifted from tech-enabled providers to AI-focused vendors.
One third of ChatGPT users report using it for emotional support. In a world where workforce shortages remain acute and reimbursement is increasingly challenging, free and open-access solutions may prove to be one way to address access to care. These come with safety challenges. Over 1 million ChatGPT users each week express some form of suicidal ideation that risks being made worse by AI hallucinations or a failure to connect vulnerable people to adequate real-world care fast enough. Some states, like Illinois have tried to ban access to AI therapy, but it’s not clear if this approach will be sustainable long-term. It may be better to channel demand for this type of support into regulated, FDA-approved solutions, rather than to ban it outright.
Technology is changing other aspects of care delivery too. Ambient scribing is freeing up therapists to spend more time focused on patients and less on note-taking. Agentic AI is also easing the intake process, and reducing stigma.
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We’re seeing a trend toward reduced friction and greater flexibility in accessing behavioral health treatment. That treatment may become increasingly embedded in everyday life, both in terms of housing and other social supports and in terms of interactions with technology.
Behavioral health care won’t just be something that happens inside a therapist’s or doctor’s real or virtual office. Payers and patients are going to want to see hard evidence that the types of behavioral health care they pay for makes a difference in their everyday lives.
Finally, we are still living with the after-effects of the pandemic. Providers say they are increasingly dealing with younger patients, including those who were infants during the pandemic, growing up with the lasting impact of early under-socialization. Though we have moved beyond the immediate impact, the ripple effects of the pandemic on behavioral health will be with us for many years.