OPEN MINDS The Behavioral Health & Social Service Industry Analyst Industry Analysis The public mental health system is driven by Medicaid and Medicaid waivers. Waivers allow participating states to operate their programs outside of the Medicaid program rules by ‘waiving’ certain federal requirements. They allow increased flexibility and control in how states administer services and control costs under capitated funding models. Medicaid waivers place greater authority at the local level by allowing states to implement the following practices: Expand eligibility to individuals not traditionally covered by Medicaid Provide services not typically covered by Medicaid Test benefit packages and/or service . . .