The United States is experiencing a “trifecta” of mental health crises – affecting youth and young adults, people with serious mental illness, and those with substance use disorders. One sobering data point: a recent BPC survey found that 44% of teenagers and 62% of young adults regularly experience mental health distress, yet fewer than half seek professional help. These crises carry mounting human and financial costs for patients, families, providers, and payers.
BPC has long worked to strengthen behavioral health care across the lifespan, and in 2024 we convened the Youth Mental Health and Substance Use Task Force to address the growing mental health crisis among youth and young adults. Since then, the use of digital solutions for mental health support has surged. BPC recently partnered with The Commonwealth Fund to host an event on these digital mental health solutions, focused on the role of policy in unlocking the promise of these tools and mitigating the risks.
In recent years, significant public and private investment has spurred the launch of more than 400 companies focused on addressing the rise in mental health conditions through digital solutions. The mental health sector now leads all other areas of digital health investment. During the event, keynote speaker Dr. Tom Insel—former director of the National Institute of Mental Health and founder of several mental health start-ups—underscored the need for new approaches: “We need to look at how to innovate, how to transform, and how to change what we do,” he said. Yet, he noted, the industry has yet to demonstrate a measurable public health impact or deliver the expected reductions in morbidity and mortality – raising the question: why not?
The panel discussion brought together Caroline Pearson, Executive Director of the Peterson Health Technology Institute (PHTI); Nick Jacobson, professor at Dartmouth College; and Sarah Hudson Scholle, principal at Leavitt Partners, in a conversation moderated by Anastassia Gliadkovskaya of Fierce Healthcare. The conversation explored the current landscape of digital mental health solutions, regulatory challenges, coverage dynamics, and the emerging role of generative AI in mental health care.
What Are Digital Mental Health Solutions, and How Well Do They Work?
Digital mental health solutions can refer to a wide range of products and services.
PHTI recently evaluated a subset of these solutions for depression and anxiety, including:
- Self-guided tools, which offer validated digital content including videos, lessons, and activities for individuals to do on their own.
- FDA-approved prescription digital therapeutics, similar in structure to self-guided tools but used alongside traditional provider-led treatment. A provider who gives a patient psychotherapy on a regular basis, for example, may recommend that the patient complete these digitized behavioral interventions in between visits.
- Blended-care solutions, which combine self-guided tools with an integrated network of clinicians. These tools allow individuals to independently engage with digital content, but also step-up to more intensive care including psychotherapy, text-based therapy, and medication management.
Pearson noted that all three categories have shown clinical effectiveness, and when used, “not only do they see symptom improvement, but they see symptom improvement that actually reduced their overall health care spending in excess of the price of the solution in most cases.” This suggests that digital mental health solutions could both improve outcomes and lower costs.
A fourth, newer category – AI chatbots purpose-built for mental health care – is quickly emerging and drawing significant attention. Slingshot AI, backed by $93 million in seed funding, recently released Ash, and Nick Jacobson’s Therabot was the subject of the first-ever clinical trial for a generative AI-powered therapy chatbot.
Regulatory Landscape: Many Players, Few Good Fits
Digital mental health solutions intersect with multiple federal authorities, highlighted in a recent Leavitt Partners assessment:
- Agencies that fund early research and development
- The Food and Drug Administration (FDA), which reviews the safety and efficacy of diagnostic and treatment tools
- Centers for Medicare & Medicaid Services (CMS), which makes coverage and payment decisions
- The Health Insurance Portability and Accountability Act (HIPAA), which governs privacy and security requirements
- The Federal Trade Commission (FTC), which monitors marketing claims and privacy practices for products outside FDA or HIPAA oversight
Which authorities apply depends on the product, Scholle explained. Tools without diagnostic or treatment components fall outside FDA jurisdiction, and HIPAA only applies to tools used by covered entities such as providers and health plans – not many consumer-facing applications. To learn more about the types of tools that fall outside the FDA’s authority, check out BPC’s issue brief, Oversight Beyond the FDA: Understanding the Regulation of Health AI Tools.
However, Scholle emphasized that “very few [regulations] actually specifically address the needs of digital mental health technologies.” Pearson added that FDA’s evidence requirements and review processes are often mismatched with the rapid innovation and constantly evolving nature of digital mental health solutions. Jacobson noted that the agency “originated for food and drugs, which digital therapeutics certainly are not.”
While questions remain about the right regulatory approach, Scholle highlighted that the administration’s interest in these tools presents an opportunity for stakeholders to collaborate on ways to expand access to high-value solutions while managing risks.
Coverage and Market Dynamics
Coverage and reimbursement of digital mental health solutions was another point of discussion. CMS launched new payment codes for prescription digital therapeutics in the final 2025 Physician Fee Schedule, but further expansion of coverage has been slow, due in part to the small number of FDA-cleared tools and CMS’ concerns about potential waste and fraud. Scholle also noted the disconnect between FDA approval and CMS coverage, which can discourage innovators from seeking FDA review at all.
Recent developments, including CMS’s request for information on the health technology ecosystem and its 2026 Physician Fee Schedule proposed rule, suggest the agency is exploring expanded payment options for digital mental health services.
In the commercial market, Pearson sees a “discordance” between the tools employers and health plans are purchasing and those that have gone through FDA review. Many purchasers opt to acquire tools earlier, seeing urgent demand and viewing regulators as lagging behind both market adoption and the evidence base.
Foundational Generative AI Chatbots
The debate over generative AI in mental health care is intensifying. Therapy and companionship is now the top use of generative AI, according to the Harvard Business Review. The American Psychological Association has cautioned against relying on general-purpose generative AI models—tools such as ChatGPT, Gemini, and Claude—for mental health support, and a new Illinois state law—HB1806—imposes broad restrictions on the use of AI in the delivery of therapy and psychotherapy services. Insel expressed concern that the Illinois law could preclude the development of science-based purpose-built models with the potential to provide much-needed care, while at the same time sparing large generic tools.
Jacobson and Insel both warned that generic models are not delivering psychotherapy. Instead, they tend to be broadly affirming, offering comfort rather than structured, evidence-based care. Purpose-built chatbots for mental health support can be differentiated from these generic models by their focus on clinically validated concepts and real-world outcome data on both effectiveness and safety, according to Jacobson.
An Opportunity for Policy
The need is clear. The nation’s mental health crisis affects Americans across all demographics. Between 2011 and 2023, rates of depression among U.S. adults increased by more than a quarter and frequent mental distress rose by nearly one-third.
Digital tools can be part of the solution – if they are effective, safe, and accessible. Now is a critical moment for policymakers, providers, and innovators to work together to shape bipartisan policies that harness the potential of digital mental health solutions to meaningfully contribute to addressing our nation’s mental health crisis.
Want to learn more? BPC has focused extensively on strengthening behavioral health care and leveraging digital solutions to improve care and lower costs. Find recent publications here:
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