We have written in the past about the strange quirk in Medicaid law that prohibits Medicaid from paying for medical services for individuals who are patients in an “institution for mental disease” – a facility that has more than 16 beds and that is “primarily engaged” in providing diagnosis, treatment and care to individuals with mental illness. This prohibition – commonly known as the “IMD Exclusion” – is a vestige of the original Medicaid program, and is often criticized as discriminatory against individuals with mental illness. A careful reading of the statute shows that the exclusion applies to any medical service received by the patient in the IMD, not just mental health services. And the courts have upheld that broad interpretation.
The exclusion seems especially harsh now in light of the opioid crisis that is plaguing many communities. Over the years, Congress, CMS and the states have tried to limit the effects of the exclusion:
- By the very terms of the law, the facility must be “primarily engaged” in treating the mentally ill. CMS defines the “facility” as the overall institution; therefore, an acute care hospital with a majority of medical-surgical beds and a minority of psychiatric beds (such as a psychiatric unit) is not subject to the exclusion.
- In the 1970s, Congress limited the exclusion to individuals over the age of 20. Children and adolescents who are receiving care in a psychiatric residential treatment facility can have their psychiatric health needs covered by Medicaid, and the care can continue beyond age 21 if the medical condition was discovered through the early, periodic, screening, diagnostic and treatment services (EPSDT) program.
- Over the years, some states received waivers of the exclusion, although most of those waivers have been allowed to expire. Some states are still permitted to devote overall savings from a waiver to a safety net care pool, the funds from which can be used to pay for services in an IMD.
- CMS has allowed some states to fund services provided to adult patients in an IMD through disproportionate share (DSH) funding.
- Finally, in the 2016 Medicaid managed care regulation, CMS allowed Medicaid managed care organizations to provide coverage in an IMD to an enrollee for up to 15 days per month.
Recently, the Congress has turned its attention to the unintended consequences of the IMD Exclusion. In May, 2018, the House of Representatives’ Energy and Commerce Committee approved legislation that would ease the exclusion in certain circumstances. Under the provisions of H.R. 5795, Medicaid could, at a state’s option, cover services in an IMD if they were provided to an individual with an opioid use disorder.
There are limitations on the new benefit, however. First, payments could only be made for a period of 30 days per calendar year. States that wish to elect the option must file a state plan amendment and include within the amendment a description of how they intend to improve outpatient care. This report must describe, for example, the transition process from inpatient to outpatient services and how care will be provided in the most integrated setting. In addition, it must include a description of how individuals will be screened for opioid use disorder. States must also report to CMS on how many individuals have been treated under the option and the types of services received.
The legislation will only be effective through the end of 2023, so Congress may need to extend it at that time. And of course, the recent action is only the first step on a longer legislative journey: the legislation must be passed by the full House, and the Senate, reconciled in conference, and then sent to the President for his signature. The recent action, however, does suggest that policymakers have begun to recognize that perhaps the time has come to eliminate the exclusion in its entirety.