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The Medicaid IMD Exclusion and Mental Illness Discrimination SUMMARY The Medicaid Institutions for Mental Disease (IMD) exclusion is an outdated, discriminatory federal rule that creates significant barriers to treatment for adults with severe mental illness. Under this rule, Medicaid payments to states are prohibited for non-geriatric adults receiving psychiatric care in a treatment facility with more than 16 beds. Even with recent advances in mental health care afforded by the Affordable Care Act and federal parity legislation, the IMD exclusion remains the only section of federal Medicaid law that prohibits federal payment for medically necessary care simply because of the type of illness being treated. This categorically discriminatory rule is a leading cause of our national psychiatric hospital bed shortage and directly contributes to a host of negative consequences for those with the most severe mental illnesses. ________________ BACKGROUND Established by Section 1905(a)(B) of the Social Security Act, the IMD exclusion prohibits “payments with respect to care or serves for any individual who has not attained 65 years of age and who is a patient in an institution for mental diseases.” Individuals over the age of 65 have always been excluded from this restriction, and a separate provision enacted in 1972 excludes patients under 21 from it. An institution for mental diseases is defined in the law as any “hospital, nursing facility, or other institution of more than 16 beds, that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing care and related services.” The U.S. Department of Health and Human Services (HHS) considers any institution to be an “IMD” that, by its overall character, is established and maintained primarily for care of individuals with “mental diseases.” Categorization as an IMD is based upon factors such as whether the facility is licensed as a psychiatric facility or specializes in providing psychiatric care; whether a large proportion of staff has specialized psychiatric training; whether the facility is under the jurisdiction of a state’s mental health agency; and whether 50% of all admitted patients are there based on a need for “institutionalization as a result of mental disease.” In 2011, as part of the Affordable Care Act, the federal government created a five-year Medicaid Emergency Psychiatric Demonstration in 11 states and the District of Columbia. The demonstration removes the restriction from select private IMDs to evaluate whether Medicaid, by reimbursing for acute psychiatric care services provided in an IMD, could lower costs and provide better care to people with psychiatric illnesses. MEDICAID August 2016

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Page 1: The Medicaid IMD Exclusion and Mental Illness ......The Medicaid IMD Exclusion and Mental Illness Discrimination CONCLUSION The IMD exclusion is a discriminatory federal rule that

TheMedicaidIMDExclusionandMentalIllnessDiscrimination

SUMMARYTheMedicaidInstitutionsforMentalDisease(IMD)exclusionisanoutdated,discriminatoryfederalrulethatcreatessignificantbarrierstotreatmentforadultswithseverementalillness.Underthisrule,Medicaidpaymentstostatesareprohibitedfornon-geriatricadultsreceivingpsychiatriccareinatreatmentfacilitywithmorethan16beds.EvenwithrecentadvancesinmentalhealthcareaffordedbytheAffordableCareActandfederalparitylegislation,theIMDexclusionremainstheonlysectionoffederalMedicaidlawthatprohibitsfederalpaymentformedicallynecessarycaresimplybecauseofthetypeofillnessbeingtreated.Thiscategoricallydiscriminatoryruleisaleadingcauseofournationalpsychiatrichospitalbedshortageanddirectlycontributestoahostofnegativeconsequencesforthosewiththemostseverementalillnesses.

________________BACKGROUNDEstablishedbySection1905(a)(B)oftheSocialSecurityAct,theIMDexclusionprohibits“paymentswithrespecttocareorservesforanyindividualwhohasnotattained65yearsofageandwhoisapatientinaninstitutionformentaldiseases.”Individualsovertheageof65havealwaysbeenexcludedfromthisrestriction,andaseparateprovisionenactedin1972excludespatientsunder21fromit.Aninstitutionformentaldiseasesisdefinedinthelawasany“hospital,nursingfacility,orotherinstitutionofmorethan16beds,thatisprimarilyengagedinprovidingdiagnosis,treatment,orcareofpersonswithmentaldiseases,includingmedicalattention,nursingcareandrelatedservices.”TheU.S.DepartmentofHealthandHumanServices(HHS)considersanyinstitutiontobean“IMD”that,byitsoverallcharacter,isestablishedandmaintainedprimarilyforcareofindividualswith“mentaldiseases.”CategorizationasanIMDisbaseduponfactorssuchaswhetherthefacilityislicensedasapsychiatricfacilityorspecializesinprovidingpsychiatriccare;whetheralargeproportionofstaffhasspecializedpsychiatrictraining;whetherthefacilityisunderthejurisdictionofastate’smentalhealthagency;andwhether50%ofalladmittedpatientsaretherebasedonaneedfor“institutionalizationasaresultofmentaldisease.”In2011,aspartoftheAffordableCareAct,thefederalgovernmentcreatedafive-yearMedicaidEmergencyPsychiatricDemonstrationin11statesandtheDistrictofColumbia.ThedemonstrationremovestherestrictionfromselectprivateIMDstoevaluatewhetherMedicaid,byreimbursingforacutepsychiatriccareservicesprovidedinanIMD,couldlowercostsandprovidebettercaretopeoplewithpsychiatricillnesses.

MEDICAIDAugust2016

Page 2: The Medicaid IMD Exclusion and Mental Illness ......The Medicaid IMD Exclusion and Mental Illness Discrimination CONCLUSION The IMD exclusion is a discriminatory federal rule that

2|P a g e Treatment Advocacy Center • www.TreatmentAdvocacyCenter.org

TheMedicaidIMDExclusionandMentalIllnessDiscrimination

In2016,basedoncommentsfromthepublicandpreliminarydatafromtheMedicaidEmergencyPsychiatricDemonstration,theCentersforMedicareandMedicaidfinalizedarulepermittingMedicaidmanagedcareorganizations(MCOs)toreceivereimbursementforacutecare(definedaslessthan15dayspermonth)providedinIMDstonon-geriatricadults.Morethan70%ofMedicaidbeneficiariesarecurrentlycoveredbyMCOs.WhywastheIMDexclusionpassedintolaw?

TheIMDexclusionwasincludedinthelawwhenMedicaidwasenactedin1965.Atthetime,therewashopethatlargeinpatientfacilitieswouldbequicklyrenderedobsoletebyadvancementsinnewantipsychoticmedicationsthatallowedsomepeoplewithseriousmentalillnesstolivesafelyinthecommunityforthefirsttime.ThereasoningbehindtheIMDexclusionprohibitingreimbursementwasthustwofold:disincentivizethetreatmentofthementallyillinlargeinstitutionsandshiftthecostsforpsychiatrictreatmentfromthefederalgovernmentontothestates.WhathasbeentheimpactoftheIMDexclusion?

TheIMDexclusion,whichprovidesdisincentivesforpsychiatriccarefacilitiestogrow,fuelsthenationwideshortageofpsychiatricbedsandhasproveddisastrousforpeoplewithseverementalillness.TheUnitedStateshasclosedalmost97%ofitsstatehospitalbedssincethemid-1950sandtodayhasfewerpsychiatricbedspercapitathanitdidin1850.Thetrend,knownas“deinstitutionalization,”acceleratedwithenactmentoftheIMDexclusion,whilethepromisedalternativeofcommunitybehavioralhealthcenterstoprovidecarewasneverrealized.Theresultsofnottreatingthoseinpsychiatriccrisisinanappropriatesettingforanappropriateamountoftimeareprofound:Insteadofprovidingadequatecare,thementalhealthsystemabandonsthosewithseverementalillnesstoarevolvingdoorofacutehospitalization,incarceration,homelessnessandvictimization.Manyacutelyillindividualswhodeterioratewithoutaccesstoappropriateinpatientcareendupininappropriatecaresettingsincludingemergencyroomsandjails.Theirfamiliesandcaregiversfrequentlysuffermedical,emotionalandfinancialimpactsastheystrugglewithlittlesupporttogettreatmentandsavetheirlovedones.TheeconomicimpactsoftheIMDexclusionhavealsobeentremendous.Whileitdoescostmoneytoprovideinpatienttreatmenttoindividualswithmentalillness,costsavingsfromrestrictinginpatientcareislargelyanillusion.Studiesshowthatshort-lengthhospitalizationsofindividualsinpsychiatriccrisesareassociatedwithhigherrehospitalizationrates.Infact,astudybythefederalAgencyforHealthResearchandQualitywithinHHSfoundthat,forMedicaidpatients,mentalillnessconditionsweretwoofthetopthreecausesof30-dayinpatientreadmissions.Alongwithdiabetes,thesethreeconditionsresultedinapproximately$839millioninhospitalcostsin2011alone.Alsocostlyaretheforensicbeds,jailandprisoncellsandhomelessnessservicesthatbecomethedefaultcaresitesforindividualsinneedwhenabedisnotavailable.

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3|P a g e Treatment Advocacy Center • www.TreatmentAdvocacyCenter.org

TheMedicaidIMDExclusionandMentalIllnessDiscrimination

CONCLUSIONTheIMDexclusionisadiscriminatoryfederalrulethatprohibitsfederalMedicaidreimbursementtostatesforadultpatientsreceivingmentalhealthorsubstanceabusecareinapsychiatricorsubstanceabusetreatmentfacilitywithmorethan16beds.TheIMDexclusionistheonlysectionoffederalMedicaidlawthatprohibitsfederalpaymenttohelpstatescoverthecostofprovidingmedicallynecessarycaretoMedicaidbeneficiaries.TheIMDexclusionhasgreatlycontributedtothenation’spsychiatrichospitalbedshortage,whichresultsinnon-treatmentofacuteandchronicseriousmentalillnessandtheinnumerablebadoutcomesresultingfromnon-treatment.WhilesignificantstepsarebeingmadeatthefederalleveltoreformtheIMDexclusion,afullrepealthatextendstoallMedicaidbeneficiariesandwithoutarbitraryinpatient-daylimitations,willultimatelybenecessarytoaddresstheseissues.


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