NYAPRS: What Do the Changes to the IMD Exclusion Mean?

What Do the Newly Proposed Changes to the IMD Exclusion Mean?

NYAPRS Brief June 10, 2016

Embedded within the Social Security Amendments Act of 1965 that created Medicaid and Medicare was a policy termed the IMD exclusion.

This policy excluded Medicaid reimbursement for treatment for those between the ages of 21 to 65 in an “Institute for Mental Disease”, which has been defined as a hospital, nursing facility, or other institution of 17 beds or more that is primarily engaged in providing diagnosis, treatment, or care of people with mental health and, according to CMS’ State Medicaid Manual, “chemically dependent patients.” On the other hand, psychiatric inpatient care in general hospitals is covered by the Medicaid program.

By including this exemption, Congress was attempting to leave the provision and funding of mental health services to state governments.

Efforts to eliminate the IMD exclusion have met with considerable controversy. Some groups have long favored lifting the exclusion, regarding it as discriminatory and hampering efforts to increase inpatient treatment beds. Other, including NYAPRS, have opposed such changes, regarding the exclusion as an appropriate vehicle to limit institutional growth and have focused instead on the expansion of community based services.

In 2013, Congressman Tim Murphy proposed allowing Medicaid to pay for all inpatient behavioral health services in those IMDS provided the facility-wide average length of stay was less than 30 days. This proposal spurred considerable controversy and, after its cost was rated as between $40-60 billion in its first 5 years by the Congressional Budget Office, lost support from both Republicans and Democrats alike.

Instead, the Obama Administration has decided the issue, releasing finalized regulations in April that permit Medicaid reimbursement in all IMDs for up to a 15 day stay in a month. The newly revised version of Congressman Murphy’s bill simply codifies these rules into law.

The ruling came as a surprise as CMS had been in the midst of the pilot program, Medicaid Emergency Psychiatric Demonstration (MEPD), which was testing the use of IMDs for individuals between the ages of 21-64 in eleven states and the District of Columbia. The pilot program ended in December 2015 and the findings weren’t due until September 2016. An interim report from CMS that was released in July 2014 hadinconclusive findings and did nothing to indicate a change in ruling.

Several important factors:

  • This policy only applies to Medicaid Managed Care payments.
  • State by state approval is required.
  • Typically, such policies have to be cost neutral. So if a state decides to pay for IMD services, actuaries will have to determine that these costs are covered by savings, reduced emergency room usage for example. There are some estimates that this policy change will ultimately cost around $2 billion.
  • Some say state increases in Medicaid Managed Care capitation payments as a result of this policy could instead/also be used by the plans to pay for more community services, although the vote is still out on this argument.

To be continued….