Closer Look at Federal Policy to Allow Medicaid to Pay for State/Private Hospital Stays

A Closer Look at the Federal Policy Change to Allow Medicaid to Pay for State/Private Hospital Stays
Harvey Rosenthal, NYAPRS


·         IMDs (Institutes for Mental Disease) include state psychiatric hospitals, free standing private for profit psychiatric hospitals and some substance use residential treatment facilities

·         Medicaid had not paid for treatment at IMDs for beneficiaries 21 and over since its inception in 1965. Most residential treatment facilities for mental health and substance-use disorders with more than 16 beds did not qualify for Medicaid reimbursement. Instead, states were responsible for the care of people with “serious mental illnesses”, e.g. funding state hospitals.

·         In 2016, CMS (the federal Medicaid agency) approved for the first time that Medicaid could pay for up to 15 day stays at IMDs, solely for enrollees in Medicaid managed-care plans.

·         This new provision authorizes Medicaid to pay for “short term stays” for all Medicaid enrollees, not just those served by private health plans. It’s not clear what the new definition for ‘short term stays’ is, but it appears to be ‘an average of 30 days’.

What’s Wrong with This Policy Change?

·         While states and localities have appropriately redirected funds from downsizing institutional settings into growing critically needed, effective and innovative community services, we appear to be headed in the opposite direction, cutting community services to fund more hospital beds.

·         CMS says it won't approve waiver requests unless they don’t create additional federal Medicaid costs, meaning that savings have to be identified from somewhere else, e.g. community services?

·         The new policy says that “participating states will be expected to take action to improve community-based mental health care” but that commitment is very vague. Further language reveals that CMS will look at applicant states’ implementation plans to “ensure that resources are not disproportionately drawn into increasing access to treatment in inpatient and residential settings at the expense of community-based services.” At what point are reductions in community care considered disproportionate?

Tying More Funding for IMD stays to Community Service Adequacy?
CMS will be looking at state’s “current availability of mental health services throughout the state, particularly crisis stabilization services” which include “increased availability of non-hospital, non-residential crisis stabilization services, including services made available through crisis call centers, mobile crisis units, coordinated community crisis response that involves law enforcement and other first responders, and observation/assessment centers as well as on-going community-based services, e.g., intensive outpatient services, assertive community treatment, xciii and services in integrated care settings such as the Certified Community Behavioral Health Clinic well as consideration of a self-direction option for beneficiaries”

These are wonderful examples of the very services we must enhance not cut!
If the continuum of inpatient to community care is equally important, then states should not be forced to choose between the two.
This should be the time for the federal government to address our ‘broken system’ by properly funding the entire continuum.

The Bazelon Center Responds in CNN piece
“Although our mental health systems are in crisis, neither the IMD rule nor insufficient hospital beds are the primary problem,” Jennifer Mathis, director of policy and legal advocacy at the Bazelon Center for Mental Health Law, wrote in a policy debate this year.

“The primary problem is the failure to implement an effective system of intensive community-based services, which have been shown to prevent or shorten hospitalizations,” Mathis wrote. “Repealing the IMD rule would do little to alleviate the true crises in our public mental health systems and would likely deepen those crises.”

In an email to CNN, Mathis added that CMS’s announcement “ignores all of the findings of the IMD demonstration that has already been done (, which showed that expanding federal reimbursement for short-term IMD stays had none of the beneficial effects that were hypothesized.”

CMS plans to overturn Medicaid ban on mental health facility pay
By Virgil Dickson  | Modern Healthcare November 13, 2018

The CMS may soon make it easier for states to use federal funds to pay for Medicaid enrollees to receive treatment at inpatient mental health facilities.

The agency issued a letter to Medicaid directors Tuesday saying they will be able to cover an average of 30 days of care at institutions of mental disease, or IMDs, through a new waiver.

In a speech shortly before the announcement, HHS Secretary Alex Azar said the Trump administration is increasingly concerned that Medicaid beneficiaries aren't receiving critically needed care because of the IMD exclusion.

"Today, we have the worst of both worlds: limited access to inpatient treatment and limited access to other options," Azar said at the National Association of Medicaid Directors conference Tuesday. "It is the responsibility of state and federal governments together, alongside communities and families, to right this wrong."

The CMS now reimburses IMD stays up to 15 days for Medicaid enrollees in managed-care Medicaid under a 2016 rulemaking. The new waiver will pay for more treatment at IMDs and apply to all Medicaid enrollees, not just those overseen by private plans. 

The waivers will only be approved to cover short-term stays. States will have to prove their plans are budget-neutral for the federal government.

The Trump administration is already offering similar 30-day IMD waivers for Medicaid enrollees battling substance abuse. 

To date, the CMS has approved the substance abuse waivers for 17 states, and the agency has seen positive results, Azar said. Virginia has seen a 39% decrease in opioid-related emergency department visits and a 31% decrease in substance-use related ED visits overall after it implemented its demonstration. The state was one of the first to receive an IMD substance abuse waiver.

"There are so many stories of Americans with serious mental illness, and their families, that end in tragic outcomes because treatment options are not available or not paid for," Azar said. "I urge everyone involved in state Medicaid programs here today to consider applying for the kind of waiver I've just outlined."

The CMS estimates that 7.1% of adults ages 21 to 64 meet the criteria for serious mental illness and require some inpatient treatment and that 13.8% experience serious substance abuse disorders. 

The exclusion has meant a difficult care experience for Medicaid beneficiaries suffering from mental illness, according to the National Association for Behavioral Healthcare (which changed its name from the National Association of Psychiatric Health Systems this year). Patients endure long stays in emergency departments and are transferred from one general acute-care hospital to another, sometimes far from their homes, because of bed shortages.

Medicaid has not paid for treatment at IMDs for beneficiaries 21 and over since its inception in 1965. Most residential treatment facilities for mental health and substance-use disorders with more than 16 beds did not qualify for Medicaid reimbursement. 

Instead, states were responsible for the care of people with severe mental illness. The federal government did not want to supplant state funding with federal Medicaid dollars.