Federal law criticized for excluding certain Medicaid patients from psychiatric care

About Katti Gray

Katti Gray (@kattigray) is AHCJ's core topic leader for behavioral and mental health. A former Rosalynn Carter Mental Health Journalism Fellow, Gray is providing resources to help AHCJ members expand their coverage of mental health amid ongoing efforts to de-stigmatize mental illness and to place mental health care on par with all health care.

Photo: Alachua County via Flickr

Photo: Alachua County via Flickr

A federal law that has long led to severely mentally ill Medicaid patients not receiving needed care at many psychiatric facilities has outlived its presumed usefulness, according to a recent report.

A February 2021 analysis by the Manhattan Institute documents how a federal institutes for mental diseases (IMDs) exclusion enacted in 1965 discourages states from investing in patient care and restricts care and access. The IMD exclusion bars states from using the federal portion of Medicaid payments for services rendered “inside or outside” IMDs. They include hospitals, nursing homes or other facilities with 16 or more beds that primarily provide mental health care. The exclusion targets Medicaid patients ages 21 to 64 years old.

Mental and behavioral health agencies in 27 states and the District of Columbia currently have in place federal waivers that grant them Medicaid reimbursements for services excluded by IMD exclusion. The waivers must be renewed regularly.

The Manhattan Institute report, which urges the exclusion to be repealed, comes amid a nationwide shortage of psychiatric beds and on the strain on mental health teleservices due to the ongoing coronavirus pandemic prompting many patients to seek mental health care for the first time.

The report dismisses what it describes as unmerited concerns that eliminating the exclusion will trigger re-institutionalizing extremely ill persons. A historic shuttering of psychiatric hospitals during the 1960s and 1970s makes that unlikely, according to the institute, which noted that the population of public psychiatric hospitals is about 5% of what it was before that massive deinstitutionalization. Community-based services — a well-intended concept that hasn’t fully materialized across the country — have since become the preferred method of care.

These were among the Manhattan Institute’s most critical arguments for nixing the IMD exclusions altogether. (The institute cited where its data or other findings came from researchers elsewhere.):

  • Fewer than 40,000 patients in the United States are in public psychiatric hospitals; compared with 560,00 persons in 1955.
  • From its previous peak of 350, the count of state-run psychiatric hospitals is roughly 210.
  • A lack of psychiatric beds prompted 79% of 328 surveyed emergency department directors to let hospital-admitted mentally ill patients linger in emergency departments, hallways and other unsuitable spots inside their facilities. The survey was from 2008.
  • A 2017 report from the National Association of State Mental health Program Directors said that “boarding,” the aforementioned practice, was a “widespread problem that is on the rise,” primarily driven by the IMD exclusion.
  • Nursing homes and group homes, which can bill Medicaid, expanded dramatically following the IMD exclusion.
  • The General Accounting Administration has reported that 47 of the 50 United States have complained that the exclusion precludes them from ensuring a continuum of mental and behavioral health care.

Consider these elements in reporting in your area:

  1. What kinds of mental health consumers/clients are served by the agencies who’ve gotten waivers? What are the care outcomes for those patients?
  2. How does the requirement that waivers regularly be renewed affect the agencies in question? Their patients?
  3. How extensive have been the waiting period for the waiver renewals? Do lapses in care result from the renewal process?
  4. Are federal and state officials responding to this report, especially in these times when mental health care budgets are being trimmed and funding has declined overall?
  5. Why haven’t previous state requests for the waiver not succeeded?

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