The change, expected to be finalized in April, should introduce new capacity and competition in the acute-care psychiatric market. It also should increase access to acute mental-health and substance-abuse services for low-income adults, many of whom get stranded for days in emergency departments or find themselves cycling through jails and homeless shelters.
The policy represents a radical break for Medicaid, which has never reimbursed for either short- or long-term care in stand-alone psychiatric facilities. Before Congress created Medicaid, states financed the hospital bills of mentally ill adults, and legislators in the 1960s wanted to keep it that way.
But over the past half century, the nation's policies on the treatment of mental illness and substance abuse have undergone a radical transformation. Advocates for the mentally ill succeeded in pushing treatment into clinics and community settings. They won so-called parity for mental-health treatment, so that it closely matched coverage for other medical care.
The transformation has been uneven, however, with tragic consequences for the nation's 9 million most severely mentally ill. As states closed their psychiatric hospitals, federal financing for community centers—the presumed alternative—was slashed. Public policy and healthcare experts cite that lack of community investment as a major reason why a high percentage of mentally ill individuals wind up in homeless shelters and prisons.
At the same time, community hospitals, which are eligible to receive Medicaid payment for adult psychiatric hospitalizations, began seeing a stream of mentally ill people in their emergency departments. Many added licensed psychiatric beds to treat them.
But acute-care hospital capacity was never enough. It created widespread “boarding” of psychiatric patients in emergency departments because no beds were available.
The proposed change to Medicaid, which would likely go into effect in 2017, is one of several fiercely debated fixes for what Dr. Ezekiel Emanuel and two colleagues described last year in JAMA as “ethically unacceptable and financially costly” gaps in care for those with severe mental illnesses.
Since Medicaid stifled private investment when the safety net insurer refused to cover stand-alone psychiatric hospital bills for adults with mental-health problems, the new policy should reverse that trend by attracting investment. Some advocates for the mentally ill welcome the change.
It “would be a not-insignificant step in the right direction,” said Ron Honberg, a senior policy adviser to the National Alliance on Mental Illness. “We still continue to struggle with an inadequate number of beds,” he said.
But other advocates fear new incentives for hospital care will undermine the nation's ongoing but fragmented push to expand outpatient treatment and support for the mentally ill.
The National Health Law Program, in its comments on the change, warned federal health officials that allowing insurers to rely on psychiatric hospitals “for crisis services, while continuing to collect payment, would set back the current movement toward the development of community-based crisis services.”