Since the creation of Medicaid in 1965, the program has excluded payment for institutions of mental disease (IMDs) for beneficiaries 21 and over. Most residential treatment facilities for mental health and substance-use disorders with more than 16 beds did not qualify for Medicaid reimbursement.
At the time Medicaid was created, states were responsible for the care of people with severe mental illness and the federal government did not want to supplant the state funding with federal Medicaid dollars.
In April, the CMS finalized a policy allowing Medicaid managed-care plans to pay the facilities for short-term stays lasting 15 or fewer days in a month.
Few beneficiaries were expected to take advantage of the new permission immediately.
“No radical change is expected July 5 as plans need to contract with facilities and those agreements may not kick in until the next contract year,” said Andrew Sperling, director of legislative affairs for NAMI.
Mark Covall, president of the National Association of Psychiatric Health Systems, agreed that the uptick in inpatient stays for Medicaid beneficiaries won't happen until January.
Covall said the 350 free-standing psychiatric facilities around the country will be able to meet the new demand since most have an occupancy rate of around 70%.
The CMS estimates that 7.1% of adults ages 21 to 64 meet the criteria for serious mental illness requiring at least some inpatient treatment and that 13.8% experience serious substance abuse disorders.
The exclusion has meant a tumultuous care experience for Medicaid beneficiaries suffering from mental illness, Covall said. 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.
If no beds are available at an acute-care hospital, patients are referred to a stand-alone psychiatric facility. Under the Emergency Medical Treatment and Labor Act, those facilities can't deny admission even though they won't be paid due to the IMD exclusion. As a result, providers say, these patients are often discharged early and get lower quality care.