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New Medicaid Waivers Available for Short-Term Residential Mental Health Services

Analysis  |  By Steven Porter  
   November 13, 2018

The added flexibility allows states to request Medicaid waivers to cover treatment in an institution for mental disease for certain adults and children.

States have long been prohibited from using Medicaid funding to cover treatment at inpatient institutions for mental disease (IMD), but that so-called "IMD exclusion" may be loosening further, thanks to a new waiver opportunity announced Tuesday by the Trump administration.

In a letter to state Medicaid directors, the Centers for Medicare & Medicaid Services outlined how states can secure authority to cover short-term residential treatment services at IMDs for adults with serious mental illness and children with serious emotional disturbances.

The agency said it won't approve waiver requests unless they are for short-term stays only and budget-neutral for the federal government.

Health and Human Services Secretary Alex Azar announced the policy during a speech Tuesday morning before the National Association of Medicaid Directors. The original intent of the IMD exclusion was appropriate, he said. The federal government was trying to discourage states from shoving patients in need of mental healthcare patients off onto the federal program.

"But today, we have the worst of both worlds: limited access to inpatient treatment and limited access to other options," Azar said in his prepared remarks. "Given the history, it is the responsibility of state and federal governments together, alongside communities and families, to right this wrong."

Azar noted that the Obama administration began granting Medicaid demonstration waivers in 2015 to make exceptions to the IMD exclusion regarding substance use disorders (SUD), in particular, adding that the Trump administration unveiled a new approach to these waivers a year ago, approving 13 waivers with more pending. There have been 17 approvals thus far.

"Where we have been able to assess results, they have already been impressive," he said.

In Virginia, for example, which secured a waiver in 2016 under the Obama administration, the state saw a 39% decrease in opioid-related emergency department visits and a 31% decrease in ED visits related to substance use, according to the Trump administration.

Azar said the new expanded waiver opportunity covering mental health needs more broadly should be taken in a broad context with multiple types of treatment to meet varying needs.

"As with the SUD waivers, we will strongly emphasize that inpatient treatment is just one part of what needs to be a complete continuum of care, and participating states will be expected to take action to improve community-based mental health care," he said.

"There are effective methods for treating the seriously mentally ill in the outpatient setting, which have a strong track record of success and which this administration supports. We can support both inpatient and outpatient investments at the same time," he added. "Both tools are necessary and both are too hard to access today."

"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," he added. "These waivers will help complement the good work so many of you are already doing to fight substance abuse, and [they] will help build a system where Americans with serious mental illness and their families can finally find the treatment and support they need."

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


The original intent behind the IMD exclusion was appropriate, but it's led us to 'the worst of both worlds,' Azar said.

Waivers will be granted only for short-term stays and only for projects deemed budget-neutral for the federal government.

The policy change dovetails with waivers the government has been granting already for substance use disorders.

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