What is the IMD Exclusion that everyone is talking about?

By Emma Sandoe

A less covered provision of Medicaid law that has been in existence since the establishment of the program in 1965 and has been making some news over the past several months, the IMD exclusion is a provision that restricts Medicaid payments for certain institutions, potentially reducing the access to available services for low-income individuals with mental illnesses. If you haven’t been hearing everyone talking about it… well, I guess you talk with fewer health policy nerds than I do.

What is the IMD exclusion?

According to the good people at the National Alliance on Mental Illness (NAMI), the IMD exclusion can be defined as: Institutions for Mental Disease (IMDs) are inpatient facilities of more than 16 beds whose patient roster is more than 51% people with severe mental illness. Federal Medicaid matching payments are prohibited for IMDs with a population between the ages of 22 and 64. IMDs for persons under age 22 or over age 64 are permitted, at state option, to draw federal Medicaid matching funds.

Why does Medicaid have this provision?

This is because when Medicaid first started, states were responsible for the care of people with severe mental illness. States cared for many people with mental illnesses in a custodial setting; essentially states often were providing people a place to sleep but no mental health services. When drafting the Medicaid bill, the federal government did not want to supplant this existing state program with federal Medicaid funding. Additionally, while President Johnson was notorious for not spending a large amount of time on the cost of Medicare, the addition of these services would add $1.8 billion to the Medicaid budget, nearly doubling the first year price tag.

The deinstitutionalization of state mental health programs has changed the landscape of mental health care in the states. While more care is needed, few states are housing and institutionalizing people with mental disease. Medicaid’s lack of payment for these services has left a hole in the social safety net for people with mental disabilities and suffering from substance use disorders. Changing this policy could improve the response to the increasing opioid epidemic in this country. While the Medicaid law has been amended to pay for IMD for children and seniors, adults have been exempt.

The proposed rule on managed care the CMS released last summer opens for door for coverage of IMDs for adults. This proposed rule allows Medicaid managed care plans to pay for short term stays (limited to 15 days in a month).

Congress is currently negotiating a mental health bill and fixing the IMD exclusion has been discussed. In the last 50 years, states have changed the way they treat mental health. It is time for the federal government to recognize this change.