Institutions for Mental Diseases Exclusion

We must prevent laws that promote over-reliance on institutional care for treatment.

The established policy has been a payment exclusion for using Medicaid funds for inpatient services in psychiatric institutions, called institutions for mental diseases (IMDs).  Changing that policy will allow states to spend money on these facilities, rather than on services that can keep people with disabilities in their homes and communities. 

HHS has issued guidance that allows funding for services to Medicaid beneficiaries while residing in IMDs. That means States are permitted to receive IMD funding through Section 1115 demonstration waivers and a number of states have already received these federal waivers.

Bills  allowing institutional bias in Medicaid services to be adopted as part of the fight against substance use disorders.  

In October 2018, the SUPPORT for Patients and Communities Act became law.  Among other provisions, the SUPPORT Act modifies Medicaid’s IMD exclusion to lift some restrictions on using Medicaid funds to pay for addiction treatment. Specifically, the Act suspends Medicaid’s IMD exclusion for treatment of substance use disorders from FY 2019 through FY 2023, but places a 30-day limit on residential treatment length of stay. States must meet specific criteria to receive federal payments (i.e., federal financial participation), including outlining their plans to improve access to outpatient care.

Previous efforts have included broader changes. In April 2018, the Health Subcommittee of the House Energy and Commerce Committee considered a bill to lift long-standing restrictions on using Medicaid funds for  IMDs.  Although the bill was aimed at combating substance use disorders, it requires states to fund unnecessary institutional care at the expense of expanding critical community-based mental health services.  CPR sent a letter opposing the bill. We were particularly concerned about the bill’s requirement that states keep at least the same number of IMD inpatient beds and institutional funding regardless of need.  The bill did not include the same requirement to invest in funding community services.  Another bill, H.R. 5797, also proposed expanding coverage for institutional services without addressing gaps in community services. The Senate Finance Committee also considered a proposal to alter the IMD payment exclusion. 

Additional Resources

House Bill Partially Repealing “IMD Exclusion” Would Do More Harm Than Good, Center on Budget and Policy Priorities (6/20/18)

Congress Needs a Broader Approach to Address Opioid Epidemic, OpEd, The Hill (6/10/18)

Consortium for Citizens with Disabilities (CCD) Letter Opposing the Bill

Repealing Medicaid Exclusion for Institutional Care Risks Worsening Services for People With Substance Use Disorders, Center on Budget and Policy Priorities

Policy Implications of Repealing the IMD Exclusion, National Health Law Program

Bazelon Center for Mental Health Law Letter Opposing the Bill (4/19/18)


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