Thinking about the “IMD” exclusion

The introduction in Congress of HR 3717 (often referred to as “the Murphy bill”) has increased the ongoing debate over the wisdom of the so-called “IMD exclusion” in Medicaid funding. Unfortunately, this debate is frequently based upon misunderstandings of the IMD exclusion. This post  is designed to correct these misunderstandings and consider the role of the IMD exclusion in light of the Affordable Care Act.
What is the IMD exclusion?
The IMD exclusion prohibits federal Medicaid benefits from being paid for care for someone between the ages of 22 and 64 in a facility with more than 16 beds that is primarily engaged in providing diagnosis, treatment or care of persons with mental illnesses. This is usually defined as a facility where more than 50% of the residents are there due to mental illnesses. 42 CFR 435.10009
Why was the IMD exclusion enacted?
The IMD exclusion was enacted primarily to relieve the Federal Medicaid program from the obligation of funding state psychiatric hospitals. At the time the IMD exclusion was enacted in 1965, every state was operating one or more psychiatric hospitals and, many states had been doing so for more than a century. No state was operating non-psychiatric hospitals. Thus, the exclusion prevented the Federal government from being burdened with a traditional state obligation.
Does the IMD exclusion discriminate against persons with mental illneses?
No. States can easily obtain Federal Medicaid support for inpatient psychiatric care by:
• Operating their own psychiatric hospitals with 16 or fewer beds
• Operating their own general medical facilities so long as the percentage of those persons being treated for mental illnesses in any of these facilities does not exceed 50%
• Placing Medicaid-eligible persons with mental illnesses in private hospitals or nursing homes so long as the percentage of those persons being treated for mental illnesses in any of these facilities does not exceed 50%. Almost every general hospital that has a psychiatric unit is eligible for Federal Medicaid reimbursement for persons on that unit.
• Placing Medicaid eligible persons with mental illnesses in private psychiatric hospitals or nursing homes so long as those facilities have 16 beds or fewer.
It is true that, if a state decided to operate a general hospital that provided non-psychiatric services, persons receiving care in such a facility would be eligible for Federal Medicaid support while persons in state-operated psychiatric hospitals would not. But since no state-operated non-psychiatric facilities exist, there is no discrimination.
What is practical effect of the IMD exclusion in the wake of the ACA?
1. The IMD exclusion has encouraged states to arrange for the treatment of Medicaid-eligible persons with mental illnesses in settings other than state-operated psychiatric hospitals. If a Medicaid-eligible persons receives care on a psychiatric ward of a general hospital, the Federal government will pay for a substantial share of the cost of that care, at least 50%. However, the cost of care in a state psychiatric hospital falls entirely on the state. In those states (currently 25 of the 50) which have chosen to expand their Medicaid program under the Affordable Care Act (ACA) to cover people whose income is above 100% of the poverty level up to 138%, there will be more of an incentive to move persons to private hospitals since the Federal government will cover a subtantially greater share of the cost (100% in the first few years). The ACA also means that in every state there will be fewer people with mental illnesses who are without private health insurance. Persons with private health insurance are not usually served in state psychiatric hospitals.
2. The increased movement of persons from state hospitals to private hospitals, whether those persons are funded by traditional Medicaid, expanded Medicaid or private health insurance, has and will reduce the need for state-operated psychiatric beds. States may respond by closing these beds or using them to meet other needs including inpatient care for undocumented persons (they are not eligible for Medicaid) and for forensic patients (persons found unfit to stand trial or not guilty by reason of insanity or transfered from state prisons). If a state believes that other funding sources, such as Medicaid or private insurance, will not pay for inpatient care for persons whom the state believes need such care or will not pay for care that lasts long enough, the state can also spend its savings on providing care for these people in state-operated facilities or on funding extended care in private facilities.
3. Most states have an inadequate community mental health system. States will probably get the most return on investment by spending savings occasioned by the ACA on expanded community services, particularly such under-funded services as peer support, crisis services, supported housing and supported employment. Funding for community mental health services will be increasing in every state due to the increased number of people who have private insurance under the ACA. Of course, the increase in community services will be greater in those states which have chosen to expand their Medicaid programs. States may also be able to take advantage of expanded community service waivers under Medicaid. Such waivers are not available for persons in state hospitals, but may be available if they reduce the need for inpatient care in private facilities covered by Medicaid. Waivers permit states to offer services not otherwise covered by Medicaid. Many of these services are highly effective and will reduce the need for inpatient care.
4. Since the IMD exclusion affects the balance between state and private psychiatric hopsitals, particularly in light of the ACA, it is important to understand the differences between these facilities:
a. Length of stay. State hospitals tend to keep people longer. That is primarily because, in private hospitals, third-party payers, including Medicaid, use the “medical necessity” standard to control the length of hospital stays. The general absence of third-party payers in state psychiatric hospitals permits longer stays. This is important because eliminating the IMD exclusion would bring Medicaid’s “medical necessity” standards to bear on state hospitals and would tend to reduce or end this difference. States should think carefully about whether these longer stays are beneficial or wasteful.
b. Involuntary treatment. Involuntary treatment is used more frequently in state hospitals. That is because Medicare, Medicaid and private insurance do not cover the costs associated with involuntary commitment proceedings. These costs include transporting the patient to court for commitment hearings and the time that a mental health professional spends preparing for and testifying in such proceedings. State hospitals frequently have courts located on the grounds and mental health professionals who are salaried state employees can more readily include court time in their schedules. Those states which require a court order for involuntary medication or other treatment will have yet additional expenses in private hospitals with no clear funding source. Becuase of these costs, private hospitals sometimes simply turn away person who refuse voluntary treatment when the hospital is unable to arrange transfer to a state facility. A state which reduces the capacity of state-operated hospitals will need to determine how to pay for the cost of involuntary treatment in private facilities for those who need it.
c. Co-occurring medical conditions. State hospitals are less apt to have the capacity to care for non-psychiatric medical conditions, particularly more complex ones. Persons with co-occurring non-psychiatric and psychiatric conditions are often better served in private general hospitals, particularly large medical centers.
d. Discharge linkage and continuity of care. State hospitals typically do a better job at linking persons to community care. This is true largely because: (i) third-party payers do not reimburse private hospitals for the cost of linkage; and, (ii) states sometimes pay community providers to give priority to persons being discharged from state hospitals. However, most states are moving their Medicaid system into various managed care arrangements. Under managed care, there will be greater integration of hospital and community mental health services. Additionally, the Affordable Care Act imposes penalties on hospitals which have high re-admission rates. These penalties may encourage greater attention to discharge planning and continuity of care at private psychiatric hospitals.

BUDGET UPDATE–July 9, 2014

The Illinois legislature could not muster enough votes either to maintain the current tax rates and pass a budget which that revenue would support or pass a budget based upon the dramatic reduction in revenue which will occur on December 31st if the current income tax rates are not extended.  Instead the legislature passed a compromise ” middle of the road” budget which is a temporary fix for our budget situation.  The Governor has signed this budget into law as Public Act 98-0680.  There is generally flat funding for most behavioral health items.  This budget is not really balanced.  The recent decision of the Illinois Supreme Court about health care benefits for government employees strongly suggests that the legislature’s efforts to fix the state pension funding problem will be found unconstitutional.   This will exacerbate the state’s budget problems.   So we can expect to see the fighting continue after the election when the legislature will need to either repeal the tax decrease scheduled to take effect on December 31, 2014 or make substantial cuts to all programs or both.   Mental health advocates will need to continue our efforts all Summer and until the November election  to convince the legislature that we cannot afford the scheduled tax cut if we are going to preserve needed services.


On December 31st, 2014, the current state personal income tax rate will go down from 5% to 3.75% and the corporate rate will go down from 7% to 5.25% unless the Illinois legislature votes to continue the current rates.  These reductions would result in serious cuts to behavioral health services including the following:

  • 140,000 individuals receiving publicly funded mental health services will have reduced access to psychiatry, counseling, ACT, and emergency medications;
  • 35,000 individuals will no longer receive any services;
  • 10,000 people will not receive needed crisis services (resulting in more admissions to the ERs and nursing homes, etc.);
  • 840 beds of the current 3,500 would be reduced for crisis residential treatment, resulting in increased homelessness;
  • 216 individuals would lose rental subsidies for the Permanent Supported Housing program, placing them at risk of losing their housing;
  • Reduction in the Individual Care Grant program, including services serving at least 75 children;
  • Reduction in funding for SMHRF Comparable Services will prevent implementation of a key pilot program;
  • Reduction of services to 880 Williams Class members currently living in the community by the elimination of drop-in centers ACT teams, and other programs.
  • Inability to meet FY15 Consent Decree targets to transition 400 Williams class members and 220 Colbert class members.
  • Inability to meet tenets of these Consent Decrees would result in federal receivership.
  • Reduction of 3,280 civil hospital beds and 320 forensic beds.
  • Reduced staffing by 650 would increase risk of violating CRIPA and other federal laws.

Click here for more details on the budget

The good news is that the Governor has proposed a budget which will continue the current personal and corporate income tax rates beyond December 31st.  However, in order for this budget to become a reality it must be passed by the Illinois House and Senate.  Please contact your state senator and state representative and tell them to vote for a continuation of the current income tax rates.  The legislature is not in session until April 28 so you can call, write or visit your legislators in the home district offices.  Click here to find out the name of your state senator and repreentative and how to contact them.

Democrats and Republicans have competing bills in Congress

Representative Barber has now introduced a competing bill which omits the controversial aspects of HR3717 (the Murphy bill) .  Some Democrats who had supported the Murphy bill have now withdrawn their support.

A hearing was held on HR3717 on April 3, 2014.  Here is link to the testimony.

On December 12, 2013, Congressman Tim Murphy (R-PA) introduced the “Helping Families in Mental Health Crisis Act of 2013.  This bill (HR 3717)  includes many provisions that have broad support in the mental health community including reauthorization of the Mental Health First Aid Act (S.153/H.R.274), the Garrett Lee Smith Memorial Act (S.116/H.R.2734,  the Children’s Recovery from Trauma Act (S.380), the Excellence in Mental Health Act (S.264/H.R.1263), the Justice and Mental Health Collaboration Act of 2013 (MIOTCRA;S. 162/H.R.401) and the Behavioral Health IT Act (S.1517, S.1685/H.R.2057),.   However, the bill would use Federal funds to encourage states to broaden the use of outpatient commitment.  Outpatient commitment is opposed by many mental health organizations.

Many national organizations have issued statements concerning Representative Murphy’s bill:

Statement of Mental Health America

Statement of the Natiional Coalition for Mental Health Recovery

Statement of the National Disabilities Rights Network

Statement of the American Psychiatric Association

Statement of the National Council 

Statement of the National Alliance on Mental Illness

Statement of Sacred Creations

Statement of Mad in America

Statement of the Autistic Self Advocacy Network

Statement of the Mental Illness Policy organization 

Statement of the Coalition of Citizens with Disabilities of Illinois

APA statement from Jejfrey Lieberman, MD

The Mental Health Summit has not taken a position on this bill.

CMS Responds to Our Concerns-Rescinds Proposal to Limit Access to Psychotropic Medications

Responding to a huge outpouring of concerns and complaints from the mental health advocacy community across the country and also to pressure from Congress, the Center for Medicare and Medicaid Services (CMS) reversed its decision to limit access to psychotropic medications.  Virtually every mental health organization in Illinois and across the country communicated to CMS  and to Congress our opposition to this proposal which would have allowed Medicare Part D providers to restrict access to medications for the treatment of serious mental illnesses.  Bravo to everyone who joined in the effort to stop this bad policy from taking effect.

In the meantime, Congress is considering legislation to prohibit CMS from going forward with such a rule.  

Below are links to information about the  CMS change of heart:

Partnership applauds CMS

Obama drops Medicare Proposal

National Council press release

NAMI press release

New York Times article–March 11, 2014


The Centers for Medicare and Medicaid Services (CMS) wants to significantly limit access to antidepressant and immunosupressant medication for people subscribing to Medicare Part D. Read today’s post to learn why you should be concerned, and what you can do to support the mental health community by raising our voices in Washington.

Earlier this month, the Centers for Medicare and Medicaid Services (CMS) announced a proposed rule that would remove antidepressants and immunosupressants from the protected class status under Medicare Part D and is considering removing antipsychotics from the same status the following year. If CMS adopts its proposal, it would reduce patient access to and the availability of mental health treatment.

Since it went into effect in 2006, Medicare Part D’s protected class structure ensures patients with mental health conditions have access to all or substantially all of the most appropriate medications, protecting them from “fail-first”1 experiences or other appeals processes. In many cases, delays caused by these processes can result in inadequate treatment and potentially tragic outcomes.

We need to ensure that all mental health patients have access to all the medications that they need. It is clear that CMS’ rule will signal a step in the wrong direction and the consequences will be detrimental. According to the World Health Organization, depression is currently the leading cause of disability worldwide. By 2030, it will be the leading global burden of disease.2 In the United States alone, the total direct and indirect cost associated with depression exceeds $83 billion annually.3

Ultimately if CMS’ rule is approved, there will be severe human, economic and societal consequences for not only mental health patients, but for all Americans. We must take action now.

Here’s How You Can Take Action Today

Now, more than ever, the mental health community of patients, families, friends and others need to join together to tell CMS and the Administration how big of a mistake implementing this rule will be for all Americans. Below you’ll find several ways in which you can make your voice heard during CMS’ open comment period, ending March 7, to protect antidepressants, immunosupressants and antipsychotics within Medicare Part D. The clock is ticking!

  1. Make Your Voice Heard by writing to your Member of Congress. Use the sample email letter to inform your member of Congress that the implementation of this proposed rule is a big mistake. Be sure to share any personal experiences and how this rule will impact you or a loved one.
  2. Share your personal stories: The Care For Your Mind blog is interested in your personal stories to help share the extent of the issue and how it will impact you or a loved one. While this rule is expected to decrease patient costs for medications, members of the mental health community understand the treatment for our conditions is far from one size fits all. Below are a few questions that may help you shape and share your story:

a. What will happen if you lose access to your medications?
b. Have you had a negative experience with “fail-first” experiences?
c. How will the new rule impact you, your parents, other family members or friends?

We encourage you to submit your personal story here for publication on our website. And in the meantime, join our conversation online by contributing to this blog below. Your voice counts and the time to speak up is now!

Share this information with others: Knowledge is power. The more people know about the proposed rule’s real life consequences, the more we can make our voices heard. Share this post and relevant information with your friends and family, on your social media accounts, through email and word of mouth offline.Together, we can send a powerful message and help ensure that patients have access to the medications they need and deserve.

Here is an action link.

Here is a recent article on this topic

Fixing Illinois’ Fiscal Crisis a Top Priority for Mental Health Advocates

Several years ago, faced with a fiscal crisis, Illinois enacted a “temporary” income tax increase.  That income tax increase will expire (“sunset”) on December 31, 2014 unless the Illinois legislature passes and the Governor signs, legislation to extend it.  If the tax increase is not extended (or some other substantial source of revenue identified) Illinois will be facing a $4 to $5 billion hole in its budget.  While there is certainly some waste in the state’s budget, it is not possible to identify $4-5 billion in cuts which will not result in dramatic reductions in mental health services and all other human services as well as in state funding for schools and other vital government programs.

2014 is an election year for the Governor, most of the Illinois Senate seats and all of the seats in the Illinois House.  Mental health advocates are urged to communicate to all legislators and all legislative candidates in the upcoming primary our support for legislation extending the current state income tax rates.   

One of the problems with the Illinois income tax is that the Illinois Constitution prohibits progressive taxation of any kind.  Thus, millionaires pay the same income tax rate as those making very minimal amounts.  This makes it difficult to raise revenue or even maintain our current tax rates without harming some of our most vulnerable citizens.  The Mental Health Summit supports efforts to place on the Fall Election Ballot an amendment to the Illinois Constitution which would permit the legislature to enact a progressive tax system.  Mental health advocates are urged to communicate to all candidates their support for placing this amendment on the Fall ballot so that all voters can consider this important issue.  Resolutions which would accomplish are pending in both the Senate and the House.  Please urge all Senate candidates to support Senate Joint Resolution  Constitutional Amendment 40 (Harmon).  Please urge all House candidates to support House Joint Resolution Constitutional Amendment 33 (Jakobsson).

Click here for information about the budget crisis.

Click here for a recent article about the crisis.