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NAMI Policy Paper
IMD Exclusion: Implications of Repeal
Congress may consider repeal of the IMD
exclusion this year. Given NAMI's unique voice representing persons with severe brain
disorders (mental Illness), it is important for us to have a clear position. This paper is
a framework for the NAMI Board's Committee on Public Policy & Communications. Its
purpose is to update committee members on the status of IMD exclusion policy and the
implications of eliminating the IMD exclusion. Suggested additional guidelines for staff
are offered for consideration.
Current Medicaid Law
Institutions for Mental Disease (IMDs) are inpatient facilities of more than 16 beds whose
patient roster is more than 51% severe brain disorders by primary admitting diagnosis.
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.
Implications of current policy
Because Medicaid will, however, pay for inpatient services to the 22-64 group in
Psych Services of general care hospitals, and in "scattered beds" in community
hospitals, the policy is not airtight. (And these loopholes may lead to more fragmented
care, or to reimbursement for care of lesser quality.)
History
The policy is grounded in the public care situation extant in 1965 when Medicaid was
enacted. State mental hospitals and county mental homes housed large numbers of persons
with severe brain disorders at (non-federal) public expense. The Congress made clear that
the new Medicaid dollars were not to supplant this public effort that was already
going on with resources from state and local governments. The exemptions for children and
the elderly were added by amendment. The exclusion for adults was upheld in a Supreme
Court case. In the early 80s, the 16-bed exemption was legislated as a response to the
Court's decision. It made a moderate concession to the realities of
deinstitutionalization, and re-stated opposition to financing "warehousing" in
state hospitals.
Discriminatory aspects of IMD
exclusion
The treatment system has changed radically in the more than thirty years since the
Congress forbade cost-shifting to the federal government of what was clearly then a state
and county responsibility. Medicaid has been amended to permit treatment of children and
adolescents, and treatment of seniors through the state options for inpatient care for
those not yet 22 and those over 64. Without use of an option, inpatient nursing home care
is available to seniors and persons disabled by other than severe brain disorders. This
leaves adults with severe brain disorders the sole category for whose inpatient care
Medicaid will not reimburse except under circumstances which narrowly limit choice, and
likely compromise quality. Thirty years after enactment, this has become discriminatory
treatment.
An equity argument can be made via comparison to adults with mental retardation. Residential treatment for these became eligible for Medicaid reimbursement in 1971, in facilities which meet the nursing home requirements for Intermediate Care Facilities for the Mentally Retarded (ICFs/MR). When such persons are discharged from an ICF/MR back into the community they may continue to be eligible for Medicaid wrap-around services through a "community options" waiver. (The "option" notion is that a facility bed can be converted to a community "slot" with no increased cost to Medicaid.)
These waivers are not available as an additional resource for persons with post-discharge from an IMD, because there was no Medicaid eligibility for person or facility while they were inpatients. Hence there is no "bed" available to swap for a community slot.
Medicaid also pays for nursing home care for
a significant proportion of residents who are elderly -- directly for Medicaid eligibles,
and through spend-down provisions with "community spouse" protections for
persons not eligible at the time of admission.
Impact of IMD exclusion on care
The hospital care received by persons with severe brain disorders moved to general care
hospital psychiatric wards has been criticized. It has been characterized, in terms of
constancy and quality of care, as being poorer than care in private psychiatric or even
state hospitals.
One unacceptable consequence of the present situation is that not only is a facility precluded from being reimbursed by Medicaid, but individual patients' eligibility for Medicaid is extinguished while they are inpatients in an IMD. Consequently, for treatment of medical disorders not related to their severe brain disorders diagnosis, they must be discharged from the IMD, have their Medicaid eligibility reinstated, be treated in a med/surg setting, and then be readmitted to the IMD.
Medicaid federal match can generally be
utilized (for 22 to 64-year olds) only in support of community-based care. (Psychiatric
units and scattered beds in acute general care hospitals are the exception.) This may
encourage poor coordination with state hospitals. The cost advantage to the state can
drain state dollars from the system entirely, simply cost-shifting in substantial part to
the federal Medicaid match. A state that, for example, saves $100 million from closing or
downsizing hospitals can deliver $100 million worth of community-based care for only $50
million at a maximum, with at least $50 million in federal Medicaid matching. The other
$50 million in state funds probably leaves the mental health system for tax relief or
other public purposes.
Changing public sector
environment
The state public mental health system, the state hospitals, and Medicaid itself have
undergone enormous change over the past three decades. Between 1970 and 1990 the total
number of state (and county) psychiatric beds decreased to 272,253, from 525,878 -- nearly
a 50% drop. Yet during this time the number of state psychiatric hospitals dropped by only
about 5% -- from 277 to 263 (More were closed, but new ones were built.) Since 1990 states
have closed 34 hospitals, and are planning to close 10 more.
States which utilized the option to treat those over 65 and or under 22 in state psychiatric hospitals thereby qualified the facility as a Medicaid-certified provider. Despite the fact that the same facility remained an IMD, this provider status qualified it to apply for DSH (disproportionate share hospital) payments. Of the slightly under $3 billion spent by Medicaid on hospitalization under control of the state MHAs for persons with severe brain disorders , $1.8 billion was in DSH payments (1993).
Political pressures to gain greater control over growth in entitlements still abound. Returning to the vote on a Constitutional amendment to balance the budget is evidence of this, if any is needed. Nevertheless, Medicaid may escape being capped at the federal level this year according to one school of thought inside the beltway. (DSH could still be cut, even if overall modification doesn't happen.)
The President had been expected to re-offer
his per capita cap proposal from the last Congress, and HHS expected the Majority
to counter again with the block grant model. Because the Medicaid growth rate is
reportedly down anyway, and because the re-distributional effects of either model across
the states would likely provoke an unwinnable formula fight, those who say nothing will
happen may be correct. The point for us is that Medicaid could still be cut by federal
law.
Previous NAMI strategy
NAMI argued during the comprehensive health care reform debate in the 103rd Congress that
some of the most highly regarded psychiatric treatment facilities were off limits to
public patients because of the exclusion. Sheppard Pratt or McLean, for example, are
closed to Medicaid recipients. This argument was effective with Members and staff, who
instinctively would want the best treatment for their loved one, if a severe brain
disorder were present. (This position was taken in the context of a greater integration of
Medicaid with private insurance than is now under consideration.)
NAMI also argued strongly throughout the debate on comprehensive healthcare reform that inpatient days must not be subject to arbitrary limits, because severe psychotic episodes may require more than thirty days per episode or sixty days per year to stabilize a patient to the point that they may be safely discharged to the community. NAMI believes that the clinical course of the illness in each case must be the determinant of length of stay, not arbitrary limits.
Implicitly this position endorses inpatient
treatment when clinically indicated, and denies the claims of those who believe any case
can be successfully treated in a community setting with little or no inpatient component.
This leads to a conclusion that inpatient options ought to be available.
Record of some specialty
hospitals
On the other hand, the scandals that some private psychiatric hospitals have perpetrated
on the private insurance sector (a recent one in Florida just this year), make advocates
and public purchasers leery of permitting unrestricted Medicaid reimbursement to the
specialty hospitals.
Total repeal: states' possible
responses
If the IMD rule were repealed entirely, states would be able to draw federal Medicaid
matching for their mental hospitals -- arguably creating an incentive to keep beds
occupied and thereby diverting funds from community services. It is not an unreasonable
assumption that the state dollars replaced by such federal matching could be removed
entirely from the treatment and supports for persons with severe brain disorders in the
public programs. A state budget director under duress to find dollars for another public
purpose, perhaps under court order or consent decree, would take the freed-up dollars out
of the mental health system without hesitation. (Apprehension over this potential outcome
was voiced by NAMI in connection with the House version of the Medicaid block grant in the
last Congress.)
The counter argument is that states know well
that their state Medicaid matching dollar goes much further in the community services
network than it does supporting very expensive bed days in state hospitals. This is
certainly true, but subject to external conditions that vary from state to state -- such
as AFSCME contracts with hospital employees (Northeastern and Midwestern states,
principally), and the power in the legislature of the Senators and Assemblymen in whose
districts the hospitals/jobs are located.
Total repeal: specialty hospital
response
The question of private specialty hospitals being accorded Medicaid reimbursements is
another matter. The mental health advocacy community in DC has told the National
Association of Psychiatric Health Systems (NAPHS) that it will strongly oppose complete
repeal. It might support admission of the specialty hospitals to the Medicaid funding
stream, if it were only for "acute" care -- not yet defined, and in a managed
system to prevent inappropriate lengths of stay.
States have seen the wisdom of a
significantly less costly bed day (according to NAPHS) than in state facilities, and in
some cases have re-allocated waiver savings to purchase such private bed days. In such
cases HCFA has not waived the IMD prohibition, but it has approved the states'
plans for investment of the savings.
Partial repeal/bed-limit change
One variant of modifying the current prohibition for facilities of over 16 beds would
increase the number of beds allowable. New York proposed 30 beds in the past. SAMHSA
recommended a 50-bed limit to the Secretary of HHS in the last Congress. SAMHSA's
objective was residential drug treatment for mothers who could then move their children
into the facility as well without causing the facility to lose payment eligibility through
exceeding the bed limit.
A likely concession of the NAPHS proponents
of amendment of the IMD "rule" is that there be no greater cost to the Medicaid
program than if there were no change. How this is to be accomplished administratively is
not completely spelled out. It could result in an artificial cap on all inpatient care at
a baseline level, with the state and its agents thereafter having only that dollar amount
within which to manage unpredictable inpatient demands.
Effect on substance abuse treatment
This raises a different issue: that of perhaps diluting Medicaid resources which may about
to be capped by broadening the allowable services for which they may reimburse. This may
be sound and humane public policy which could take resources from NAMI's prime objective.
Relationship to DSH
Policy Committee Chairman Sue Davis wanted the consideration of the possible repeal of the
IMD exclusion considered together with the loss of some DSH payments to the states.
The President's proposal for Medicaid will be released as part of the Budget proposal, following the State of the Union Message in the first week of February. It will reportedly contain a $22 billion reduction over five years. $7 billion of this comes from the per capita cap change, and the remaining $15 billion comes from DSH (disproportionate share hospitals). This $15 billion represents about a third of current DSH payments.
The big question is how such a DSH cut would be allocated among states. Will it be pro rata or targeted? Targeted would mean that a de novo census of hospitals that furnish more than 25% of their billings in "uncompensated care" would be developed, and remaining DSH payments would follow this formula. The alternative would be to leave the money where it has been historically and reduce it proportionally. The latter may be easier politically because it doesn't take away what communities have now to give to communities which have less or none currently.
The likelihood of a DSH cut is greater than that of an IMD repeal, partial or entire. So every state could assume a drop in federal medicaid reimbursement for uncompensated care. Some states have drawn DSH payments to their state hospitals. This is uneven across states.
If a state whose mental hospital(s) have received DSH payments in the past were to be able to draw federal Medicaid matching directly, would they still be able to draw DSH? For cases that still would not become Medicaid eligible, and would remain "uncompensated", yes. But for those cases made Medicaid eligible by IMD repeal, DSH claims would be over.
Why would this matter, since now the state would be able to claim such cases under Medicaid? If Medicaid were effectively capped, either by Act of Congress or through the state's budget limits for matching funds, the state's ability to use Medicaid for eligibles in the state hospital could take money from other programs supported by Medicaid.
At the same time that a state could be taking
a proportional DSH cut at the federal level with all other states, many of the persons in
its hospital census who counted toward the DSH formula would no longer be
"uncompensated" cases due to restored Medicaid eligibility, and so would no
longer count toward the DSH payment formula. As a result states could take a double hit on
DSH, while only moving Medicaid dollars around -- not attracting any additional federal
Medicaid matching. This situation could create an incentive to claim Medicaid
reimbursement for inpatient care at the state hospital(s), where an extraneous condition
exists that requires keeping the hospital(s) open.
Suggested guidelines for NAMI
position
Modification of the IMD exclusion must not result in
Changes in IMD Exclusion should:
The above guidance would help NAMI Board and staff in screening specific proposals that come forward for acceptability to NAMI.
Existing Board Policy on IMDs is as follows, squarely placing NAMI on record as supporting repeal of the IMD exclusion:
"The Federal Government currently denies Medicaid reimbursement for persons, otherwise Medicaid eligible, who are over 21 and under 65 years of age--if such persons reside in facilities designated as 'Institutions for the Mentally Diseased' (IMDs). State hospitals, nursing homes, and residential facilities of 16 or more beds may be classified as IMDs if they provide specialized 'mental illness' services, have over 50% of their patients diagnosed as 'mentally ill,' or meet certain other criteria.
"The application of the IMD rule most dramatically affects persons suffering from schizophrenia and other severe mental illnesses because these individuals tend to fall within the impacted age group and thereby are denied Federal Financial Participation (FFP) in their treatment, solely on the basis of where they happen to reside, assuming they would meet all other Medicaid eligibility requirements.
"The IMD rule is thus discriminatory and works against the provision of necessary health care for young and middle-aged adults with mental illnesses.
"NAMI calls upon the Congress to repeal the IMD rule and to adopt uniform standards of Medicaid eligibility based upon individual resources and the need for physical and mental illness services, rather than upon the location in which services are provided or the residence of the recipient."
Papers from the Legal Action Center which takes a firm position in favor of coverage of inpatient treatment for drug abuse; from SAMHSA which lays out options and makes recommendations; and from NAPHS which supports a "level playing field" in a budget neutral, acute care environment are enclosed.
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