Introduction to “Medicaid’s Institutions for Mental Diseases (IMD) Exclusion Rule: A Policy Debate”

The following two Viewpoints present a debate on the future of Medicaid’s so-called institutions for mental diseases (IMD) exclusion rule. The debate has particular salience for the larger policy debate on whether the United States has enough psychiatric inpatient beds and the types of facilities and services needed in a comprehensive system of psychiatric services.

The IMD exclusion rule was part of the original Medicaid policy from 1965. Understanding the IMD rule requires understanding what is meant by “institutions for mental diseases.” For purposes of current Medicaid policy, IMDs are hospitals, nursing homes, or other institutions with more than 16 beds that are primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases other than dementia or intellectual disabilities. The IMD exclusion rule prohibits federal Medicaid payments for services delivered to individuals ages 22 to 64 who reside in IMDs. Originally, the IMD designation was reserved for facilities where half the resident population had a mental disease. In the 1980s, the federal government clarified that individuals with a diagnosis of dementia or intellectual disabilities were not counted toward the 50% limit. Over time, the rule was also driven by whether the facility was considered to be “primarily engaged” in providing psychiatric services. Later still, the policy was amended to apply only to facilities with more than 16 beds. All of these criteria are now in place (1).

Congress adopted the exclusion rule for various reasons. The main reason for excluding free-standing public hospitals from receiving federal Medicaid funding was a concern that such payments should not supplant state funding for public hospitals, a historic responsibility in every state. Lawmakers also wanted to encourage care in general hospitals and community mental health centers, where such care would be eligible for Medicaid reimbursement, because these facilities were not considered to be IMDs. The IMD exclusion rule favored short-term hospital care in community-based settings and not in free-standing public and private psychiatric hospitals and nursing homes, which historically involved longer lengths of stay. The rule, however, did not specify anything about length of stay. The 16-bed criterion was introduced to permit small, community-based facilities to receive Medicaid payments. The rule also does not exclude payments to specialized inpatient and residential services for children (under age 22) and specialized geriatric inpatient and residential services (for Medicaid beneficiaries over age 64). States may include such services in their state Medicaid plans.

Over the past 50 years of limiting federal Medicaid payments to certain psychiatric facilities, the IMD exclusion rule has periodically come under scrutiny. A few modest changes have been made, but for the most part the rule has remained in place. In recent years, some stakeholders and policy makers have argued for a complete repeal of the rule, and others have argued that the rule serves its original purposes well enough and that no further change is needed. In the following debate, Jennifer Mathis, J.D., of the Judge David L. Bazelon Center for Mental Health Law, takes the affirmative position to retain the IMD exclusion rule. Her Viewpoint is followed by an argument for total repeal of the rule, written by Dominic A. Sisti, Ph.D., and Aaron Glickman, B.A., of the University of Pennsylvania.

Publication of this debate is part of a collaboration between Psychiatric Services and two foundations, the Thomas Scattergood Behavioral Health Foundation and Peg’s Foundation. The foundations engaged one of us (HHG) to edit a series of policy papers for publication as free-standing essays to support advocacy in behavioral health services. These papers can be found on the Web site of the Scattergood Foundation (www.scattergoodfoundation.org/policy-paper-series#.W42NROhKhPZ). At the invitation of the other of us (LBD), several of the policy papers have been submitted for publication in the journal. The following debate was published recently in the Scattergood series (1), and we present it here for our readership. We feel that the issue of the IMD exclusion rule is timely and significant. We hope you will agree that the issues are complex and interesting. We find that each of the arguments has merit. Where do you stand on this important issue? Let us know what you think about the IMD exclusion rule.