Medicaid Demonstration to Expand D.C.’s Behavioral Health Services

The Centers for Medicare & Medicaid Services (CMS) recently approved Washington, D.C.’s Section 1115 waiver to allow Medicaid to reimburse institutions for mental diseases (IMDs) for residential treatment services provided to Medicaid-eligible adults with substance use disorder (SUD) or serious mental illness (SMI)/serious emotional disturbance (SED).

An IMD is a hospital, nursing facility, or other institution with more than 16 beds that is primarily engaged in diagnosis, treatment, or care of individuals with mental diseases. Without CMS approval, federal law prohibits Medicaid payment for services provided in IMDs for adults ages 21–64; this prohibition, intended to leave states with the primary responsibility for funding inpatient behavioral health services, is known as the IMD exclusion.

State Medicaid programs are given some flexibility regarding the type, amount, duration, and scope of services covered. All Medicaid programs must cover certain behavioral health services, including inpatient services, while some states cover additional services through optional benefit categories. However, the long-standing IMD exclusion creates coverage gaps and fragmented care for behavioral health services.

There have been a few options for states to receive Medicaid funds for IMD services: the Medicaid Emergency Psychiatric Services Demonstration (MEPD) — a three-year (2012–2015) demonstration that provided federal funding for services provided at private IMDs; Section 1115 waivers for certain services; Medicaid managed care capitation payments; disproportionate share hospital (DSH) payments; and the state plan option under the SUPPORT Act.

Indiana and Vermont have submitted applications for similar IMD mental health waivers, but D.C. is the first applicant to receive approval. Specific goals of D.C.’s demonstration include: increasing adherence to and retention in SUD treatment; decreasing inappropriate emergency department visits and hospital services by enrollees with SUD or SMI/SED; reducing readmission rates for inpatient SUD or SMI/SED treatment; and ensuring that beneficiaries being treated in an IMD setting are also being assessed for and accessing treatment for their physical health conditions.

Arkansas Medicaid allocates DSH payments for uncompensated care and makes capitation payments to Provider-led Arkansas Shared Savings Entities for services provided at IMDs. However, a waiver of this type could help Arkansas address coverage gaps for adults experiencing SMI/SED or SUD, particularly opioid use disorder.