Happy hispanic man talking to his support group about his successful fight with drug addiction

The opioid epidemic continues to affect individuals, families, and communities across the US. Each year, thousands die from overdoses and the number continues to increase. Medicaid has historically filled gaps in responding to public health crises, such as the AIDS epidemic in the 1980s and the Flint water crisis. In response to the opioid epidemic, many states have expanded their Medicaid programs to cover a range of treatment services for opioid and other substance use disorders (SUDs).

Historically, inpatient behavioral health services have been funded by states. State policymakers have expressed interest in the recent years about expanding available funds to cover these treatment services. Since Medicaid’s inception, states have been prohibited from using federal Medicaid funds for services provided to nonelderly adults in “institutions of mental disease” (IMDs), a policy known as the IMD payment exclusion. However, this lack of federal funding may limit access to needed inpatient services and contribute to high levels of unmet need. In recent years, the federal government has provided new mechanisms for states to finance IMD services for nonelderly adults through Medicaid in certain situations. There are now four options for states to cover these services: Section 1115 demonstration waivers, managed care “in lieu of” authority, disproportionate share hospital payments, and the SUPPORT Act state plan option.

A full report from Kaiser Family Foundation (KFF) provides new data to understand current patterns of Medicaid enrollees’ use of inpatient and outpatient SUD and mental health treatment services; explains the options for states to access federal Medicaid funds for enrollees receiving IMD services; analyzes current waiver activity; and draws on our interviews with policymakers in two states and one county using IMD waivers to examine successes and challenges. Appendix Tables contain state-level data. Key findings include:

  • Many nonelderly Medicaid adults with a behavioral health condition report unmet treatment needs. Though Medicaid adults with behavioral health needs are more likely than those privately insured to have used services in the past year, treatment rates are low across all payers, including payers not subject to the IMD payment exclusion. Most Medicaid adults who receive behavioral health treatment do so as outpatients.
  • Twenty-six states have a Section 1115 waiver to use Medicaid funds for IMD SUD services, as of November 2019. Vermont and the District of Columbia are the only two states with IMD mental health waivers to date.
  • We spoke with policymakers in Vermont, Virginia, and San Diego County using IMD waivers and learned that all of them devoted substantial time and resources to expanding and strengthening available community-based SUD treatment services in addition to IMD services. All three regions report overall positive experiences with their waivers, along with some implementation challenges that had to be resolved.
  • Early waiver evaluation results in the case study areas show more Medicaid enrollees using SUD services and increased provider participation since allowing IMD payment. Policymakers also described some constraints of the IMD waivers, particularly around the length of stay limits.

Enabling states to access federal Medicaid funds for inpatient SUD and mental health treatment could help to address unmet behavioral health treatment needs and help states to cover services that reflect current evidence-based treatment standards. Additionally, providing federal matching funds for IMD services can free up state dollars previously spent on inpatient treatment to instead fund corresponding expansions in community-based services across the behavioral health care continuum. State initiatives to expand behavioral health services cannot solely focus on inpatient services and instead also must consider community-based services, given states’ community integration obligations under the Americans with Disabilities Act. Thus, state expansion of behavioral health services may also address demonstrated unmet treatment needs for outpatient behavioral health services.

As we look ahead at the future of behavioral health funding, there are a host of questions about how allowing states to use federal Medicaid funds for IMD services could affect access to and utilization of inpatient and outpatient care, health outcomes, care quality, costs, IMD day limits, discharge planning and care transitions, and the continued evolution of evidence-based best practices for SUD and mental health treatment. KFF will continue to track the use of Section 1115 demonstration waivers to fund IMD services, and how state experiences with IMD SUD waivers may translate into IMD mental health waivers, given the differences in treatment protocols and the requirements set forth by the November 2018 CMS guidance.

Priya and Marybeth presented on a recent webinar for AcademyHealth’s Medicaid Demonstration Evaluation Learning Collaborative, a group of evaluation researchers examining the policy questions, and study designs, methodologies, data sources and metrics used in Medicaid waiver initiatives.

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Committee Member

Marybeth Musumeci, J.D

Associate Director - Kaiser Family Foundation

Marybeth Musumeci is an Associate Director at the Program on Medicaid and the Uninsured at Kaiser Family Found... Read Bio

Priya Chidambaram

Priya Chidambaram

Policy Analyst - Kaiser Family Foundation

Priya Chidambaram is a Policy Analyst with the Program on Medicaid and the Uninsured at the Kaiser Family Foun... Read Bio

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