The Institutes for Mental Disease Exclusion (IMD Exclusion) provision of Medicaid prohibits Medicaid from reimbursing states for the treatment of people with mental illness who are between 18 and 65 years old. This causes states to kick the seriously ill out of hospitals--lock the front door and open the back--in order to make residents Medicaid eligible and get a 50% match from the federal government to provide for their care. We wrote about the IMD Exclusion in the Washington Post.
One offset to this federally sanctioned discrimination against people with serious mental illness was the Medicaid Disproportionate Share Hospital (DSH) Payments. These are payments to state hospitals that have a disproportionate share of people living below poverty. Now, under ACA the DSH payments go away and the provisions against reimbursing states for long-term hospital care stay in place.
The following is a devastating (and unfortunately, well-informed) analysis by the National Association of State Mental Health Program Directors, who are responsible for state mental health programs. It details the combined impact of ACA and changes in Medicaid on the ability of people with serious mental illness to be hospitalized in future. The full report is available at http://nasmhpd.org/docs/publications/TheDSHInterplay04_26_13WebsiteFINAL.pdf
NASMHPD Analysis:
This bulletin has been prepared to inform State Mental Health Agencies (SMHAs) and other mental health stakeholders on the interplay between Medicaid disproportionate share hospital (DSH) payments, the Medicaid Institutions for Mental Disorders (IMD) exclusion, the new Medicaid expansion program embodied in the Affordable Care Act (ACA), and declining state mental health budgets – and the impact of this “perfect storm” of events on state public mental health systems and people with serious mental illness.
DSH payments will be significantly reduced beginning in 2014. Through specific provisions in the ACA, the Department of Health and Human Services (HHS) is required to cut supplemental Medicaid payments to hospitals with high a proportion of publicly insured and uninsured patients on the theory that expansions in health insurance coverage under the ACA will lower uncompensated care costs in safety net facilities. However, this process will create an unintended risk to the mental health safety net system. Due to the ACA provisions on DSH payment cuts, safety net hospitals could see reductions close to $22 billion from 2014 to 2021. NASMHPD has informed policymakers that a number of SMHAs depend on DSH payments as a significant source of Medicaid funding for state psychiatric hospitals.
Overall, DSH dollars represent a sizeable share of the $37 billion nation-wide under the direction of State Mental Health Authorities (SMHAs) – including community-based care – so losses of this magnitude will further erode resources available to address the needs of individuals in state hospitals and community-based safety net programs. In FY 2010, there were 37 SMHAs that reported receiving a total of $2.8 billion in DSH funds. This amount represented 27 percent of all state hospital revenues in FY 2010. In those states that use DSH payments to fund home- and community-based waiver programs, there will be larger constraints on the SMHA’s ability to meet Olmstead objectives. These concerns are exacerbated by recent losses sustained in state funding for mental health programs, approaching $5 billion across the last five fiscal years in 41 states.
Another critically important dynamic of this perfect storm scenario is that the Federal Medicaid matching payments for hospital services are prohibited for institutions for IMDs that includes those levels for the population between the ages of 22 and 64.
NASMHPD also has informed policymakers that on top of the DSH payment reductions, because the ACA does not eliminate Medicaid’s prohibition on reimbursing IMDs or state psychiatric hospitals for care provided to Medicaid recipients, these institutions will not be able to collect Medicaid reimbursement for care to currently eligible or newly eligible Medicaid adult beneficiaries – at the same time DSH payments will erode.
Another major factor in this policy dynamic is that beginning in 2014, the ACA expands Medicaid to include a new mandatory eligibility group: all adults under age 65 with income up to 138 percent of the federal poverty level (FPL).
Originally, it was assumed that all states would implement the ACA Medicaid expansion in 2014 as required by ACA statute because implementing the expansion was required in order for states to receive any federal Medicaid funding. However, the Supreme Court ruled in 2012 that the federal government cannot terminate federal Medicaid funding a state receives for its current Medicaid program if a state refuses to implement the new Medicaid expansion initiative. The Supreme Court ruling has unleashed a financial scramble on whether states should take or leave new funds offered through the new Medicaid expansion at a 100 percent match rate between 2014 and 2016 and tapering off to 90 percent in 2020. Regardless of their decision, states will experience DSH payment reductions. Currently 18 states have indicated to HHS that they will not opt in to the new Medicaid expansion program.
It will be the worst of all worlds if some states choose not to participate in the Medicaid expansion at the same time their DSH funds are reduced, the IMD exclusion remains in force and state mental health programs suffer additional budget cuts. States will be caught in a tight payment vise as they provide care to the uninsured, but receive little or no compensation from government agencies to offset costs associated with treating uninsured people.
In states that do not expand Medicaid, there is likely to be a substantial loss of adult psychiatric beds. This oncoming “perfect storm” of budget and DSH cuts coupled with a growing uninsured population with behavioral health conditions and decreasing bed capacity demands serious consideration and a policy solution. It is incumbent for mental health advocates to reach out to all state officials making decisions about the new Medicaid expansion effort to fully inform them about the negative consequences for access to psychiatric inpatient care and community-based programs, if a state chooses to opt out of the Medicaid expansion initiative.
(End of NASMHP analysis)
Of course, there is a way the states could protect the most seriously ill and that would be to prioritize spending so the most seriously ill go to the head of the line rather than the rear. Most state commissioners of mental health work to improve the mental health of the highest functioning and/or serve the largest numbers of people rather than provide treatment to the most seriously ill. This mission creep is what leads to more mentally ill being incarcerated than hospitalized. The state mental health program directors failure to focus on the most seriously ill, combined with the cuts above, virtually ensure our loved ones will not get the care they deserve.
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