D.C. Medicaid Program Granted First IMD Waiver Specifically for Mental Health

A first-of-its-kind Medicaid demonstration project aimed to improve care for beneficiaries with serious mental illness (SMI) and/or serious emotional disturbance (SED) has been approved in Washington, D.C.

The Centers for Medicare & Medicaid Services (CMS) announced the approval of D.C.’s Section 1115 Medicaid waiver Wednesday.

It quite literally waives federal rules that typically prevent Medicaid from paying for beneficiaries to stay in in-patient psychiatric treatment facilities — or “institutions for mental diseases” — with more than 16 beds. The rule is known as the IMD exclusion, and it applies to patients with mental health conditions and those battling substance use disorder (SUD).


Critics have often denounced the rule, which dates back to 1965, when Medicaid was enacted. They call it exclusionary and harmful for those who require serious mental health or substance abuse treatment.

CMS began allowing IMD waivers for in-patient SUD treatment back in 2015, but Medicaid programs only recently were given the chance to submit similar mental health waivers. The Trump administration first announced the opportunity late last year.

D.C. is the first Medicaid program to have its SMI/SED waiver approved. It will allow for the treatment of beneficiaries with SMI or SED in residential psychiatric treatment facilities for short periods.


“For too long, our system has failed to provide Americans with serious mental illness and their families the treatment and assistance that they need,” U.S. Department of Health & Human Services (HHS) Secretary Alex Azar said in a press release announcing the news. “Americans with serious mental illness too often end up homeless or in our prisons, when access to treatment could help them lead healthy lives. President Trump has made it a priority for HHS to expand access to evidence-based treatment for serious mental illness and substance use disorders, and this waiver is a significant step in that broader agenda.”

D.C. will be expected to achieve a statewide average length of stay of 30 days for SMI/SED beneficiaries, according to a 2018 letter from CMS outlining the opportunity. The same will be true of other states whose waivers are approved.

So far, only Indiana and Vermont have put in similar IMD waivers for mental health. Both are still awaiting approval from CMS.

Additionally, participating states must commit to “a number of steps to improve their community-based mental health care,” according to the press release.

At the same time CMS granted D.C.’s SMI/SED waiver, it also granted the district’s IMD waiver for SUD treatment, making it the 27th Medicaid program to participate in the substance abuse demonstration.