Post-Election Cycle, IMD Exclusion Remains a Divisive Behavioral Health Issue

Arguably one of the most polarizing issues concerning behavioral health for years — and perhaps decades — has been the restriction on federal funds for psychiatric institutions holding a certain number of inpatient beds.

The prohibition on so-called “institutes of mental diseases” (IMD) is better known as the IMD exclusion and has been in place since 1965. That was when President Lyndon Johnson signed legislation to create Medicaid, which was designed to provide matching federal assistance to states paying for the health insurance of low-income individuals.

Under the IMD exclusion, federal rules prohibit Medicaid from paying for psychiatric inpatient care facilities with at least 16 beds. The facilities can be those treating for acute behavioral conditions and substance use disorder (SUD), with regulations on the exclusion varying among states co-administering Medicaid services to residents.


Due in part to different state regulations, the IMD exclusion is arguably one of the more complex areas of health care law to comprehend.

“[S]ome of these [inpatient psychiatric] facilities are primarily regulated by states and oversight is often fragmented across state agencies,” the nonpartisan Medicaid and CHIP Payment and Access Commission (MACPAC) noted in a letter addressed last year to then-Vice President Mike Pence and House Speaker Nancy Pelosi. “Thus, it is difficult to make broad conclusions about IMDs as a group.”

The last few years have seen an uptick of politicians on both sides of the aisle calling for the law to be repealed. The IMD exclusion debate also made its way into the 2019-2020 election season, but though news coverage of the issue seems to have since waned, one thing has not changed — that is, how sharp the divide continues to be between those remaining in favor of the exclusion and others who feel that it has outlived its usefulness.


The battle over the IMD exclusion

As calls have grown for repeal of the IMD exclusion, a rare consensus appears to be gradually building among a number of Republicans and Democrats in favor of doing away with the law.

“It’s not a partisan issue at play,” Michael Gray, a legislative and policy counsel for the Arlington, Virginia-based Treatment Advocacy Center, told Behavioral Health Business. “The best evidence of that are the states that are applying for waivers.”

The Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, is the nation’s largest payer of behavioral health services. In recent years, CMS has allowed states to submit waivers in order to provide IMD treatment to certain individuals with behavioral conditions.

Across the political spectrum, over 30 states — ranging from solid blue Vermont to deep red Oklahoma — have been given approval for the waivers for SUD, mental health treatment or both.

“Oklahoma and Vermont, you don’t get much more further apart on the two-party divide than in those two states,” Gray said. “Clearly, this is not a red-blue issue.”

Gray believes that support across the partisan divide for the repeal affirms that stakeholders like the Treatment Advocacy Center are on the right side of the issue — namely, that the exclusion is contributing to inadequate care for patients with behavioral conditions.

Specifically, he believes that community-based resources cannot address all the needs of patients experiencing severe behavioral episodes. More beds in psychiatric hospitals, he said, are needed.

“Community-based voluntary treatment is not always going to keep them out of crisis, out of emergency and out of being a threat to their own lives and safety,” Gray said. “That’s where psychiatric hospitals are necessary.”

Gray also feels the lack of federal funding for inpatient psychiatric beds is an example of behavioral health concerns not being prioritized by Medicaid.

“If you had a broken leg and you’re a Medicaid recipient, the payment for that reimburses the health care providers that care for you,” he said. “We just want to see the federal government pay for their share of psychiatric treatment for Medicaid eligible individuals, just like they do for other kinds of treatment.”

Gray said that advocates on the pro-repeal side — ranging from prominent behavioral care systems like Baltimore’s Sheppard Pratt Hospital to the National Alliance on Mental Illness (NAMI) — have findings to back up their claims. Those calling for the exclusion to stay in place, such as Jennifer Mathis, say the same thing.

Mathis is the director of policy and legal advocacy for the Washington, D.C.-based Bazelon Center for Mental Health Law. Mathis believes that community-based resources can work for individuals as opposed to hospitals creating more beds. The problem, she believes, is that such resources are inadequately funded.

“If you don’t have a functioning community service system, and you just keep responding to the pressure that creates on psychiatric hospitals by building more beds, all you do is create more need for psychiatric hospital beds,” she told BHB.

As an example, she cited a demonstration project previously conducted by the federal government that earmarked increased funding to hospitals. She noted that the project ultimately failed to result in more inpatient admissions and longer patient stays, which would run counter to the argument that more funding would automatically result in more inpatient psychiatric beds.

“At best, it’s not going to help,” Mathis said. “At worst, it’s going to increase institutionalization, and it takes away from the development of community-based services that actually are serving people in their everyday lives.”

Mathis acknowledged that those calling for the IMD exclusion to be repealed are enjoying growing public support among health care stakeholders and policymakers. However, she said it should not be taken as a sign that the pro-repeal camp is on the right side of the argument.

On the contrary, Mathis believes that it speaks to how the voices of people with behavioral conditions are not being heard in general.

“If you talk to organizations that are either run by people with psychiatric disabilities, or represent people with psychiatric disabilities, you will hear very different perspectives,” she said. “I have been in many rooms in Congressional meetings where there’s a wide array of mental health groups represented between providers, insurers and parents or families. There is not a single group at the table that has been invited that represents people with psychiatric disabilities, and those voices seem to be ignored.”

The path towards common ground

The IMD exclusion is a complex issue that, more often than not, tends to generate less news buzz as other health care matters. Nonetheless, passion still burns intensely within those in the policy sphere arguing for or against a repeal, with both sides seemingly not close to establishing a middle ground on the issue.

That both sides are quite entrenched in their positions is something policy experts like Morgan Shields take umbrage with. And, she believes the impasse is ultimately doing more harm than good for those with behavioral conditions.

“The debate between these two extremes has created a vacuum of accountability and quality improvement in this space, impacting very vulnerable patients,” Shields said in an email to BHB.

Specializing in inpatient psychiatry research, Shields is a National Institute of Mental Health (NIMH) postdoctoral fellow at the University of Pennsylvania. She has co-authored a number of inpatient psychiatry studies in various journals and her current work specifically involves the study of IMD hospitals.

When it comes to those calling for the IMD exclusion to stay intact, Shields feels more evidence is needed to show that alternative resources — such as peer support specialists — can sufficiently help patients with extreme behavioral conditions. She believes that when questions are raised about evidence, IMD proponents might feel as though community care resources are under attack.

“Folks arguing for a move away from inpatient care do not push for increased accountability because they view it as taking resources away from community care,” she said. “Alternatives simply might not be appropriate for individuals who are experiencing very extreme states of psychosis or exhibiting dangerous behaviors.”

Regarding those advocating for the IMD exclusion’s repeal, Shields said that there is evidence showing that inpatient psychiatry can do harm to patients at current levels of bed capacity. However, she believes the evidence at best is weak and most likely driven by variations in the care experience of patients.

“One could argue [the care experience of patients] is modifiable,” Shields said. “That is, it is likely possible to provide inpatient care that is trauma-informed, patient-centered, and perhaps even beneficial.”

Shields added that those on the pro-repeal side may not consider certain factors as to why some inpatient hospitals might be in favor of the exclusion. As an example, she cited suicidal ideation and how patients with such feelings are perhaps better served not at inpatient facilities, but in outpatient centers using evidence-based practices to manage moods.

Shields also talked about the perception of bed scarcity at hospitals that the pro-repeal side tends to cite in their arguments. Shields said the problem may not be an actual lack of beds, but inpatient hospitals being selective in their admission of patients.

“The policy solution, in this case, would be to fix this selection of patients, not create more beds,” Shields said.

Shields believes both sides genuinely care about the well-being of patients and that it is not impossible for them to find some common ground.

Shields further mentioned there is evidence demonstrating that trauma-informed interventions could be helpful at the inpatient psychiatric level. Such interventions, she feels, can lead to a reduction in hospital injuries, litigation and — ultimately — staff turnover that can translate into savings for organizations. 

“Improved quality might [also] reduce post-discharge readmissions, which are costly,” Shields added.

If inpatient data in hospitals of psychiatric patients was better, both parties would have a starting point on where to fix the problem together, she argues. It is a lack of data that — in her view — weakens the arguments of both sides, even as they might claim evidence supporting their respective stances.

To help remedy the problem, Shields believes local and federal governments should be investing in the improvement of data infrastructure.

“I think both sides of the debate would agree that we should have more information about what is happening inside of these facilities and the impacts on patient outcomes,” she said. “This will be an excellent and necessary step to achieving our ultimate goal of patient well-being.”

The sharing of data, Shields feels, could result in more mutual respect among opponents on the issue, and more progress.

“If we start from a place of agreement, we can work backward to figure out how best to achieve that goal using evidence and a commitment to principles of patient-centered care,” she said.

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