A new bill in Congress would chip away at the Medicaid institution for mental diseases (IMD) exclusion for those with substance use disorder (SUD).

Since its inception in 1965, the federal government has refused to cover services provided in IMDs and has not allowed such services to be covered by Medicaid. In later years, Medicaid was allowed to cover some behavioral health services provided in small facilities, those with less than 16 beds, and narrowed the prohibition to apply only to those aged 18 to 64 years old.

Advocates have long criticized the IMD exclusion, calling it “discriminatory.”

The Recovery Act (H.R. 9422), filed by Democratic U.S. Rep. Brittany Pettersen on Aug. 27, would allow states to cover addiction treatment services in IMDs via Medicaid. States would have to file amendments to their state Medicaid plans with the federal government. The bill would apply to state Children’s Health Insurance Programs (CHIP), a public health plan for vulnerable children. 

The bill would also increase the share of matching federal funds, called the federal medical assistance percentage (FMAP), to 90% for these services. That high level of federal funding would last for five years. Patients would have to have at least one diagnosed substance use disorder and cannot be 65 or older.

Pettersen announced the introduction of the bill on Sept. 4 at the facility where her mother previously received addiction treatment.

“My mom is an example of what’s possible when people struggling with substance use disorder have access to the resources and support they need, but I know she was one of the lucky ones,” Pettersen said in a statement. “Far too many people are left without care because of the stigma associated with addiction and the lack of funding and priorities at every level of government.”

Specifically, the bill amends Sections 1915 and 1905 of the Social Security Act. If passed, it would go into effect on Jan. 1, 2025. It also adds a new definition for facilities eligible to participate. They include residential services for adolescents and intensive residential services for adults.

The bill would leave it up to the Secretary of the U.S. Department of Health and Human Services to define the number of days in IMD treatment that would be covered. That determination has to be “in accordance with the most recent evidence-based criteria developed by a nonprofit medical association with expertise in substance use disorder treatment, such as the American Society of Addiction Medicine (ASAM).” Eligibility for coverage would be assessed every 30 days or less, as determined by the secretary, according to the bill.

The bill would allocate $25 million in funding for states to get training grants.

“The expansion of Medicaid to provide coverage for residential SUD treatment services will significantly increase our ability as providers to serve more clients and fulfill our mission,” Crystal Ahles, executive director of Sobriety House, said in a news release. “Without this coverage, state and federal funding is limited, and access to care is difficult for those needing help.

“The change in legislation will allow for expanded access, which is imperative.”

The IMD exclusion is pointed to as a key institutional barrier to behavioral health care for those who qualify for government assistance. It’s especially acute in the psychiatric hospital world.

There has been some action to address the shortfall of coverage at the state level. For example, New York sought 1115 waivers in January 2023 from the federal government to allow for the coverage of serious mental illness and addiction for adults and serious emotional disturbance for adults and children.