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New guidance aims to provide greater flexibility in Medicaid

Tags: Health

President's commission recommends that HHS grant waiver approvals to states to ease the IMD exclusion, which would expand Medicaid reimbursement to larger  mental health treatment facilities

 In a letter to state Medicaid directors Nov. 1, the Trump administration announced new opportunities to design programs to meet substance abuse and opioid addiction treatment needs through the Medicaid program.

The updated guidance further cements the significant role Medicaid plays in treating addiction.

Approximately 22 million Americans are classified as having an addiction disorder, also known as a substance use disorder, with only one in 10 receiving treatment.

The Centers for Disease Control and Prevention (CDC) states that drug overdoses are now the leading cause of accidental death in the United States. More than 60 percent involve an opioid — which works out to be approximately 91 lives every day. This statistic has quadrupled since 1999.

Medicaid is already a vital source of health coverage for individuals with addiction problems and accounts for 21 percent of all health care spending on substance use disorders. According to the Kaiser Family Foundation, Medicaid covered three in 10 adults with opioid addiction in 2015.

Medicaid supports a full continuum of care that spans prevention, treatment and recovery support services for people with substance use disorders.

For instance, Medicaid has allowed many states to increase access to medication-assisted treatment (MAT), the most effective treatment for opioid disorder, which combines medication with counseling and therapies. All state Medicaid programs cover at least one of the three medications—methadone, buprenorphine and naltrexone — used for MAT, and most cover all three.

Medicaid’s ability to pay for inpatient treatment is limited because of a decades-old federal rule, known as the Institutes of Mental Diseases (IMD) exclusion, which prevents states from allowing Medicaid to reimburse for care at treatment facilities with more than 16 beds. The IMD exclusion is a component of the Social Security Act, and legislation would be needed to repeal it entirely.

However, a regulation was updated last year allowing up to 15 days of care for inpatient stays meeting certain conditions in Medicaid managed-care only.

While still recognizing the need to enact legislation, the President’s Commission recommended that the Department of Health and Human Services (HHS) use its existing administrative authority to grant waiver approvals to states to ease the IMD exclusion.

In a letter issued on the same day as their recommendations, HHS Centers for Medicare and Medicaid Services (CMS) announced to Medicaid directors that they would be using their authority under another piece of the Social Security Act — Section 1115 — to waive certain provisions of federal law for an “experimental, pilot or demonstration project” that “is likely to assist in promoting the objectives of” the Medicaid program.

The new guidance to Medicaid directors on what are known as Section 1115 waivers is intended by the administration to allow Medicaid to cover even more of the continuum of care for people with substance use disorders, including inpatient treatment. Previously, states needed to meet certain milestones prior to getting a waiver approved by CMS. Under the updated guidance, states would be able to achieve these milestones over the life of the demonstration.

While the expectations for initial waiver approval are loosened, according to the National Association of Medicaid Directors, there will be significant new reporting and evaluation requirements.

IMD payment waivers are the most frequently sought type of Section 1115 behavioral health waiver requests. Utah was the first state to see its waiver approved under the new guidance, joining six other states (California, Maryland, Massachusetts, New Jersey, Virginia and West Virginia) that already have Section 1115 waivers to use federal Medicaid funds to pay for substance use treatment services.

An additional seven states have pending waiver requests for IMD substance use services. For instance, some states are allowing up to 30-day stays in IMD facilities whereas others propose 90 days.

Counties annually invest $83 billion in community health systems, including behavioral health services.

Through 750 behavioral health authorities, counties plan and operate community-based services for individuals with substance use disorders. In almost half of all states, counties help finance the Medicaid program, contributing approximately $28 billion in 2012, the last year for which figures are available.


Valerie Brankovic, legislative assistant, contributed to this report.

About Brian Bowden (Full Bio)

Associate Legislative Director – Health

Brian Bowden serves as NACo’s Associate Legislative Director for Health and staffs NACo’s Health Steering Committee, lobbying Congress and the Administration on all health issues impacting counties including Medicaid, behavioral health, public health, jail health and long-term care.

Contact the Editor

Bev Schlotterbeck
Executive Editor
(202) 942-4249
bschlott@naco.org