CMS Solicits States to Participate in Medicaid Emergency Psychiatric Demonstration

On August 9, 2011, the Centers for Medicare & Medicaid Services (CMS) sent a letter to state Medicaid directors (Directors Letter) inviting them to participate in the Medicaid Emergency Psychiatric Demonstration (Demonstration), as authorized by Section 2707 of the Affordable Care Act (ACA). Under the Demonstration, federal matching funds will be available for Medicaid payments to private Institutions for Mental Disease (IMD) for Medicaid recipients ages twenty-one to sixty-four for emergency psychiatric care for a period of three years. Applications for the Demonstration may be submitted by the Medicaid agencies of the fifty states, U.S. territories, or District of Columbia, before October 14, 2011.

The Demonstration marks renewed interest in Congress and CMS in potentially modifying the IMD exclusion that has been contained in the Medicaid statute since its enactment. Under the Medicaid statute, federal Medicaid dollars are not available to match state expenditures for services for patients ages twenty-one to sixty-four who reside in an IMD. An IMD is defined by federal law as a hospital, nursing facility, or other institution that has more than sixteen beds and which is primarily engaged in providing diagnosis, treatment, or care of persons with mental disease.

As described in the Directors Letter and a related Demonstration Design and Solicitation prepared by CMS, the purpose of the statutory IMD exclusion is to retain the historic role of the state in the funding of long term inpatient psychiatric care. Over time, however, and in part as a result of the Medicaid IMD exclusion, many state IMDs have closed and psychiatric patients have increasingly been served in non-institutional settings, including an increased number of visits to overcrowded emergency rooms in general acute care hospitals. Moreover, the combination of the IMD exclusion with the Emergency Medical Treatment and Active Labor Act (EMTALA), which requires psychiatric hospitals to accept an appropriate transfer from another hospital if the psychiatric hospital has the capacity to provide stabilizing treatment, has led to situations in which psychiatric hospitals are required to provide uncompensated care for individuals who are otherwise eligible for their state’s Medicaid program.

The Demonstration would grant a partial waiver of the IMD exclusion in selected states. For the first time, federal Medicaid matching dollars would be available for payments made to non-governmentally operated IMDs for services provided to Medicaid eligible individuals ages twenty-one to sixty-four, if those services are necessary to stabilize an emergency medical condition. The Directors Letter defines an emergency psychiatric medical condition by reference to EMTALA, and by further providing that the emergency medical condition must be with respect to an individual who expresses suicidal or homicidal thoughts or gestures, if determined dangerous to his or her self or to others. The IMD exclusion would not be affected for services outside the scope of the Demonstration, including non-emergency services or services provided by a governmentally owned or operated IMD.

The stated goal of the Demonstration is to assess whether this expansion of Medicaid coverage improves access to and the quality of medically necessary care and whether the expansion is cost effective. In addition, CMS seeks to determine whether the expanded coverage will reduce the burden on general acute care hospital emergency rooms, and evaluate the extent to which features of the behavioral health delivery systems and the design of the Medicaid program in a state (including the degree of specialized managed behavioral healthcare) affect the impact of the expansion. CMS will conduct an independent evaluation of the Demonstration, and will provide a recommendation to Congress as to whether the Demonstration should be continued and expanded on a national basis.

Applications to participate in the Demonstration will be reviewed and selected on a competitive basis. Requirements for completing the application and the application scoring process are described in Directors Letter. In awarding grants, CMS will take into consideration a number of factors, including the availability of various types of beds for individuals with mental conditions in the state, the level and type of investment in community-based behavioral services by the state, and the design of the state’s Medicaid program. As required by statute, CMS will also seek to achieve a balanced geographical distribution of states and territories participating in the Demonstration.

Up to $75 million has been appropriated for the conduct of the Demonstration over the three-year period.

CMS has issued a press release, the Directors Letter, a Demonstration Design and Solicitation, and Application Proposal Guidelines related to the Demonstration.