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June 04, 2021

Federal Funding for Mental Health Treatment and the IMD Exclusion: Where Do We Stand?

This Briefing is brought to you by AHLA’s Behavioral Health Task Force.
  • June 04, 2021
  • Emily M. Park , Husch Blackwell LLP
  • Emma P. Pelkey , Lewis Brisbois Bisgaard & Smith

It has been several years since the passage of the 21st Century Cures Act and several other legislative and regulatory actions taken in response to the growing opioid epidemic and increasing mental health crises reverberating throughout the United States. For over 50 years, the federal government did not provide funding for serious mental illness and substance use disorder treatment, believing such matters to be local issues requiring local solutions. The bulwark of this position was the Institutions for Mental Disease (IMD) exclusion, created in 1965, around the time there was significant movement toward deinstitutionalization. The IMD Exclusion prohibits federal financial participation for care provided to Medicaid beneficiaries between the ages of 21 and 64 in a facility with more than 16 beds that is “primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases[.]” Part of the Cures Act, however, required the Centers for Medicare & Medicaid Services (CMS) to provide direction to state Medicaid agencies on the use of Section 1115 Medicaid waivers for mental health treatment programs for adults and children. CMS issued this guidance in November 2018.

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