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Medicaid rule puts IMD exclusion in better context
In late April, the federal government issued its long-awaited final rule on managed care in Medicaid and the Children’s Health Insurance Program (CHIP). The rule overhauls the programs for the first time in more than 10 years.
For behavioral health providers, the most significant provision allows—for the first time ever—for Medicaid to pay for inpatient treatment in a facility with more than 16 beds, by tempering the often bemoaned Institutions for Mental Diseases (IMD) exclusion. The IMD exclusion has not changed in fee-for-service Medicaid.
Most states employ managed care Medicaid, which is delivered under contract through commercial insurance companies, although behavioral health is carved out in many of these arrangements.
Goals of the rule
According to the federal Department of Health and Human Services (HHS), which oversees Medicaid and Medicare, the final rule has four goals:
- Supporting states in their efforts to improve quality of care;
- Strengthening consumers’ experience of care;
- Improving accountability and transparency; and
- Aligning rules across health insurance plans.
The document is 1,425 pages long. Generally, it allows states to enter into contracts that promote delivery system reform, such as pay-for-quality models. In the IMD changes, it allows plans to cover 15-day inpatient mental health and addiction services. The rule also sets network adequacy standards but leaves flexibility for states. Additionally, it establishes what is known as a “medical loss ratio,” which will demand that insurance companies spend 85% of their premium dollars on care rather than profits or general administration.
IMD Exclusion
“For the first time, the federal government has said in official rulemaking that IMDs for short-term inpatient care can be paid by managed care organizations under Medicaid,” says Mark J. Covall, president and CEO of the National Association of Psychiatric Health Systems (NAPHS).
Covall estimates that more than 50% of Medicaid enrollees will be affected by the change. The rule is specific to the type of managed care in which the health plan is at risk—getting a per-member, per-month fee in exchange for being responsible for all of the care of enrollees.
Many agree the IMD change is huge. The last time there was any change involving IMD providers was in 1972 when Congress allowed states the option of using Medicaid to pay for inpatient mental healthcare for people under age 21, says Covall.
“The adult population—ages 21 to 64—has never been able to access IMDs, from the beginning of Medicaid,” he says.
And “IMD” is used quite broadly. The statute defines it as any facility with more than 16 beds that is primarily engaged in the delivery of psychiatric care, which includes substance use disorders (SUDs). Most psychiatric hospitals have more than 16 beds, so they qualify as IMDs. Residential treatment facilities, for SUD as well as mental illness, are considered IMDs as well, if they have more than 16 beds.
Recent trends demonstrate that one type of IMD—the state mental hospital—has become scarce, as have units within hospitals for psychiatric care. This has created a bed shortage and has left patients without needed services, says Covall.
“Demand for inpatient psychiatric treatment has grown, and there are fewer beds, and a backlog in emergency departments,” he says. “[The IMD change] will have a positive impact on getting patients into treatment who are waiting for a bed in a general hospital. Patients could also go to freestanding psychiatric hospitals in the community.”
It’s important to note that the HHS rule only allows Medicaid managed care to pay for 15 days per month in inpatient psychiatric treatment, says Covall. There’s an allowance for crisis residential care, but because the rule emphasizes short-term care, there is no provider incentive for the “warehousing” of patients in IMDs.
However, NAPHS had recommended that the day limit be based on the average length of stay per facility, not on the individual beneficiary.
“We recommended 25 days or less,” Covall says, noting that under Medicare, long-term hospitals are defined has having lengths of stay of more than 25 days on average.
HHS came up with the 15 day benchmark by looking at the IMD demonstration project that showed the average length of stay was just over eight days. Authors nearly doubled the average to arrive at 15 days.
Ironically, the day limit would be inconsistent with prevailing parity laws. For example, a patient with Medicaid coverage who is admitted for cancer treatment would not have a 15-day limit on inpatient treatment.
Chuck Ingoglia, vice president of public policy for the National Council for Behavioral Health, says parity should still apply, regardless of how the plan is set up.
“No matter how many contractors you have, how many kinds of plans, you have to look holistically at the plan and make sure parity applies,” he says.
Under the Medicaid managed care final rule, insurance companies have to provide mental health and SUD treatment at parity, but enforcement will remain the challenge, as it is in other applications of parity rules.
Integration
Ingoglia also says the substantial change is clearly placing the stress on integration of behavioral and physical health.
“Previously we saw a lot of carved-out arrangements of specialty managed care companies that managed the behavioral benefit,” he says. “Now, they’re putting behavioral in the same plan as the physical.”
Matt Salo, executive director of the National Association of Medicaid Directors, agrees that the industry momentum toward integration must continue.
“There is a growing recognition that the whole space around mental health and substance abuse should no longer be considered to be separate, but to be better integrated into acute care services and the other things Medicaid pays for,” Salo says. “It’s not only a matter of what kinds of medications are needed, but what kinds of services, what social and economic interventions are necessary.”
Ingoglia says, however, that there’s a difference between integrating services and merely combining the dollars.
“There’s a lot of focus now on integrating the money,” he says. “But simply integrating the money will not necessarily lead to integrated care. For that, you need to make sure you have a benefit.”
Implementation
The next step will involve state processes in examining their Medicaid benefits to make sure they are in compliance with the final rule, says Ingoglia. As states have moved from carve-outs to carve-ins for behavioral healthcare, the authorization process has become more time-consuming and difficult.
“We need to make sure there are no disincentives to care in terms of copays and other barriers,” he says.
Covall says the idea is to continue to build an appropriate regulatory structure that protects patients and makes sense to stakeholders. In managed care, unlike fee for service, it’s often the insurance company that defines the benefits absent any state or federal regulations that set some type of floor.
“Hopefully it’s a collaborative relationship,” he says. “But in many cases it’s not, and that’s why we need the protections of parity.”
Unlike the 1980s, when the addiction treatment system perhaps went overboard with high utilization and was essentially punished by managed care denials, there are checks and balances on both sides in the new rule, says Covall. Insurance companies contract with states to manage the care of Medicaid enrollees these days and are incentivized to keep the costs down for the states.
“There needs to be a balance to make sure that individuals get the care that they need, but no more, and no less,” he says.
According to Covall, requiring that 85% of the funds states give to managed care Medicaid has to be spent on direct care is one way of making sure patients get adequate care.
Partnerships
Managed care Medicaid has high penetration rates across the country. More than half of all Medicaid beneficiaries nationally receive most or all of their care from such risk-based plans, according to the Kaiser Family Foundation’s market tracker. There are 280 managed care Medicaid plans, with spending of $161 billion in FY 2014.
“A modern healthcare system is going to have a heavy hand with both government and the private sector partnering,” Salo says.
He also believes that it’s misleading to call Medicaid managed care privatization.
“When you say that word—privatization—it conjures up things like ‘we’re giving this cash cow to the private sector,’” he says. “With the Medicaid managed care regulation and the state oversight, that’s not really the case.”
And this doesn’t mean that states give over the operation of Medicaid to insurance companies, he says, adding that state legislators had approached him, suggesting he speak up to say that the managed care rules, instead of limiting state government, would actually require additional Medicaid staff.
“Payment reform isn’t going to come easy, and it isn’t going to come cheap,” says Salo. “It’s not like, ‘here’s a bunch of money.’ There’s constant state oversight of managed care contracts.”
Experts conceded that states have greatly varying degrees of generosity when it comes to Medicaid benefits—not only in eligibility and expansion, but actual coverage. The federal government, in issuing this final rule, is focusing on a nationwide threshold for Medicaid enrollees and enriching the behavioral health benefit overall. Stay tuned as this massive rule rolls out over the next three years.
Allison Knopf is a freelancer based in New York.
More online
Find additional fact sheets here.
Find the final rule here.
