Some rules are borne out of the best of intentions, and the Institutions for Mental Disease Exclusion (“IMD exclusion”) bears the hallmarks of such a beginning. The IMD exclusion bars federal funding for care of patients between the ages of 21 and 65 who receive inpatient treatment in an IMD, a hospital, nursing facility or other institution with more than 16 beds that primarily treats those with mental illness. This provision came into being in 1965, primarily as a way to prevent dubious institutions from stocking up on mentally ill patients for the purposes of collecting federal funds en masse, but also to put the onus on states, rather than the federal government, to care for the mentally ill.

In modern times, however, the IMD exclusion is arguably one of the larger impediments to expansion of mental and behavioral health treatment, particularly in the area of substance abuse disorders, where a brewing epidemic of opioid addiction demands a proportional institutional response. Not only does this exclusion apply to standard mental health institutions, a Center for Medicare & Medicaid Services (“CMS”) interpretation applies the exclusion to other facilities such as substance abuse treatment center. The irony is that states which have accepted the Medicaid expansion to cover a wide range of newly-eligible patients for mental and behavioral health disorders such as substance abuse find themselves stymied by a lack of appropriate facilities in which to treat them. The Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) provides that covered individuals receive the same coverage for mental and behavioral health as for other medical and surgical benefits, yet medical and surgical facilities are not limited to a maximum of 16 beds, rendering much of the benefit of this law illusory.

The Medicaid expansion provides mental and behavioral health providers with a steady new flow of patients in dire need of assistance – so long as that inpatient treatment is provided in increments of 16. Substance abuse victims now have the coverage to receive the services they desperately need, and behavioral health providers now have more tools than ever to combat the problem. The obstacle in care comes in the limitation of the facilities.

Even an exception for behavioral health provider facilities for substance abuse treatment would provide significant relief, and CMS went so far as to allow eight states to include IMD benefits under Medicaid managed care programs for a period of ten years. Although this exception hasn’t been allowed recently, it at least provides a ray of hope that CMS can adapt regulatory policies to reflect a growing problem, understanding that it may be standing in the way of progress with draconian measures.

True parity can only be attained when mental and behavioral health facilities are free from the limitations imposed by the IMD exclusion. Until then, rather than protecting patients from unscrupulous institutions, this policy will only continue to hurt those who need real care.