CMS to allow Medicaid mental health demonstrations

CMS sent state Medicaid directors an email on Nov. 13 announcing new opportunities to design service delivery systems for treating mental health. The announcement eases previous prohibitions against using Medicaid funding to pay for short-term residential treatment in an institution for mental disease (IMD).

States can now submit waivers for delivery systems for adults with serious mental illness (SMI) and children with serious emotional disturbance (SED). The SMI/SED demonstration could help improve access to mental health services and limit the negative impacts of these conditions, including improving education and employment goals. In 2016, 10.4 million adults in the United States had an SMI, but only 65 percent received mental health services that year.

Medicaid is already the largest payer of behavioral health services in the country, with more than 25 percent of adults with a serious mental illness relying on Medicaid, according to CMS.

“More treatment options for serious mental illness are needed, and that includes more inpatient and residential options,” HHS Secretary Alex Azar said in a statement. “As with the SUD [substance use disorder] waivers, we will strongly emphasize that inpatient treatment is just one part of what needs to be a complete continuum of care, and participating states will be expected to take action to improve community-based mental health care.”

States can pursue mental health services delivery systems through Section 1115 waivers. To date, 17 states have received authority from CMS to pursue similar demonstration projects related to substance use disorders.

States that participate in the SMI/SED demonstration will be required to take “a number of actions to improve community-based mental health care,” CMS stated. Reimbursement for the demonstration is also limited to beneficiaries who are short-term residents in IMDs primarily to receive mental health treatment. The projects must be budget neutral to the federal government.

States are also required to follow other information reporting with actions on achieving milestones and goals of the demonstrations, including data and performance measures.