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IMD (Institutions for Mental Disease) Exclusion

Updating the IMD Exclusion

Where NAMI Stands

NAMI supports modifying a federal law, known as the “IMD exclusion,” to allow Medicaid to pay for short-term stays of adults ages 21-64 in psychiatric hospitals and facilities.

Note: IMD stands for “Institutions for Mental Disease,” an outdated term that remains in federal law.

The need for acute psychiatric care is high, but options are scarce

  • Each year, mental health conditions account for millions of emergency department (ED) visits – or nearly 1 in 12.[i]
  • Emergency rooms are not equipped to handle mental health emergencies, and often have nowhere to refer people for stabilization because , the number of psychiatric beds in the U.S. has decreased by nearly one-third over the past two decades.[ii]
  • People with mental illness commonly languish for days in EDs, are jailed, or are released without any care, because an appropriate hospital bed is not available.
  • The well-publicized case of Virginia state senator Creigh Deeds illustrates the worst outcome of this shortage: After being held in an ED for 24 hours on an emergency psychiatric hold, Deeds’ son Gus was released without care because there were no hospital beds available. The next day, Gus injured his father and completed suicide.

The IMD exclusion worsens an acute shortage of psychiatric hospital beds

Currently, federal law does not allow Medicaid to pay for care in many psychiatric hospitals. Specifically, the law prohibits payment for adults between ages 21- 64 in hospitals or treatment facilities that have more than 16 beds and that primarily provide mental health or substance use care. Updating the IMD exclusion will help people to get mental health care when they need it most. It will also help relieve emergency department and jail overcrowding. This change will fill an important gap, providing people with the care needed to stabilize after a mental health crisis.

  • The IMD exclusion limits access to existing specialty treatment facilities and psychiatric hospitals for most adults who are covered by Medicaid.
    • Updating the IMD exclusion would allow adults ages 21-64 to access the full range of existing psychiatric hospitals and treatment facilities for short-term stays.
  • The IMD exclusion creates a disincentive for health systems to create or expand psychiatric acute care, despite demand.
    • Modifying the IMD exclusion would make it easier for health systems to build capacity because Medicaid patients would be covered for short-term stays.

IMD Exclusion Request

  • NAMI asks that U.S. Senators support updating the IMD exclusion to permit short-term stays for all Medicaid plans.

FAQ on the IMD Exclusion

Q: Isn’t repealing the IMD exclusion a step backward? Wasn’t the intent of the IMD exclusion to help prevent institutionalization?

A: Members of Congress agree that Medicaid should not promote institutionalization. As a result, proposals for modifying the IMD exclusion would permit Medicaid to pay only for short-term stays, from 15 to 20 days.

  • Permitting short-term stays in psychiatric hospitals and residential treatment facilities will help people get the care they need to recover—not incentivize institutionalization.
  • The current exclusion creates a disincentive to create additional options for acute psychiatric care. As a result, people experiencing psychiatric crises are being held in jails across the country. In fact, some states have laws that specifically permit jailing a person when a psychiatric bed is unavailable and the person is considered a safety risk.

Updating the IMD exclusion would help by ensuring psychiatric hospitals and residential facilities can be paid to provide needed short-term care.

Q: What about the costs associated with this? My Congressional Representative and Senator are opposed to any proposal that isn’t budget neutral.

A: Modifying the IMD exclusion is not about increasing costs, it’s about reducing cost-shifting. The IMD exclusion shifts significant costs to states and local communities when people who are experiencing acute symptoms are unable to get the psychiatric care they need.

  • Without enough psychiatric beds, people are being boarded in emergency departments, stretching already thin ED staff and increasing costs.
  • Frequently, people with acute psychiatric symptoms are jailed because no psychiatric bed is available. Law enforcement officials have become default responders in mental health crises, diverting resources from other public safety issues and jails have become the largest mental health facilities in this country.
  • In other circumstances, people with mental illness are discharged from emergency departments without any place to go because no residential facility is available.
  • When jailed or discharged too early or without the appropriate care for their psychiatric symptoms, people get worse and experience poor outcomes. This also increases costs to health and mental health care, housing and criminal justice.
  • Families of adults with mental illness who are not able to get mental health care experience high costs, too, in lost work time and productivity and the high emotional toll of a loved one not getting the care he or she needs.

Q: Won’t this divert funding from general hospitals with psychiatric beds? Don’t general hospitals offer a more integrated setting and better opportunities for integrated mental and physical health care?

A: In most regions of the country, there is a severe shortage of beds available for acute psychiatric care. Modifying the IMD exclusion will expand options, not divert funding from general hospitals.

While general hospitals provide other medical care, psychiatric care in most general hospitals is not well-integrated with other care. Psychiatric wards in general hospitals are typically locked and people are isolated from other hospital patients, so a general hospital does not necessarily offer a more integrated setting.

In addition, people with psychiatric conditions often have highly individualized needs. Psychiatric hospitals or residential treatment facilities can often provide more specialized care that better meets the needs of individuals.

Q: Doesn’t investment in better community-based mental health services make more sense than repealing the IMD exclusion?

A: People with mental health conditions—just like people with any medical condition—need a range of care options from outpatient services to hospital care.  Updating the IMD exclusion to allow for short-term stays in psychiatric hospitals helps strengthen the system and provides people who rely on Medicaid with more treatment options.

Q: The Medicaid managed care final rule permits managed care organizations (MCOs) to pay for short-term stays in IMDs. Doesn’t this mean modifying the IMD exclusion isn’t needed?

A:  The recently-released Medicaid managed care final rule permits MCOs to pay for short-term stays in IMDs, but it does not apply to anyone who is covered by Fee-For-Service (FFS) Medicaid.

  • There are multiple states who do not contract with Medicaid managed care organizations. In these states, the IMD exclusion is still in effect for the adult Medicaid population (ages 21-64).
  • In states with Medicaid managed care, people who qualify for Medicaid due to disabilities, including psychiatric disabilities, are often enrolled in FFS. For these individuals, the IMD exclusion is still in effect.

In summary, many Medicaid recipients are still affected by the IMD exclusion. Modifying the IMD exclusion for all Medicaid plans will level the playing field and provide increased access for people in need of care.

[i] Owens, Pamela L., Ph.D. et al. July 2010. Mental Health and Substance Abuse-Related Emergency Department Visits among Adults, 2007. H-CUP Statistical Brief #92. Agency for Healthcare Research and Quality. Downloaded from

[ii] Email from American Hospital Association. April 2016.

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