Component of Mental Health Bill Could Expand Medicaid Payments for Psychiatric Hospitals

Congress is weighing whether to allow psychiatric hospitals to bill Medicaid for up to 20 days of care each month for adult patients, signaling a potential shift in lawmakers’ views about institutionalizing people with serious mental illnesses.

The plan, outlined in a broad bill to overhaul the mental health system, would loosen restrictions that have prevented the federal-state health insurance program throughout its entire 50-year existence from paying such facilities for most services. Pitched as a way to address a shortage of beds to care for patients that might otherwise end up homeless or in prison, the proposal is reviving a long-running debate over whether treatment should be administered in the community or in institutions. It also reopens the question of whether states should be allowed to shift some of the financial cost of operating psychiatric hospitals to the federal government, as they can for other medical facilities.

The biggest obstacle is cost. The Congressional Budget Office estimated that an earlier version of the policy change and another Medicaid billing adjustment in the legislation by Rep. Tim Murphy will boost federal spending by between $40 billion and $60 billion over a decade.

Mindful of the estimate, the Pennsylvania Republican narrowed the scope of the change before the bill was approved by the House Energy and Commerce Subcommittee on Health in November. The text of the provision in question is still in brackets, indicating it could be revised again. Murphy’s plan also includes language that would make any change contingent on it not raising a state’s Medicaid spending.

“There are a lot of philosophical conversations around this right now, but it really does boil down to the money,” said Paul Gionfriddo, president and CEO of the nonprofit Mental Health America, which has expressed tentative support for Murphy’s plan.

The billing change focuses on stand-alone institutions for mental diseases, or IMDs, which are different from psychiatric wards in general hospitals. Medicaid currently won’t pay IMDs with more than 16 beds for services provided to adults between the ages of 21 to 64, but will pay if treatment involves senior citizens or children. 

Mark J. Covall, president and CEO of the National Association of Psychiatric Health Systems, said funding was considered to be the state’s responsibility when Medicaid was enacted in 1965, because state mental hospitals mostly provided long-term, custodial care. 

Medicaid was enacted less than two years after President John F. Kennedy signed legislation that authorized funding to build community mental health centers (PL 88-164) amid concerns about warehousing in mental institutions

As state mental hospitals have closed or downsized, however, Covall said demand for psychiatric beds has exceeded supply, creating barriers to accessing care and forcing some patients to spend more time than necessary in emergency rooms.

Rep. Eddie Bernice Johnson of Texas, the leading Democratic co-sponsor of Murphy’s bill, said concern about the IMD exclusion has been the key driver of her interest in developing mental health legislation. Many people end up incarcerated or on the streets, she said, and incidences are soaring.

“Without that Medicaid coverage, the low-income people will not have access to care,” Johnson said in an interview. She called the language in the Murphy bill “a very good framework to start,” noting that ideally it would go further but that they’re “really walking a tightrope” to maintain bipartisan support.

The Centers for Medicare and Medicaid Services cited concerns about the availability of short-term inpatient psychiatric care and the potential for delayed treatment in a recent proposal to allow limited billing for adults in IMDs through managed care organizations that administer Medicaid benefits.  

The top Democrat on House Energy and Commerce, Frank Pallone Jr. of New Jersey, added language essentially codifying the CMS plan to Murphy’s bill at the subcommittee markup. Pallone’s move could potentially conflict with Murphy’s more liberal Medicaid billing change; Murphy doesn’t think the rule fully addresses existing mental health needs. 

Treatment Alternatives

Some mental health groups maintain that the IMD billing prohibition has helped encourage community mental health services and avoided unnecessary institutionalization. They also say there are alternatives to hospitalization that, in some cases, allow professionals to intervene in crisis situations in smaller, community-based settings.

Jennifer Mathis, deputy legal director for the Judge David L. Bazelon Center for Mental Health Law in Washington, D.C., acknowledged a lack of institutional psychiatric beds in some circumstances, but said the solution is to expand community services that prevent people from having to go to the hospital in the first place. She said there aren’t enough of those services available because public health systems are cash-strapped.

“If you just keep focusing on building more hospitals, you will guarantee there aren’t enough community services because it’s a finite pool of money,” Mathis said. “It’s going to come out of community services, so then you draw systems further and further backward.”

Eric Buehlmann, deputy executive director for public policy at the National Disability Rights Network, similarly echoed concern that institutionalization with a new Medicaid funding stream will be perceived as an easier fix than implementing a comprehensive system of community-based services.

“It’s an extremely tough issue because it’s billed as the simple, easy way to solve this problem,” he said. “That’s what scares us.”

Covall of the National Association of Psychiatric Health Systems, which backs Murphy’s bill, said the IMD policy has been a symbol for deinstitutionalization, with advocates anxious not to roll back the clock. But he thinks a carefully-crafted change would be widely supported, citing “a major shift” in how people view the issue.

Parity Concerns

In addition to concerns about shortages of beds, supporters of paying the psychiatric hospitals see a disconnect between singling out IMDs for exclusion from Medicaid and a broader policy goal of ensuring parity between mental and physical health care.

“Nobody wants to go down a route to re-institutionalization,” said Gionfriddo of Mental Health America. “But no one wants to deny people to get the opportunity to get care for a chronic condition because it’s a chronic condition of the brain.”

On Capitol Hill, the IMD language in Murphy’s bill hasn’t drawn as much attention from Energy and Commerce Democrats as other pieces of the mental health overhaul; it wasn’t among the four provisions that drew opposition in an October letter to committee leaders.

But some lawmakers may see the move as premature, coming after Congress cleared legislation last month to extend a demonstration project that tests expanded Medicaid reimbursement for IMDs. Pallone submitted a statement for the record that said the demonstration extension through at least Sept. 30, 2016, aligns with the CMS proposal and is “the appropriate way to responsibly address the Medicaid IMD exclusion.”

In the Senate, Louisiana Republican Bill Cassidy and Connecticut Democrat Christopher S. Murphy included language to create an exception to the IMD policy in their mental health overhaul, which is similar to Rep. Murphy’s bill and is awaiting committee action.

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