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Rebecca Farley

Director, Policy & Advocacy, National Council for Behavioral Health

CMS to Consider Limited Exceptions to Medicaid Payment Exclusion for Residential Substance Use Treatment

February 10, 2015 | Addictions | Medicaid | Comments
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The Centers for Medicare and Medicaid Services is exploring ways for states to use Section 1115 Medicaid waivers to cover certain residential substance use treatment services, said the agency in a letter to Senator Richard Durbin (D-IL). The letter came in response to a recent request from Senator Durbin and 17 of his Senate colleagues urging CMS to use its statutory authority to revise the current payment exclusion policy that prevents community-based substance use treatment providers with more than 16 beds from participating in Medicaid.

The payment prohibition, known as the “institutes for mental disease” or IMD exclusion, was created in the early days of the Medicaid program – an era when today’s robust community-based addiction treatment system did not exist – as a way to ensure that states retained financial responsibility for mental hospitals. Today, the exclusion prevents Medicaid from providing federal matching funds for services provided in most residential substance use settings, hindering patients’ access to care.

Senator Durbin and his colleagues asked CMS to use its regulatory authority to reexamine the IMD exclusion, suggesting that substance use disorders should not be considered “mental diseases” and therefore that Medicaid’s IMD exclusion should not apply to residential treatment for these disorders.

While CMS stopped short of promising to enact changes to the law or commenting on its authority to do so, the agency did note that it “continues to take steps to reassess the IMD payment exclusion policy, within the parameters established by Congress.” CMS cited the Section 1115 waivers as a potential vehicle for states to implement residential substance use coverage, but cautioned that it will only allow a “limited number of proposals to test comprehensive SUD system transformation” in this way. The agency is currently developing guidance for using Section 1115 waivers for such reforms, based on an earlier informational bulletin published last October.

The CMS letter also points out several of the agency’s activities aimed at individuals with substance use disorders, such as supporting medication assisted treatment, Screening, Brief Intervention, and Referral to Treatment (SBIRT), and the recently launched Innovation Accelerator Program to improve health care and reduce costs.