Skip to content
Find a Provider
The National Council logo

CMS Issues New Guidance on Waivers of IMD Rule

Capitol Connector
Your source for the latest updates from Capitol Hill. We translate policy into practice so you can learn how policy trends will affect your work and how best to prepare.

Stephanie Pellitt

Policy and Advocacy Associate

CMS Issues New Guidance on Waivers of IMD Rule

Share on LinkedIn

On Thursday, the Centers for Medicare and Medicaid Services (CMS) issued a letter to State Medicaid Directors outlining a new waiver process to allow Medicaid payment of a broad range of services for opioid and other substance use disorders (SUD), including residential treatment. The letter, issued in response to President Trump’s declaration of an opioid public health emergency, promises states a “more flexible, streamlined” 1115 Medicaid waiver approval process to accelerate state’s ability to respond to the opioid epidemic. While this move could present an opportunity for states to expand their continuum of care for addiction, strict budget neutrality requirements and heightened state reporting requirements may prove too burdensome for states to realistically pursue this option.

CMS explains that these waiver demonstrations must provide a full continuum of care for people with addiction, and may include residential services. CMS emphasizes that all demonstrations must be budget neutral, meaning that the demonstration cannot cost the federal government more than what it would have paid absent the demonstration. Even if states choose to expand residential services, payment for room and board remains prohibited and states could lose funding for services provided in facilities known as IMDs (Institutions of Mental Diseases) if they cannot meet a set of new quality measures.

Further, payment for inpatient care will be provided on a prospective basis, meaning if spending exceeds a pre-determined amount, state Medicaid programs would be on the hook to pick up the additional costs. CMS will closely monitor state spending on a quarterly basis for these demonstrations to ensure budget neutrality. If at the end of the five-year demonstration states are not in compliance with the budget neutrality requirements, CMS can recover the difference from states.

Under the Administration’s new guidance, states will be subjected to a number of new reporting and evaluation measures. In addition to a waiver application, states must submit a detailed implementation plan and robust interim and final evaluation reports. CMS will evaluate waivers based on whether they meet specified milestones and performance measures, including whether the demonstration is leading to a reduction in overdose deaths. Many of the required performance measures are not included in current Medicaid or 1115 waiver reporting requirements, and thus will be an added responsibility for states. CMS will penalize states with a $5 million deferral if they do not submit interim and final performance evaluations on time. Finally, states will be required to establish residential treatment provider qualifications that meet nationally recognized, SUD-specific, evidence-based program standards (such as the ASAM criteria) for these demonstrations.

If states fail to meet any of these new requirements, federal payment for services provided in IMDs may be withheld and/or any request to extend the demonstration may be denied. The full guidance from CMS can be found here. Stay tuned to the Capitol Connector for more updates on the new IMD waiver process.