The IMD change

The Center for Medicaid Studies announced a few days ago a change in the use of Medicaid funds for psychiatric hospitalization. I have been talking to friends all day long who I think understand things better than me. I have been told some different things but the bottom line was shared by everyone. The CMS action not only makes more hospitalization and longer hospitalization likely. It makes it legal.

Sections of the article about it are reprinted below.

CMS is loosening up restrictions on Medicaid reimbursement for institutional-based mental health and substance abuse services by allowing states to make a capitation payment for enrollees with a short-term stay in an institution for mental disease (IMD) in its massive Medicaid managed care final regulation released on Monday (April 25)….The final rule says states may make a capitation payment for enrollees with a short-term stay, no more than 15 days, in an Institution for Mental Disease (IMD) to address access problems for inpatient psychiatric and substance use disorder services. The provision will be implemented 60 days after the rule is published….. The National Health Law Program noted that CMS also included a requirement that IMD services must meet requirements for “in lieu of” services. This policy allows states to cover alternative services or settings “in lieu of services” covered under the state plan, according to NHeLP. NheLP pointed out that CMS said this will allow the enrollee to have a choice between IMD and community-based services and that the agency said a managed care plan cannot force an enrollee to get services at an IMD.

How it affects things will depend on your particular state. I don’t know that it will exactly be the same in any two states. So much of what I have to say is directed specifically towards what I believe will be issues in Tennessee. Some of the issues are probably common to most states.

1. The first thing to realize is somebody still has to pay regardless of the rules and how this is done will have a lot to do with how this rule affects specific states.

2. The articles reference “capitation payments.” What this means is that mco’s are paid not so much for the needs of the people served as much as a lump sum per person served. This means if a person costs more than the lump sum payed you are in the hole. Your hope is that there are enough people who cost less to make up for the people who cost more.

3. Insurance companies will not passively take a loss. If they are presented with the possibility of loss due to significant new expenses they have a couple of options.

A. Insist the state pay them more money. In Tennessee Medicaid takes about a third of the budget. State lawmakers have a task force right now whose big hope is to significantly cut that budget. A demand for a significant increase in budget because of a rule coming out of Washington is not likely to be warmly met.

B. If the state does not adequately meet anticipated new demands then one option would be to regulate that demand. Even if something is legal it still must be justified by medical necessity. If you make it difficult for people to justify on the basis of medical necessity longer stays then that will decrease the amount of financial loss you incur.

C. But you will still incur massive loss. This rule change means much state hospitalization formally paid for by state mental health budgets will now fall on state Medicaid budgets. In Tennessee that is not an insignificant amount of money. Everyone in the state hospital will not be on Medicaid but the expense will still be real.

D. One option, that will be a primary option, will be to change other benefits you pay. It means ending coverage of some service or services currently provided or decreasing reimbursement rates to providers. Tennessee will do both I believe. Case management services have been on the chopping block before and I wonder if they won’t be amputated this time. Dropping reimbursement rates to providers had also been a topic of discussion. The rate is already extremely low. Rate drops will put some providers, particularly small providers in rural areas in danger of going under.

E. There is another term used in the new rule that depending on how it is interpreted may really muddy the waters. The rule says that IMD services can be “in lieu” of contracted services. If the rule actually means what it says people on Medicaid can not be forced to accept services in lieu of contracted services. In other words, hospitalization by this rule would have to be voluntary. Voluntary.

F. No one knows how exactly the rule will be interpreted. In Tennessee there is no voluntary state hospitalization. All state hospitalization is based on committal. How will this affect things??

G. Aside from how this might affect the rights of individuals what would happen if a state Medicaid trying to manage a potential ocean of new expenses said that based on this rule they would not approve hospitalizations that are not voluntary? I don’t know if such a thing is even likely. Just food for thought.

All this is to say there are more questions than answers. The potential for this rule to have unintended consequences is real. It could easily mess up far more than it “solves.” Again I think it may well vary from state to state. As salvation it does not solve much. At most it gives political victory to some folks passionately searching for it.

It will doubtlessly affect in some way the ongoing debate about mental health legislation on the federal level. That effect will be much clearer in coming weeks.

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