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* Congressional Research Service
Informing the legislative debate since 1914
Updated February 25, 2025
Medicaid's Institution for Mental Diseases (IMD) Exclusion
Medicaid is a joint federal-state program that finances the
delivery of primary and acute medical services, as well as
long-term services and supports, for a diverse low-income
population, including children, pregnant women, adults,
individuals with disabilities, and people aged 65 and older.
Medicaid's Institution for Mental Diseases (IMD) exclusion
limits the circumstances under which federal Medicaid
funding to states is available for inpatient behavioral health
care (i.e., mental health or substance use disorder [SUD]).
The exclusion applies to facilities with more than 16 beds
primarily engaged in providing diagnosis, treatment, or
care of persons with mental diseases, including medical
attention, nursing care, and related services. In recent
years, policymakers have expressed concerns about the way
the IMD exclusion is affecting access to inpatient
behavioral health care.
hats the VMD Exdusion?
The IMD exclusion is a long-standing policy under
Medicaid that prohibits the federal government from
providing federal Medicaid funds to states for services
rendered to certain Medicaid-eligible individuals who are
patients in IMDs (§1905(a)(30)(B) of the Social Security
Act [SSA]). When a Medicaid-eligible individual is a
patient in an IMD, the individual cannot receive Medicaid
coverage for services provided inside or outside the IMD.
Due to the exceptions explained in the Legislative
History section, the IMID exclusion applies to individuals
aged 21 through 64.
The term 'institution for mental diseases' means a
hospital, nursing facility, or other institution of more
than I 6 beds, that is primarily engaged in providing
diagnosis, treatment, or care of persons with mental
diseases, including medical attention, nursing care, and
related services. (SSA §I 905(i).)
Determination of whether a facility is an IMD depends on
whether its overall character is that of a facility established
and maintained primarily to care for and treat individuals
with mental diseases. Examples include a facility that is
licensed or accredited as a psychiatric facility or one in
which mental disease is the current reason for
institutionalization for more than 50% of the patients.
For the definition of IMDs, the term mental disease
includes diseases listed as mental disorders in the
International Classification of Diseases, with a few
exceptions. (See Centers for Medicare & Medicaid Services
[CMS], State Medicaid Manual, Part 4, §4390.) Under this
definition, SUDs are included as mental diseases. If the
substance abuse treatment follows a psychiatric model and
is performed by medical personnel, it is considered medical
treatment of a mental disease.
Leg sative History
The IMD exclusion was part of the Medicaid program as
enacted in 1965 as part of the Social Security Amendments
(P.L. 89-97). The exclusion was designed to assure that
states rather than the federal government maintained
primary responsibility for funding inpatient psychiatric
services. However, federal Medicaid law as originally
enacted included an exception to the IMD exclusion for
individuals aged 65 and older, consistent with the federal
government's new role in financing the care of older adults.
In 2018, at least 42 states provided this optional coverage
for individuals aged 65 and older.
The Social Security Amendments of 1972 (P.L. 92-603)
provided another exception to the IMD exclusion for
children under the age of 21 (or in certain circumstances
under the age of 22), commonly referred to as the Psych
Under 21 benefit. This optional benefit allows states to
provide coverage for inpatient psychiatric services to
children in certain types of facilities. However, these
services are mandatory for states to cover if an early and
periodic screening, diagnosis, and treatment (EPSDT)
screen of a child determines inpatient psychiatric services
are medically necessary. As a result, all states provide
Medicaid coverage of inpatient psychiatric services for
individuals under the age of 21.
The Medicare Catastrophic Coverage Act of 1988 (P.L.
100-360) created the statutory definition of an IMD, which
followed the regulatory definition with one addition: the
exception for facilities with 16 beds or fewer. Thus, small
facilities can receive Medicaid funding, which indicates
Congress supported the use of smaller facilities rather than
larger institutions.
npatient Mental Health Servces for
Persons Aged 2 Through 64
Taking into consideration all the statutory exceptions, the
IMD exclusion prevents the federal government from
providing federal Medicaid funds to states for any service
delivered to individuals aged 21 through 64 in an IMD.
However, states can receive federal Medicaid funding for
inpatient behavioral health services for individuals aged 21
through 64 if the care is provided outside of an IMD, such
as in facilities with 16 or fewer beds and facilities that are
not primarily engaged in providing care to individuals with
mental diseases.
Section II5 Wa vers
States may request a Section 1115 waiver to receive federal
Medicaid funds for services provided to individuals who are
patients in IMDs. Between 1993 and 2009, nine states had](ViewImageLocal?handle=hein.crs/govesru0001&div=1&collection=&method=preview&ext=.png&size=3)