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Updated June 15, 2018
Medicaid's Institutions for Mental Disease (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 IMD exclusion limits the circumstances under
which federal Medicaid matching funds are available for
inpatient mental health care. Policymakers have concerns
about access to mental health care, and in recent years some
have introduced bills to amend or eliminate the IMD
exclusion. The scope of the unmet need for inpatient mental
health care for individuals with mental illness on Medicaid
is unknown, as is the extent to which the need might be met
by increasing community-based care or inpatient care in
facilities that are not IMDs.
What Is the IMD Exclusion?
The IMD exclusion is a long-standing policy under
Medicaid that prohibits the federal government from
providing federal Medicaid matching funds to states for
services rendered to certain Medicaid-eligible individuals
who are patients in IMDs. (§1905(a)(29)(B) of the Social
Security Act [SSA].) When a Medicaid-eligible individual
is a patient in an IMD, he or she cannot receive Medicaid
coverage for services provided inside or outside the IMD.
Due to the exceptions explained in the Legislative
History section, the IMD 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 (e.g., mental retardation). (See Centers for
Medicare & Medicaid Services, State Medicaid Manual,
Part 4, §4390.) Under this definition, substance use
disorders (SUD) 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.
Legislative 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.
As originally enacted, federal Medicaid law included an
exception to the IMD exclusion for individuals aged 65 and
older. Therefore, since the beginning of Medicaid, states
have had the option to provide Medicaid coverage of
services provided to individuals aged 65 and older in IMDs.
In 2012, 45 states and the District of Columbia (DC)
provided this optional coverage (most recent data
available).
The Social Security Amendments of 1972 (P.L. 92-603)
provided an exception to the IMD exclusion for children
under the age of 21, or in certain circumstances under the
age of 22. (This exception is commonly referred to as the
Psych Under 21 benefit.) With this exception, states have
the option to provide inpatient psychiatric hospital services
to children. 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
large institutions.
Inpatient Mental Health Services for Persons Aged
21 Through 64
Taking into consideration all the statutory exceptions, the
IMD exclusion prevents the federal government from
providing federal Medicaid matching funds for any service
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