Buried in the U.S. Senate’s now-stalled effort to repeal and replace Obamacare is legislative language that mental health care professionals have been seeking for years — an exemption to a rule that prohibits federal dollars from being spent on “Institutions For Mental Disease.”
It’s a rule as old as the landmark 1965 program establishing Medicaid — the government-provided medical insurance for the poor and disabled — and it bars federal dollars from being used for adult patients treated at certain kinds of psychiatric facilities.
Known as the IMD Exclusion, the rule was drafted at a time when mental health professionals, advocates for patients and some federal lawmakers were trying to end the notorious era of psychiatric asylums.
That era is over, but the rule still exists. And in Sonoma County, it makes it difficult financially to send mental health patients to Aurora Santa Rosa Hospital, a privately run IMD that is the only psychiatric hospital left in the county.
Mental health patients under the county’s care are often sent to psychiatric hospitals in other counties because the county would have to pay the full cost of care at Aurora with no federal financial match.
“We don’t want to change the IMD exclusion. We don’t want warehouses anymore,” said Michael Kennedy, the county’s director of mental health services. “But for short-term inpatient hospitalizations, they should just go back and say ‘freestanding psych hospitals are not IMDs.’ ”
The Senate’s repeal and replace bill, known as the Better Care Reconciliation Act of 2017, would have would greatly reduced Medicaid spending, the single largest payer of mental health services in the country, with more than 4.5 million beneficiaries, according to the Treatment Advocacy Center, a Virginia-based national nonprofit that works to eliminate barriers to treatment for people with severe mental illness.
It would also have allowed states to more easily waive Obamacare’s 10 essential benefits, which include mental health coverage. But the fact that it addressed the IMD exclusion is a hopeful sign for those who have been struggling to get lawmakers to take note of the outdated rule.
“Leaving aside the other issues in the bill, this is a really important aspect for the mentally ill and should be pursued in order to allow for effective care,” said John Snook, executive director of the Treatment Advocacy Center.
The Senate bill would have allowed adults from the ages of 21 to 65 to stay up to 90 days a year in an IMD, defined as a facility that has 17 or more beds and is primarily engaged in the treatment of people with mental illness.
The federal funding exclusion did not apply to psychiatric units tied to acute general hospitals. Before it became Aurora in 2013, that facility was operated by Santa Rosa Memorial Hospital and was eligible for matching funds through Medi-Cal, the state’s version of Medicaid.
Prickly issue of funding
Ever since the closure of the two local psychiatric hospitals, the funding exclusion has been a thorny issue for Kennedy, who says it forces him to send patients to other counties for treatment in psychiatric hospitals that accept Medi-Cal.
Last year, the county mental health department referred about 1,000 individuals to psychiatric hospitals, with about 71 percent covered by Medi-Cal. Most of the adults 21 to 65 were sent outside the county because it costs too much to treat them at Aurora, which does not qualify for Medi-Cal funding.
The county spent more than $10.3 million on hospitalizing psychiatric patients in the 2015-16 fiscal year, or 15 percent of the $66 million spent by the county on mental health services.
Kennedy says the rule does not take into account how the landscape of psychiatric hospitals has changed.
During the 1980s, general acute care hospitals began shutting down their psychiatric units for financial reasons. What popped up in their place were short-term freestanding psychiatric hospitals like Aurora.
The federal exclusion has been amended to make exceptions for youths under 21 and adults 65 and older. And in recent years, some exceptions have been granted to states with managed care mental health programs. California is not one of them.
In 2016, the county Behavioral Health Department provided care to about 5,000 people. Of these, about 1,000 were referred for inpatient psychiatric treatment; 29 percent were covered by Medicare or private insurance or had no insurance at all.
The rest, 71 percent, were covered by Medi-Cal and thus were not eligible for federally subsidized care at facilities like Aurora. Kennedy said the exclusion is discriminatory against adult Medi-Cal beneficiaries younger than 65.
The county mental health department could try to refer all of its Medi-Cal patients to Aurora, but it would leave the county responsible for paying the full cost of care there, which amounts to about $1,200 a day, said Kennedy. That would mean cutting mental health services elsewhere, such as residential services for mental health patients leaving hospitals, the mobile support team or jail-based mental health services.
Alternatives to exclusions
Making an exception for short-term freestanding hospitals would allow the county to draw down more Medi-Cal dollars and send more people to Aurora. Of all the people who go through the county’s Crisis Stabilization Unit, only about 25 percent are referred to a psychiatric hospital, he said.
“When somebody’s really in bad shape psychiatrically, and psychotic, they need a hospital for a few days,” Kennedy said. “We have to have that. ... A lot of times they wind up in the ERs or law enforcement is picking them up.”
Another possible way around the IMD exclusion is establishing a 16-bed psychiatric health facility or PHF, which in terms of care is equivalent to a psychiatric hospital. But because it has fewer than 17 beds, the cost of care provided there for adults can be billed through the Medi-Cal program. Kennedy is currently working with Marin County mental health officials to identify a site for a PHF that can be used by both counties.
But an end to the outdated IMD exclusion is long overdue, said Snook of the Treatment Advocacy Center. And if the failed Senate bill is any indication, it appears that both sides of the political spectrum in Washington agree change is needed.
You can reach Staff Writer Martin Espinoza at 707-521-5213 or firstname.lastname@example.org. On Twitter @renofish.