With the opioid epidemic continuing, state interest in expanding access to substance use disorder (SUD) services remains high. Medicaid financed 21% of SUD services and 25% of mental health services in 2014. Section 1115 waivers related to behavioral health remain the most frequent type of waiver sought and obtained by states, with most requesting authority to use federal Medicaid funds for services provided in "institutions for mental disease" (IMDs). Since Medicaid's inception, Congress has prohibited states from using Medicaid funds for IMD services for non-elderly adults. This brief provides new data and answers key questions about the Medicaid IMD payment exclusion as waiver activity continues, and Congress considers legislative changes, including a House bill that would restrict IMD SUD services to those with opioid use disorder, excluding those with other SUDs. Key issues include the following: (1) CMS continues to approve Section 1115 IMD SUD waivers, although recent waivers generally do not address coverage of community-based SUD services, while earlier waivers were contingent on coverage of services across the care continuum. Twelve states have approved IMD SUD waivers, and 13 IMD SUD requests (including 12 new states, and one seeking to expand existing authority) are pending with CMS as of June, 2018. (2) Congress is considering amending the IMD payment exclusion, including a House bill that restricts IMD SUD services to those with opioid use disorder, a minority (22%) of nonelderly Medicaid adults with SUD. The vast majority of those with SUD (78%) would be excluded from IMD treatment services under the House bill (Figure 1). The Senate Finance Committee also considered, but did not vote on, a proposal to alter the IMD SUD payment exclusion. As administrative and legislative activity related to Medicaid IMD payment continues, key issues to watch include diagnosis-based restrictions on service access, day limits, accompanying community-based service expansions, delivery system reforms, performance measures, and waiver evaluation results.
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