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Since the enactment of the Medicaid statute in 1965, payment for services for beneficiaries ages 21 to 64 who are patients in institutions for mental diseases (IMDs) has been prohibited; this is known as the IMD exclusion. Section 1905(i) of the Social Security Act defines an IMD as a “hospital, nursing facility, or other institution of more than 16 beds, that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing care, and related services.” In response to stakeholder concerns about the limited availability of publicly funded inpatient psychiatric beds and the fairness of the IMD exclusion, the Patient Protection and Affordable Care Act (P.L. 111-148, Affordable Care Act,) authorized and the Centers for Medicare & Medicaid Services (CMS) implemented the MEPD from July 1, 2012 to June 30, 2015. MEPD provided federal payments to participating states for inpatient care provided in private IMDs to stabilize psychiatric emergency medical conditions (EMCs) among Medicaid beneficiaries ages 21 to 64. MEPD tested the extent to which reimbursing IMDs improved access to and quality of inpatient psychiatric care for Medicaid beneficiaries with psychiatric EMCs and reduced use and overall costs of Medicaid-funded mental health services, including inpatient, outpatient, and emergency services. Eleven states (Alabama, California, Connecticut, Illinois, Maine, Maryland, Missouri, North Carolina, Rhode Island, Washington, and West Virginia) and the District of Columbia, and 29 private IMDs participated.

Analyses required by the Cures Act confirm that MEPD was not associated with reductions in Medicaid and Medicare costs or emergency room use. New analyses found that forensic hospitals are rare in MEPD States, and forensic patients occupy a substantial portion of beds in non-forensic hospitals. Lengths of stays, payment rates, and expenditures per stay were not consistently greater for general hospital psychiatric units than for IMDs. Only a small share of all IMDs and IMD beds participated in MEPD.