Closing the Mental Health Gap

Medicaid IMD Exclusion on the Move in Budget Talks, Offering Promise for Inpatient Behavioral Health Care


Enshrined into Medicaid policy since its creation is a colossal gap for mental health coverage. THA has been advocating strongly to close that gap for years and is pushing for it still as the 2023 Texas legislative session enters its home stretch.

This gap specifically targets services given at “institutions for mental disease” (IMD), which include psychiatric hospitals and mental health facilities with more than 16 beds. These facilities are the state’s safety-net mental health providers. They treat both children and adults with varying acuity needs, from patients with severe mental health and substance use disorders to those undergoing court-ordered mental health treatment and patients requiring outpatient therapy services.

The federal Medicaid IMD exclusion policy prevents eligible patients ages 21 to 64 from receiving coverage for inpatient mental health care lasting longer than 15 days. That prevents patients in a psychiatric crisis from receiving the full range of their eligible Medicaid benefit, regardless of their needs – unlike a patient in a hospital for physical care, who has access to a full continuum of services.

Texas hospitals have fought persistently to give patients the behavioral care they need and create an IMD exclusion waiver in the Texas budget, one of the state’s most pressing behavioral health needs.

The “Why” of the Waiver

After the COVID-19 pandemic, Texas saw a stark increase in mental health concerns due to factors such as social isolation, loss of loved ones and employment, and other pandemic-era traumas. Data from the Centers for Disease Control and Prevention (CDC) show that throughout the pandemic, depression and anxiety grew dramatically. The National Alliance on Mental Illness recently found one in five Texans is affected by mental health conditions, and two out of three Texans with those conditions don’t receive treatment. Texas patients continue to navigate certain daunting barriers to care.

For Texans with severe mental illness, the IMD exclusion is one such barrier, as the Texas Hospital Association explains in its white paper on the federal policy.

The exclusion stems from an antiquated standard of inpatient psychiatric care. In addition to flatly applying the IMD rule regardless of a patient’s medical needs, it disrupts patients’ continuity of care and creates confusion for hospitals that are unaware of whether patients have used up any of that 15-day allotment at another facility.

In 2018, the federal government adopted policy that allows states to pursue waivers from the IMD exclusion. Implementing such a waiver in Texas would benefit both behavioral health patients and their care teams and facilities, who no longer would ring up costs for uncompensated care for patients who require a stay beyond the 15-day mark.

Status report: The budget

There’s hope for coverage expansion through a state waiver from the IMD exclusion following its inclusion in the current House version of the state budget. Though not originally drafted into House Bill 1, the rider allowing for the IMD exclusion is now in the bill. Because the Senate version of the budget did not include it, the IMD waiver will be among the items budget conferees haggle over as they work to reconcile the two versions into the state’s final 2024-25 funding setup.

Budget talks currently bode well for the state’s needs in the behavioral health arena, with the budget set to include millions in additional funds for psychiatric inpatient beds, mental health grant programs and a gigantic increase to the Loan Repayment Program for Mental Health Professionals. THA is doing its part to see that the IMD exclusion becomes a part of that equation as well.