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CMS expands mental health payment for residential services

CMS letter to state Medicaid directors outlines new federal waiver to get reimbursed for residential treatment services.

Susan Morse, Managing Editor

The Centers for Medicare and Medicaid Services is offering states the ability to get paid for short-term residential treatment services for adults with serious mental illness and children with serious emotional disturbance, the agency said in a letter sent today to state Medicaid directors.

States can apply for a federal waiver to design and get reimbursed for residential treatment services provided in institutions for mental disease.

Beneficiaries must be short-term residents in institutions for mental disease and be there primarily to receive mental health treatment. The project is expected to be budget neutral to the federal government. 

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Approximately 10.4 million adults in the United States had a serious mental illness in 2016, but only 65 percent received mental health services in that year.

Because serious mental health conditions often arise in adolescence or early adulthood and often go untreated for many years, these individuals are less likely to finish high school and attain higher education, disrupting education and employment goals, CMS said.

Medicaid is the single largest payer of behavioral health services, including mental health and substance use services. More than a quarter of adults with a serious mental illness rely on Medicaid.


About a quarter of individuals with serious mental illness have a co-occurring substance use disorder.

CMS currently offers states the flexibility to pursue demonstration waivers regarding substance use disorders, including opioid use disorder.

CMS said it has approved this authority in 17 states, where it is already improving outcomes for beneficiaries. For example, early results in Virginia show a 39 percent decrease in opioid-related emergency room visits, and a 31 percent decrease in substance-use related ER visits overall after implementation of the demonstration.

With today's announcement, CMS said it would be able to offer a path forward to the 12 states that have already expressed interest in expanding access to community and residential treatment services for mental health and substance use disorders.

Participating states will be expected to commit to taking a number of actions to improve community-based mental healthcare. They will also be expected to report information detailing these actions and submit data and performance measures identified by CMS.

CMS recommends the following strategies: Improved data-sharing between schools, hospitals, primary care, criminal justice, and specialized mental health providers; integration of mental health care and primary care; care coordination to help patients transition from acute care back into their communities; and increased access to evidence-based services that address social risk factors and are designed to help individuals maintain a job or stay in school.


CMS is announcing this new demonstration opportunity following the publication of the Medicaid managed care proposed rule.

States identified key concerns from the last rule issued in 2016 regarding the 15-day length of stay for managed care beneficiaries in an institution for mental disease. CMS did not propose any changes to this requirement, but the agency is asking for comment from states for data that could support a revision to this policy.


"More treatment options for serious mental illness are needed, and that includes more inpatient and residential options. As with the SUD (substance use disorder) waivers, we will strongly emphasize that inpatient treatment is just one part of what needs to be a complete continuum of care, and participating states will be expected to take action to improve community-based mental health care," said Health and Human Services Secretary Alex Azar. "There are effective methods for treating the seriously mentally ill in the outpatient setting, which have a strong track record of success and which this administration supports. We can support both inpatient and outpatient investments at the same time. Both tools are necessary, and both are too hard to access today."

Twitter: @SusanJMorse
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