Impact of Medicaid Institution for Mental Diseases exclusion on serious mental illness outcomes.

OBJECTIVES: Medicaid's Institution for Mental Diseases (IMD) exclusion bars federal funding for treatment in facilities with more than 16 psychiatric beds, but some states have obtained waivers under Section 1115 of the Social Security Act to increase options for treating serious mental illness (SMI). This retrospective claims study assessed health care resource utilization, costs, homelessness, and incarceration among Medicaid beneficiaries with SMI in states with and without waivers. STUDY DESIGN: Patients were 18 years and older and had at least 1 diagnosis of SMI and 12 months of continuous enrollment pre- and post index date. METHODS: Fixed-effect models, adjusted for patient and state characteristics, estimated the waivers' impact on outcomes. RESULTS: The odds of having psychiatric-specific inpatient admissions and emergency department (ED) visits were lower by 14% and 26%, respectively, in the waiver cohort (n = 130,224) vs the nonwaiver cohort (n = 3,102,971). Odds of all-cause inpatient admissions and ED visits were also lower (9% for both) in the waiver cohort, but the odds of having all-cause outpatient visits were 19% greater in the waiver cohort. States with waivers had 11% fewer incarcerations, or about 250 fewer cases per year, based on an average of 23,592 incarcerations. CONCLUSIONS: Our findings underscore the beneficial impact of IMD exclusion waivers on psychiatric-specific and all-cause health care resource utilization and costs as well as on incarceration rates for individuals with SMI. CMS may want to consider the results of this study in addition to other available data when granting waivers to states and potentially removing this exception from the Medicaid law.