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Lessons Learned from Nursing Home Funding Reforms

Guest Author
July 15, 2015
We are pleased to share a guest blog post from Health & Medicine intern Jacob Ginsburg.

On June 1st 2015 the Federal Register published the Medicaid managed care proposed rules, which included a change in the Medicaid rule for (Institutes for Mental Disease) IMDs.  This particular revision would loosen the ban on federal reimbursement for people requiring mental health treatment between the ages of 18-64 staying in IMDs, allowing for monthly capitated payments to managed care entities for people requiring inpatient stays in a mental health facility as long as admissions lasted less than 15 days.

When Medicaid was introduced, the IMD exclusion aimed at preventing states from shifting the cost of the historically state-run mental health institutions to the federal government. Additionally, by stipulating strict guidelines on what constitutes an IMD, the IMD exclusion attempted to incentivize the formation of smaller community based facilities.  Pressured by restricted federal funding, and combined with a general support of patients’ rights, these large asylums began to close and patients moved into smaller facilities.   This gained support because of the idea that smaller institutions offered a less restrictive environment to receive care.  

Unfortunately the effects of this trans-institutionalization of people with mental illness into nursing homes gave these new facilities an incentive to find loopholes in the IMD exclusion to receive federal Medicaid money.  At the same time nursing homes lobbied to protect their State funding. As nursing homes gained a greater financial stake in the institutionalization of individuals with behavioral health conditions, concerns arose about the quality of care patients received in these facilities. The closing of large, state-operated psychiatric institutions, aided by the IMD exclusion, had unintentionally given rise to a market for nursing homes that continued to segregate people with mental illness.

As that market expanded and the nursing home industry gained power, advocacy groups continued to push back against the profit driven nursing facilities, attempting to eliminate these IMDs/nursing homes and demanding more resources for community-based alternatives to institutionalization.

The demands of advocates culminated in a series of reforms starting in 2009. The presence of large numbers of nursing home residents with behavioral health conditions had caught the attention of the Chicago Tribune, which published a series of investigative articles about poor care at these facilities. The Illinois General Assembly responded with nursing home reform legislation and a new Medicaid payment system.  In a legal push, the Williams consent decree attempted to strengthen patients’ rights and reduce utilization of institutions by requiring that people in mental health facilities be offered options to leave and receive community care.  In response, the nursing homes and mental health facilities managed to include the creation of a new type of nursing facility—Specialized Mental Health Rehabilitation Facilities (SMHRFs)—in SB 26, the Medicaid expansion bill. 
The push back against the Williams consent decree and other reforms, represented by the formation of the SMHRFs, attempts to preserve the business model of the IMDs and keep patients in these facilities.If passed, the revision to the IMD exclusion would solidify the existence of these SMHRF institutions by granting them federal Medicaid reimbursement. However, while on paper these facilities offer transitional care to help people move into the community—and while this seems more appealing— limited information exists on if these new facilities can deliver the short term care they claim to provide.

There will always be unintended consequences which materialize as the push and pull between provider interest, and consumer interest; yet, policy should anticipate and attempt to mitigate this conflict. Any advocated policy should take into account, as best as possible, the reactions of profit-seeking entities in their desire to support a successful business. Moving forward we must not just examine the theoretical benefit of a policy but evaluate the practical effects and the logical fallout of any changes in policy and funding.