CMS letter to State Medicaid Directors outlines new opportunities for states to receive payment for residential treatment services. The letter includes a new opportunity for states to receive authority to pay for short-term residential treatment services in an institution for mental disease (IMD) for adults with serious mental illness (SMI) and children with serious emotional disturbance (SED). CMS believes these opportunities offer states the flexibility to make significant improvements on access to quality behavioral health care

Medicaid is the single largest payer of behavioral health services, including mental health and substance use services in the U.S. By one estimate, more than a quarter of adults with a serious mental illness rely on Medicaid. Approximately 10.4 million adults in the United States had an SMI in 2016, but only 65 percent received mental health services in that year. Serious mental health conditions can have detrimental impacts on the lives of individuals with SMI or SED and their families and caregivers. Since these conditions often arise in adolescence or early adulthood and often go untreated for many years, individuals with SMI or SED are less likely to finish high school and attain higher education, disrupting education and employment goals.

Through this demonstration opportunity, federal Medicaid reimbursement for services will be limited to beneficiaries who are short-term residents in IMDs primarily to receive mental health treatment. CMS will not approve a demonstration project unless the project is expected to be budget neutral to the federal government.

States will also be expected to report information detailing actions taken to achieve the milestones and goals of these demonstrations as well as data and performance measures identified by CMS as key indicators of progress toward meeting the goals of this initiative.

CMS is announcing this new demonstration opportunity following the publication of the Medicaid Managed Care proposed rule. States identified key concerns in the 2016 final rules limitation regarding 15-day length of stay for managed care beneficiaries in an IMD. CMS did not propose any changes to this requirement at this time; however, CMS is asking for comment from states for data that could support a revision to this policy. Meanwhile, this new demonstration opportunity will give interested states the ability to seek federal authority to have greater flexibility to pay for residential treatment services in an IMD as part of broader delivery system improvements.

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1. Promoting flexibility

Providing states with greater flexibility to use limited, actuarially sound rate ranges, removing barriers to transition new services and populations into managed care. Also providing states with more flexibility to set meaningful network standards, removing outdated and overly prescriptive requirements and enable the use of modern means of electronic communication when appropriate.

2. Strengthening Accountability

To help states move more quickly through the federal rate review process and to allow less documentation to submit in certain circumstances to ensure patient protections and fiscal integrity. Require states to develop a Quality Rating System (QRS) for health plans to facilitate beneficiary choice and promote transparency.

3. Maintaining and Enhancing Program Integrity

Strengthening federal requirements to protect federal taxpayers from cost shifting by prohibiting states from retroactively adding or modifying risk-sharing mechanisms and ensuring that differences in reimbursement rates are not linked to enhanced federal match.