Medicaid is the backbone of a functioning community-based mental health system. It is the largest payer of behavioral health services, and in many communities, the only payer of intensive community-based services like Assertive Community Treatment (ACT), mobile crisis services, supported housing, and peer support. Yet time and again, the Trump administration has tried to slash Medicaid, threatening enrollees’ coverage and access to the services and supports. The President’s 2021 budget is no different—it calls for over $1 trillion in cuts of Medicaid and the ACA. Most of this would come from cuts in funding to Medicaid, including Medicaid expansion, which has been associated with reducing significant unmet mental health care needs. Such deep cuts would lead states to slash coverage and restrict services.
Adding insult to injury, Trump has kept up a steady drumbeat for “more institutions.” This year’s budget includes an additional $5.9 billion over ten years for institutional services, primarily in the form of illegal waivers of a provision of the Medicaid Act that excludes federal financial reimbursement (FFP) for services provided in mental health and substance use disorder inpatient facilities with more than sixteen beds. These facilities are commonly referred to as IMDs, and the payment prohibition as the “IMD exclusion.” The IMD exclusion was enacted as part of Medicaid in 1965 against the backdrop of an unprecedented rise in the rate of individuals confined to institutions with horrendous conditions. Weakening the “IMD exclusion” while cutting funding for community-based mental health services would be a stark reversal of decades of progress, undermining the Americans with Disabilities Act and the Integration Mandate articulated by the Supreme Court’s decision in Olmstead v. L.C.
Because states shoulder most of the costs of IMDs, they have a powerful incentive to minimize their use. In contrast, states split the costs of community-based mental health interventions with the federal government, and therefore have an incentive to use those interventions whenever possible.
If the federal government alters the funding scheme, this alters the incentives. The problem with increasing incentives for inpatient services is that psychiatric beds tend to be “elastic.” That is, if the beds exist, they are filled, drawing resources away from community-based services and creating a cycle where the lack of a functioning community-based system drives the need for more inpatient beds.
The president’s budget proposal is not a binding document, but it a statement of his priorities and values. Loud protestations to the contrary, Trump’s administration is clearly stating it is no friend to people with psychiatric disabilities. Its proposal would leave states without adequate funding for community-based service, while promoting retrograde institutional-based interventions. We must be highly suspicious of any proposal that claims to “help” with one hand, while taking away basic services with the other.
For more information on the implications of repealing the IMD exclusion see Jennifer Lav, Policy Implications of Repealing the IMD Exclusion.