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Medicaid Demonstration Targets Serious Mental Illness Treatment

In a letter to state Medicaid directors, the Centers for Medicare & Medicaid Services (CMS) outlined a new demonstration opportunity for states to receive Medicaid reimbursement for services furnished at institutions for mental disease (IMDs) for individuals with serious mental illness (SMI) or serious emotional disturbance (SED).

The demonstrations can be carried out through Section 1115 waivers that, if approved, would waive the longstanding IMD exclusion for individuals with SMI or SED in the Medicaid program.

Seventeen states have taken advantage of similar waivers for individuals with substance use disorders, including opioid use disorder. As part of the demonstration for SMI and SED, states would be expected to meet several additional milestones, including:

  • ensuring good quality of care in psychiatric hospitals and residential treatment settings;
  • improving care coordination and transitions to community-based care;
  • increasing access to a continuum of care; and
  • identifying individuals with SMI or SED earlier to engage them in treatment sooner.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Rachel Schwartz is a former policy associate at America's Essential Hospitals.

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