CMS-10382.Supporting Statement Part A

MEDICAID EMERGENCY PSYCHIATRIC DEMONSTRATION
OMB SUBMISSION: REQUEST FOR APPROVAL OF OMB CLEARANCE
SUPPORTING STATEMENT- PART A
A. BACKGROUND
Under the provisions of section 2707 of the Patient Protection and Affordable Care Act of 2010
(See Attachment A), the Centers for Medicare & Medicaid Services (CMS) is conducting the
Medicaid Emergency Psychiatric Demonstration. This is a 3-year Demonstration that permits
participating States to provide payment under the State plan to private psychiatric hospitals for
inpatient emergency psychiatric care to Medicaid recipients aged 21 to 64 who have expressed
suicidal or homicidal thoughts or gestures and are determined to be dangerous to themselves or
others.
The goal of the Demonstration is to assess whether this expansion of Medicaid coverage to
include services provided in private, free-standing inpatient psychiatric facilities improves access
to and quality of medically necessary care and whether this change in reimbursement policy is
cost-effective. Focusing on psychiatric emergencies, the Demonstration is also an attempt to
explore a potential remedy to alleviate one of the factors contributing to psychiatric boarding,
one of the consequences associated with the Medicaid institutions for mental diseases (IMD)
exclusion.
State Medicaid Agencies will be invited to submit application proposals to participate in the
Demonstration. The following is a description of the Demonstration beginning with a historical
framework to understand the intent of the Demonstration and the problems it is intended to
address followed by a description of the Demonstration design and requirements for State
participation and the instructions for preparing an application protocol.
B. JUSTIFICATION
B.1

Circumstances Making the Collection of Information Necessary

B.1.1 Deinstitutionalization and the Medicaid IMD Exclusion
The creation in the United States of regional State mental hospitals in the 19th Century was
largely a responsive and humane alternative to the frequent practice of confining the indigent
mentally ill under squalid conditions in almshouses and prisons (Torrey, 1997). Continuing into
the mid-20th Century, the treatment of serious mental illness was now usually provided through
inpatient admissions in a private or State funded mental hospital. However, at the same time,
mental hospitals, particularly public institutions, had increasingly become known for their
overcrowded and poor hygienic conditions. Although many inpatient treatment modalities were
available at these institutions, their effectiveness was often equivocal, condemning those with
more serious mental illnesses to years of largely custodial inpatient care. With the advent of a
new class of psychotropic drugs in the mid-1950s, specifically the anti-psychotic medication
chlorpromazine, it was found that many persons with mental illnesses could be effectively

treated in an outpatient setting. This began a movement away from institutionalization, toward
community-based treatment and the establishment of community mental health centers. This
transition became known as “deinstitutionalization” which was in keeping with the principle that
severe mental illness should be treated in the least restrictive setting (Torrey, 1997).
It has been a long-standing policy of the Federal government that the States should bear the
responsibility for funding inpatient psychiatric facilities and so for many years the States and
counties provided all funding for inpatient care within a network of State and local municipal
mental institutions. This policy guided future legislation including the amendments to the Social
Security Act in 1950 whereby patients in mental institutions were excluded from receiving
Federal payments for old-age assistance (Geller, 2000). Another factor supporting such an
exclusion in this and subsequent legislation may have been that many in Congress apparently
believed that State mental institutions were simply warehouses which furnished no effective
treatment and thus were inappropriate for coverage (Rosenbaum, Teitelbaum, and Mauery,
2002).
The legislation establishing Medicaid continued this coverage exclusion but deviated somewhat
from the policy by allowing Federal matching funds for inpatient mental health care in
psychiatric institutions for individuals aged 65 and older.
The Social Security Administration of 1972 legislation expanded Medicaid coverage to include
inpatient care for individuals under age 21 in “institutions for mental diseases” or IMDs. An
IMD is defined as a hospital, nursing facility, or other institution that is primarily engaged in
providing diagnosis, treatment, or care of persons with mental diseases, including medical
attention, nursing care, and related services (42 U.S.C. 1396d). It is important to note that the
payment exclusion does not apply to inpatient treatment for mental diseases in facilities that are
part of larger medical entities, such as general hospitals or skilled nursing facilities, as long as
the majority of the patient population was admitted and treated for reasons other than mental
disease.
As part of the Medicare Catastrophic Act of 1988 (P.L. 100-360), Congress further defined an
IMD as a facility with more than 16 beds. This was apparently added to promote small
community-based group living arrangements as an alternative to large institutions. Thus, after
these amendments, today Medicaid provides mental health treatment coverage for a large
percentage of Medicaid entitlee’s, but coverage is excluded for inpatient treatment of adults aged
21-64 in any stand-alone, acute or long-term care institutions with 17 or more beds that provide
treatment for mental diseases. This payment exclusion became known as the Medicaid IMD
exclusion.
With deinstitutionalization came a commensurate reduction over time in the number of
psychiatric beds through downsizing and closures, particularly of the regional State mental
hospitals. Although unrelated to the deinstitutionalization movement, the Medicaid IMD
exclusion provided an incentive to shift the cost of care for mental diseases to other care
modalities and facilities where Medicaid matching funding was available and indirectly
contributed to the decrease in the number of publicly funded inpatient psychiatric beds. As a

consequence, the Medicaid IMD exclusion may be a contributing factor to psychiatric boarding
and recidivism in general hospital emergency departments.
B.1.2 Emergency Medical Treatment and Active Labor Act (EMTALA)
In 1986, the Emergency Medical Treatment and Active Labor Act (EMTALA), section 1867 of
the Social Security Act (42 U.S.C. 1395dd), was enacted in response to concerns that some
emergency departments across the country had refused to treat indigent and uninsured patients or
inappropriately transferred them to other hospitals, a practice known as “patient dumping.”
EMTALA requires hospitals that participate in Medicare to provide a medical screening
examination to any person who comes to the emergency department, regardless of the
individual’s ability to pay.
If a hospital determines that the person has an emergency medical condition (EMC), it must
provide treatment to stabilize the condition or provide for an appropriate transfer to another
facility (U.S. GAO, 2001). For psychiatric emergencies, an EMC is defined as an individual
expressing suicidal or homicidal thoughts or gestures, and determined dangerous to self or others
(CMS, 2010).
A hospital’s EMTALA obligation ends when a physician, or qualified medical person, decides:
that no EMC exists (even though the underlying medical condition may persist); that an EMC
exists and the individual is appropriately transferred to another facility; or that an EMC exists
and the individual is admitted to the hospital for further stabilizing treatment (CMS, 2010).
In the case of individuals eligible for Medicaid who require immediate treatment for a
psychiatric emergency, EMTALA requires a Medicare participating hospital to provide treatment
until the individual’s condition is stabilized and/or transferred to an inpatient facility where the
person can be treated until the condition is stabilized.
Psychiatric patients are considered stabilized when they are protected and prevented from
injuring or harming themselves or others. The administration of chemical or physical restraints
for purposes of transferring an individual from one facility to another may stabilize a psychiatric
patient for a period of time and remove the immediate EMC. However, the underlying medical
condition may persist and if not treated appropriately, the EMC may resurface.
A Medicare-participating hospital with specialized capabilities may not refuse to accept an
appropriate transfer from another hospital of an individual protected under EMTALA who has an
unstabilized EMC requiring these specialized capabilities. This requirement to accept an
appropriate transfer applies to any Medicare-participating hospital with specialized capabilities,
regardless of whether the hospital has a dedicated emergency department. In this case, if an
individual is found to have an EMC that requires specialized psychiatric capabilities, a
psychiatric hospital that participates in Medicare, and has capacity, is obligated to accept an
appropriate transfer of that individual. It does not matter if the psychiatric hospital does not have
a dedicated emergency department (CMS, 2010).

Medicaid will cover inpatient psychiatric admissions in an IMD for children under age 21 and
adults over age 64. However, for Medicaid recipients aged 21 to 64, Medicaid will only cover
the cost of such admissions as long as the inpatient psychiatric care is provided in a mental
health facility which has less than 17 beds or a medical facility whose primary purpose is not the
provision of treatment for mental disease.
Since psychiatric hospitals with 17 or more beds are required to admit these Medicaid patients
for stabilization of an emergency medical condition requiring psychiatric capabilities, and these
individuals are not commonly insured by other health plans, the EMTALA statute often amounts
to a mandate for psychiatric hospitals to render uncompensated care to these individuals.
B.1.3 Psychiatric Boarding
The Medicaid IMD exclusion, is purported to be a major factor contributing to the rate of
“psychiatric boarding” in hospital emergency departments (DHHS, 2008). Psychiatric boarding
occurs when an individual with a mental disorder is kept in a hospital emergency department for
several hours because appropriate mental health services are unavailable. Emergency
departments are required to provide treatment to stabilize or transfer these patients in accordance
with EMTALA. Thus, even if a psychiatric bed is available at an outside facility, the boarding
time may be extended when there is uncertainty as to whether a patient’s condition meets the
EMTALA definition of “stabilized” for transfer. The result is a disruption in the continuity of
care directed at the patient and the overall diminished quality of care provided to the patient at
the most critical period of the treatment episode.
In the case of more serious mental disorders requiring inpatient admission, boarding can include
improper placement, for instance, to a bed on a medical ward or in a skilled nursing facility,
when a psychiatric bed at the hospital or at a referral facility outside the hospital would be more
appropriate but is not available (DHHS, 2008). This situation becomes even more acute when
the individuals seen are suicidal or homicidal and present a danger to themselves or others. It
appears that these cases are most often referred to non-government psychiatric facilities
specializing in emergency conditions and short-term hospitalizations as more and more, the State
mental hospitals have limited their bed space to long-term resident admissions focusing on the
treatment of chronic psychiatric illnesses.
Although a comprehensive, nationwide evaluation of psychiatric boarding has not been
completed, there appears to be ample survey and anecdotal information to indicate that it is a
frequent and prevalent problem leading to serious consequences for psychiatric patients and
unnecessary hospital costs (DHHS, 2008).
B.1.4 Demonstration Legislation
Section 2707 of the Patient Protection and Affordable Care Act was enacted to implement a
demonstration to study the effects of allowing Medicaid payment for the inpatient stabilization of
a more serious mental health related problem. That is, to provide payment for inpatient
stabilization for psychiatric patients aged 21 to 64 who express suicidal or homicidal gestures
and are considered a danger to themselves or others.

By allowing coverage for inpatient admission for emergency psychiatric treatment otherwise
prohibited by the Medicaid IMD exclusion, the Demonstration may improve access to
appropriate psychiatric care, improve quality of care for Medicaid patients, and encourage
greater availability of inpatient psychiatric beds, thereby reducing the necessity of psychiatric
boarding.
Section 2707 of the Patient Protection and Affordable Care Act authorizes a 3-year Medicaid
emergency psychiatric demonstration project that permits non-government psychiatric hospitals
to receive Medicaid payment for providing EMTALA-related emergency services to Medicaid
recipients aged 21 to 64 who have expressed suicidal or homicidal thoughts or gestures and are
determined to be dangerous to themselves or others. Under the Demonstration, participating
States shall provide payment under the State Medicaid Plan to an institution for mental diseases
that is not publically owned or operated and is subject to the requirements of EMTALA.
B.1.5 Statutory Waiver Authority
Under section 2707 of the Patient Protection and Affordable Care Act, authority is provided to
waive requirements of titles XI and XIX of the Social Security Act, including the requirements
of sections 1902(a)(1) relating to state-wideness, and 1902(1)(10)(B) relating to comparability,
to the extent necessary to carry out this demonstration. The statute provides specific waiver
authority to allow State Medicaid payment and Federal matching funds for current IMD
exclusion qualifying services for States that participate in this Demonstration.
B.1.6 Demonstration Design
There are several requirements stated or implied by the statute that guide the implementation and
operation of the Demonstration. The following is an outline of the design of the Medicaid
Emergency Psychiatric Demonstration following the parameters set by the section 2707 statue.
B.1.7 State Solicitation and Selection
States seeking to participate in the Demonstration project will submit an application to CMS.
The application instructions, mailing address and due date are provided in a separate attachment
(see Appendix 1). States submitting applications to participate in the Demonstration will be
selected on a competitive basis based on their responses to the application subject areas. The
selection will also include factors necessary to achieve an appropriate national balance in the
geographic distribution of the Demonstration.
B.1.8 Selection Process
Application proposals will be provided to an application review panel composed of subject
matter experts that will determine the responsiveness of each proposal to the solicitation and
score each proposal based on pre-determined criteria. The rank order listing of panel
recommendations will be provided to the CMS Administrator for final selection. Two additional
factors will guide the final selection. First, in accordance with the statute, the selection of States
will be guided by an effort to achieve a balance in the geographic distribution of the

Demonstration. Second, the number of States selected for the Demonstration must necessarily
be limited by the amount of funding and so, based on anticipated patient census, the total number
of States selected will be limited so as to allow all selected States the opportunity to precipitate
in the demonstration for the full 3-year period.
B.1.9 Participating Institutions
Institutions selected by a participating State for inclusion in the Demonstration must meet all of
the following criteria:
(1) An institution for mental diseases, defined specifically as a hospital, nursing facility, or other
institution of more than 16 beds, that is primarily engaged in providing diagnosis, treatment, or
care of persons with mental diseases, including medical attention, nursing care, and related
services {SSA section 1905(i), 42 USC 1395(i))} and, in general, meeting the requirements of
Section 4390 of the State Medicaid Manual (see Appendix 2).
(2) An institution subject to the requirements of the Emergency Medical Treatment and Active
Labor Act or EMTALA {SSA section 1867, 42 U.S.C. 1395d}, i.e., a Medicare participating
institution having an emergency department.
(3) Not be publicly owned or operated.
Note: Some discussion should be made here about the requirement in the statute that payment
can be made only to institutions for mental disease that are subject to EMTALA. Paraphrasing
section 2707 of the Patient Protection and Affordable Care Act, it stipulates that payment will be
made under the Demonstration to institutions for medical diseases that are not publically owned
or operated and are subject to the requirements of the Emergency Medical Treatment and Active
Labor Act for the provision of medical assistance to Medicaid eligible individuals aged 21 to 64
requiring stabilization of an emergency medical condition. As mentioned in the section above on
EMTALA, the Medicare State Operational Manual interpretive guidelines state that EMTALA
applies to a psychiatric facility in those instances in which it accepts transfer of a patient needing
stabilization of an emergency medical condition that requires the specialized psychiatric
capabilities of the psychiatric facility, even though the facility has no emergency department.
Thus, all Medicare- participating hospitals that are institutions for mental disease are subject to
EMTALA in the way and manner stipulated in section 2707 and thus also meet the requirement
to receive payment under the Medicaid Emergency Psychiatric Demonstration.
This interpretation is expanded to walk-in emergency admissions by a response entered into the
final rule for the application of EMTALA published in 1994 (DHHS/HCFA/OIG, 1994) which
states:
“…many psychiatric hospitals do not have organized emergency departments. However, many
of these facilities offer 24-hour psychiatric services on a walk-in basis for persons who are not
patients of the hospital. Although these hospitals do not have organized emergency departments,
they are presenting themselves to the public as providing care for psychiatric emergencies. We
believe this type of facility must comply with the requirements of section 1867 of the Act and

render emergency care within their capability to do so (or provide for a transfer in accordance
with section 1867(c) of the Act).”
B.1.10 Patient Eligibility Criteria
Individuals eligible for the provision of medical assistance available under the Demonstration are
those meeting all of the following criteria:
(1) Aged 21 to 64;
(2) Eligible for medical assistance under the State plan; and
(3) Require such medical assistance for services to stabilize an emergency medical condition
where the individual expresses suicidal or homicidal thoughts or gestures and is determined
dangerous to self or others.
The Demonstration is open only to individuals meeting these criteria who receive medical
assistance under the State’s Medicaid fee-for-service program and includes individuals eligible
by virtue of the authority of section 1115 of the Social Security Act. Also eligible, for inclusion
in this Demonstration, are individuals in managed care plans whose eligibility and payment for
inpatient psychiatric services is Medicaid fee-for-service (i.e., carved out).
The State may extend participation in the Demonstration to eligible individuals throughout the
State or limit participation to individuals residing in one or more specific regions.
B.1.11 Demonstration Management
CMS is responsible for overseeing the implementation, management and evaluation of the
Demonstration. Each selected State, and participating institutions within the State, is a
Demonstration site. The State is responsible for overseeing the implementation and operation of
the Demonstration at the participating institutions, verifying patient eligibility and assuring that
appropriate services are provided within the parameters set by the section 2707 statute.
B.1.12 Patient Administration
As stated in the statute, each participating State shall establish a process for how it will ensure
that institutions participating in the Demonstration will determine whether or not Demonstration
patients have been stabilized, the process to be initiated by the State prior to the third day of an
inpatient stay. The State is responsible for managing the provision of services for the
stabilization of the medical emergency through utilization review, authorization, or management
practices, or the application of medical necessity and appropriateness criteria applicable to
behavior health.
B.1.13 Payment to Participating Institutions

The State Medicaid Agency will provide Medicaid payment to participating institutions for
services provided to eligible patients under the Demonstration.
B.1.14 CMS Payment to States
The CMS will pay each quarter, to each participating State, an amount equal to the Federal
medical assistance percentage of expenditures in the quarter for medical assistance paid to
participating institutions for inpatient services provided under this Demonstration.
Funds shall be allocated to eligible States on the basis of criteria, including availability of funds
and predicted patient admissions and costs. State Medicaid Agencies are advised that once the
Federal funding limit is reached, states will not receive payment of the Federal share of any
outstanding Medicaid expenditures.
B.1.15 Cost Estimate and Mechanism to Limit, Reallocate and Stop Expenditures
Section 2707 of the Patient Protection and Affordable Care Act requires that payment to States to
reimburse the Federal share of Medicaid costs under the Demonstration shall not exceed $75
million. Although the statute authorizing the Demonstration has appropriated $75 million to pay
the Federal share of Medicaid payments provided under the Demonstration, the statute allows for
the use of these funds to pay Federal administrative and evaluation costs for the Demonstration.
Assuming that these costs may be as much as $8.5 million, the Federal share limit would be
$66.5 million. Participating States will be advised of the spending limitation and informed that
once the spending limit is reached, further Federal matching payments will stop and the State
will be responsible for the total cost of the Medicaid IMD excluded services.
A mechanism is needed to track predicted and observed payments, to help CMS establish
funding limits for each State and assist CMS in providing information to the States when they are
near their funding limit. This mechanism (See Attachment B) will help CMS to ensure that the
Federal Medicaid reimbursement is halted before the total funding limit is reached.
As part of their Demonstration application, States will be required to provide the names of the
psychiatric facilities they selected to participate in the Demonstration with information about the
number of psychiatric beds, cost per bed per day, average length of stay, the estimated number of
emergency psychiatric adult Medicaid patients expected to be admitted each year at these
facilities, and the estimated Medicaid costs. At the beginning of the Demonstration, these
figures and estimates will be used to determine the 3-year limitation for the number of patients
and Federal share payments for each State. These estimates can be updated each quarter based
on the actual claims submitted by the States. In this way, both CMS and the States will be able
to assess their cumulative expenditures relative to the Demonstration funding limitation.
As the cost estimate is re-calibrated each quarter based on actual patient census and cost
experience, a mechanism can be used to reallocate spending limits to distribute funds equitably
across the States. As an example, in Attachment B, Table 1, the estimated 3-year Federal share
amount (column 6) is divided by the average cost per day per bed (column 2) to yield an estimate
of the 3-year total number of inpatient days for each State (column7). The next column in Table
1 lists the ratio per-State of the inpatient day total to the total across all States or each State’s

proportion to the whole (column 8). Multiplying these percentages against the $66.5 million
Demonstration spending limit yields an apportioned 3-year Federal match spending limit for
each State (column 9). Dividing that amount by the cost per bed per day provides the
corresponding apportioned 3-year inpatient day limit (column 10).
During the Demonstration, some States may experience higher or lower than expected patient
admissions. If the initial spending limits remain, some States could reach their funding limits
early and end participation, while others continue for 3-years without reaching their funding
limits. Thus it would be possible to have both left over funds and also States that ended
participation for lack of funds. The mechanism to reallocate expenditure limits will ensure the
equitable distribution of Federal matching funds, give each State the fullest opportunity to
participate in the Demonstration and help to inform CMS and the States as to when funding will
end.
B.2

Purpose and Use of the Information

B.2.1 State Application Proposal
The statute requires that a State seeking to participate in this Demonstration project shall submit
an application that includes such information, provisions, and assurances necessary to assess the
State’s ability to conduct the Demonstration as compared with other State applicants.
B.2.2 State Reporting
As a condition for receiving payment under this Demonstration, a State shall be responsible for
collecting and reporting information to the CMS about the conduct of the Demonstration in the
State for the purposes of providing Federal oversight and the evaluation of the Demonstration.
This information will include regular reports by institution about patient admissions and
discharges, their diagnoses, time to stabilization, and lengths of inpatient stay. The State is also
required to cooperate with the CMS evaluation team and assist in the collection of information
necessary to evaluate the Demonstration.
B.2.3 CMS Evaluation
The CMS is required to conduct an independent evaluation to determine the impact of the
Demonstration on the functioning of the health and mental health service system within the
participating States and individuals enrolled in the Medicaid program. The evaluation shall
include: (1) An assessment of the Demonstration in relation to access to inpatient mental health
services under the Medicaid program including average lengths of inpatient stays and emergency
room visits; (2) An assessment of discharge planning by participating hospitals; (3) An
assessment of the impact of the Demonstration project on the costs of the full range of mental
health services (including inpatient, emergency and ambulatory care); and (4) An analysis of the
percentage of consumers with Medicaid coverage who are admitted to inpatient facilities as a
result of the Demonstration project as compared to those admitted to these same facilities
through other means. CMS is also required to submit to Congress a recommendation as to

whether the Demonstration project should be continued after December 31, 2013, and expanded
on a national basis.
B.3

Use of Information Technology

States currently electronically collect the required information for this Demonstration and will
submit information electronically to CMS. The information collection will not require a
signature from the participating States.
B.4

Duplication of Efforts

This information collection does not duplicate any other effort and the information cannot be
obtained from any other source.
B.5

Small Businesses

This information collection does not impact small businesses or other small entities.
B.6

Less Frequent Collection

The statute requires that a State seeking to participate in this Demonstration project shall submit
an application that includes such information, provisions, and assurances necessary to assess the
State’s ability to conduct the Demonstration as compared with other State applicants.
B.7

Special Circumstances

There are no special circumstances for this information collection.
B.8

Federal Register/Outside Consultation

The information collection will only occur once in the application proposal voluntarily submitted
by State Medicaid Directors. The emergency Federal Register notice with 25-day comment
period published on April 8, 2011.
B.9

Payments/Gifts to Respondents

This Demonstration will not require payments/gifts to respondents.
B.10

Confidentiality

No assurance of confidentiality is provided to the participating States, but it is CMS’ policy to
apply confidentiality for all individual identifying information.
B.11

Sensitive Questions

This Demonstration does not include surveys or individual respondents.

B.12

Burden Estimates (Hours & Wages)

This Demonstration involves the voluntary submittal of one application proposal from a
maximum of 54 State Medicaid Directors. The application proposal submittal will only occur
once. CMSs estimate is 40 hours and wages totaling $1,600 for States to gather necessary
information and to write the application proposal.
B.13

Capital Costs

This Demonstration does not involve capital costs.
B.14

Cost to Federal Government

There is no cost to the Federal government for this Demonstration.
B.15

Changes to Burden

There are no changes to burden for this Demonstration.
B.16

Publications/Tabulation Dates

There are no publications/tabulation dates for this Demonstration.
B.17

Expiration Date

This Demonstration does not include a survey or form.
B.18

Certification Statement

There are no exceptions to the certificate statement identified in Item 19, “Certificate for
Paperwork Reduction Act Submissions,” of OMB Form 83-I.

References

42 U.S.C. §1396d , United States Code, Title 42: The Public Health and Welfare, Section 1396d,
Definitions, U.S Government Printing Office, January 2003.
42 U.S.C. §1395dd, United States Code, Title 42: Section 1395dd, Examination and Treatment
for Emergency Medical Conditions and Women in Labor, [Social Security Act, Section 1867]
Centers for Medicare & Medicaid Services, Medicare State Operations Manual, Appendix V
Interpretive Guidelines – Responsibilities of Medicare Participating Hospitals in Emergency
Cases, Revision 60, July 16, 2010.
http://www.cms.gov/manuals/Downloads/som107ap_v_emerg.pdf
DHHS, ASPE, A Literature Review: Psychiatric Boarding, David Bender, Nalini Pande, Michael
Ludwig, The Lewin Group, Office of Disability, Aging and Long-Term Care Policy, Office of
the Assistant Secretary for Planning and Evaluation, US DHHS, October 28, 2008 contract
number HHS-100-03-0027.
DHHS/HCFA and OIG, Medicare Program; Participation in CHAMPUS and CHAMPVA,
Hospital
Admissions for Veterans, Discharge Rights Notice, and Hospital Responsibility for Emergency
Care, 42 CFR Parts 405 and 489 and 42 CFR Part 1003, Federal Register, June 22, 1994, Sec.
482.12(f),Page 30.
Geller, Jeffrey L., Excluding Institutions for Mental Diseases From Federal Reimbursement for
Services: Strategy or Tragedy? Psychiatric Services, Volume 51, pp. 1397-1403, November
2000.
Rosenbaum, Sara, Teitelbaum, Joel, and Mauery, D. Richard, An Analysis of the Medicaid IMD
Exclusion, Center for Health Services Research and Policy, Department of Health Policy,
George Washington University School of Public Health and Health Services, December 19,
2002,
http://www.gwumc.edu/sphhs/departments/healthpolicy/CHPR/downloads/behavioral_health/rep
orts/IMD%20Report%201202.pdf
Torrey, E. Fuller, Out of the Shadows: Confronting America's Mental Illness Crisis, John Wiley
& Sons, New York, 1997.
United States General Accounting Office, EMERGENCY CARE: EMTALA: Implementation
and Enforcement Issues, Report to Congress, GAO-01-747, June 2001.

ATTACHMENT A
LEGISLATIVE LANGUAGE
SEC. 2707. MEDICAID EMERGENCY PSYCHIATRIC DEMONSTRATION PROJECT
(a) AUTHORITY TO CONDUCT DEMONSTRATION PROJECT.—The Secretary of Health
and Human Services (in this section referred to as the ‘‘Secretary’’) shall establish a
demonstration project under which an eligible State (as described in subsection (c)) shall provide
payment under the State Medicaid plan under title XIX of the Social Security Act to an
institution for mental diseases that is not publicly owned or operated and that is subject to the
requirements of section 1867 of the Social Security Act (42 U.S.C. 1395dd) for the provision of
medical assistance available under such plan to individuals who—
(1) have attained age 21, but have not attained age 65;
(2) are eligible for medical assistance under such plan; and
(3) require such medical assistance to stabilize an emergency medical condition.
(b) STABILIZATION REVIEW.—A State shall specify in its application described in
subsection (c)(1) establish a mechanism for how it will ensure that institutions participating in
the demonstration will determine whether or not such individuals have been stabilized (as
defined in subsection (h)(5)). This mechanism shall commence before the third day of the
inpatient stay. States participating in the demonstration project may manage the provision of
services for the stabilization of medical emergency conditions through utilization review,
authorization, or management practices, or the application of medical necessity and
appropriateness criteria applicable to behavioral health.
(c) ELIGIBLE STATE DEFINED.—
(1) IN GENERAL.—An eligible State is a State that has made an application and has been
selected pursuant to paragraphs (2) and (3).
(2) APPLICATION.—A State seeking to participate in the demonstration project under this
section shall submit to the Secretary, at such time and in such format as the Secretary requires,
an application that includes such information, provisions, and assurances, as the Secretary may
require.
(3) SELECTION.—A State shall be determined eligible for the demonstration by the Secretary
on a competitive basis among States with applications meeting the requirements of paragraph
(1). In selecting State applications for the demonstration project, the Secretary shall seek to
achieve an appropriate national balance in the geographic distribution of such projects.
(d) LENGTH OF DEMONSTRATION PROJECT. — The demonstration project established
under this section shall be conducted for a period of 3 consecutive years.
(e) LIMITATIONS ON FEDERAL FUNDING.—
(1) APPROPRIATION.—
(A) IN GENERAL.—Out of any funds in the Treasury not otherwise appropriated, there is
appropriated to carry out this section, $75,000,000 for fiscal year 2011.
(B) BUDGET AUTHORITY. — Subparagraph (A) constitutes budget authority in advance of
appropriations Act and represents the obligation of the Federal government to provide for the
payment of the amounts appropriated under that subparagraph.
(2) 5-YEAR AVAILABILITY.—Funds appropriated under paragraph (1) shall remain available
for obligation through December 31, 2015.

(3) LIMITATION ON PAYMENTS. — In no case may—
(A) the aggregate amount of payments made by the Secretary to eligible States under this section
exceed $75,000,000; or
(B) payments be provided by the Secretary under this section after December 31, 2015.
(4) FUNDS ALLOCATED TO STATES.—Funds shall be allocated to eligible States on the
basis of criteria, including a State’s application and the availability of funds, as determined by
the Secretary.
(5) PAYMENTS TO STATES. — The Secretary shall pay to each eligible State, from its
allocation under paragraph (4), an amount each quarter equal to the Federal medical assistance
percentage of expenditures in the quarter for medical assistance described in subsection (a). As a
condition of receiving payment, a State shall collect and report information, as determined
necessary by the Secretary, for the purposes of providing Federal oversight and conducting an
evaluation under subsection (f)(1).
(f) EVALUATION AND REPORT TO CONGRESS.—
(1) EVALUATION.—The Secretary shall conduct an evaluation of the demonstration project in
order to determine the impact on the functioning of the health and mental health service system
and on individuals enrolled in the Medicaid program and shall include the following:
(A) An assessment of access to inpatient mental health services under the Medicaid program;
average lengths of inpatient stays; and emergency room visits.
(B) An assessment of discharge planning by participating hospitals.
(C) An assessment of the impact of the demonstration project on the costs of the full range of
mental health services (including inpatient, emergency and ambulatory care).
(D) An analysis of the percentage of consumers with Medicaid coverage who are admitted to
inpatient facilities as a result of the demonstration project as compared to those admitted to these
same facilities through other means.
(E) A recommendation regarding whether the demonstration project should be continued after
December 31, 2013, and expanded on a national basis.
(2) REPORT. — Not later than December 31, 2013, the Secretary shall submit to Congress and
make available to the public a report on the findings of the evaluation under paragraph (1).
(g) WAIVER AUTHORITY.—
(1) IN GENERAL.—The Secretary shall waive the limitation of subdivision (B) following
paragraph (28) of section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) (relating to
limitations on payments for care or services for individuals under 65 years of age who are
patients in an institution for mental diseases) for purposes of carrying out the demonstration
project under this section.
(2) LIMITED OTHER WAIVER AUTHORITY.—The Secretary may waive other requirements
of titles XI and XIX of the Social Security Act (including the requirements of sections
1902(a)(1) (relating to state wideness) and 1902(1)(10)(B) (relating to comparability)) only to
extent necessary to carry out the demonstration project under this section.
(h) DEFINITIONS. — In this section:
(1) EMERGENCY MEDICAL CONDITION.—The term ‘‘emergency medical condition’’
means, with respect to an individual, an individual who expresses suicidal or homicidal thoughts
or gestures, if determined dangerous to self or others.
(2) FEDERAL MEDICAL ASSISTANCE PERCENTAGE.—The term ‘‘Federal medical
assistance percentage’’ has the meaning given that term with respect to a State under section
1905(b) of the Social Security Act (42 U.S.C. 1396d(b)).

(3) INSTITUTION FOR MENTAL DISEASES. — The term ‘‘institution for mental diseases’’
has the meaning given to that term in section 1905(i) of the Social Security Act (42 U.S.C.
1396d(i)).
(4) MEDICAL ASSISTANCE. — The term ‘‘medical assistance’’ has the meaning given that
term in section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)).
(5) STABILIZED.—The term ‘‘stabilized’’ means, with respect to an individual, that the
emergency medical condition no longer exists with respect to the individual and the individual is
no longer dangerous to self or others.
(6) STATE.—The term ‘‘State’’ has the meaning given that term for purposes of title XIX of the
Social Security Act (42 U.S.C. 1396 et seq.).

ATTACHMENT B
COST ESTIMATE AND MECHANISM TO LIMIT, REALLOCATE AND STOP
EXPENDITURES
Demonstration Cost Estimate
The Medicaid Emergency Psychiatric Demonstration mandated under section 2707 of the
Affordable Care Act authorizes payment for services in settings that are currently not covered
under Medicaid. Congress appropriated $75 million for the conduct of the Demonstration and to
pay the Federal portion of Medicaid payment for services provided under the Demonstration. As
this is only the Federal portion of the Medicaid payment, States participating in the
Demonstration will be expected to pay their portion of the Medicaid payment for these additional
services, totaling perhaps an additional $50 million depending on the Federal matching rate, plus
the additional administrative costs in implementing the Demonstration.
Although not specifically stated, the statute implies that savings may be achieved under
Medicaid by reducing Medicaid expenses associated with less appropriate care in lieu of
inpatient admission including those associated with emergency department psychiatric boarding
at general hospitals. However, specific estimates of these costs for Medicaid patients age 21 to
64, or for Medicaid patients in general, are not available in the literature.
Important in developing an estimate of the number of eligible patients and cost of providing
Medicaid payment for this population is some estimate of the number of Medicaid eligible
patients aged 21 to 64 admitted to psychiatric facilities, the average length of stay for these
admissions, and the cost per day. The National Association of Psychiatric Health Systems
(NAPHS) commissioned an analysis in 2005 to estimate the budgetary impact of modifying the
Medicaid institution for mental diseases (IMDs) exclusion. The analysis was performed by the
Moran Company and was entitled “Estimating the Budgetary Impact of Modifying the Medicaid
‘IMD Exclusion’ to Cover Emergency Care: An Update to the 2006-2015 CBO Baseline.” To
obtain specific information about the target population, the analysis included a survey of 40 nongovernment psychiatric institutions from among the membership of the NAPHS. The findings
from the analysis revealed that approximately 45.5 percent of all psychiatric inpatient days for
Medicaid enrollees were the result of emergency admissions required under the Emergency
Medical Treatment and Active Labor Act of 1986 (EMTALA). Of these, 15.5 percent were
uncompensated days for Medicaid enrollees aged 21 to 64. The authors reported that this
translated into an average of 4.3 uncompensated EMTALA (emergency admission) days for
adult Medicaid entitlees per licensed psychiatric bed. Based on this report, multiplying the
number of beds in a psychiatric facility by 4.3 will yield an estimate of the number of uncovered
Medicaid IMD exclusion days at that facility during a year. Thus, to provide an example, if a
psychiatric hospital has 85 beds, the total number of uncovered EMTALA days would be 85
multiplied by 4.3 or 365.5 uncovered days for the year.
The 2008 NAPHS Annual Survey reported that among its membership of private psychiatric
hospitals, the average psychiatric impatient length of a stay for adult Medicaid patients is 8 days.
Using the example above and dividing the total number of uncovered days by the average length

of stay yields an estimate of the number of uncovered Medicaid patients: that is, 365.5 uncovered
days divided by 8 equals 45.7 or approximately 46 patients. Thus, one can estimate that for an
85-bed inpatient psychiatric facility there will be approximately 46 uncovered EMTALA
Medicaid admissions during the year.
A list of Medicare-certified psychiatric facilities with 17 or more beds was obtained from the
Center for Medicaid, CHIP and Survey & Certification (CMCS). These data are from the
CASPER Reporting System. State and other government operated facilities were deleted from
the list. The data reported in the list included the number of beds and the average payment per
bed per day at each facility. Since there is a limit to Demonstration expenditures, it was decided
to construct estimates using information from a selection of States most likely to submit
applications. States considered most likely to submit an application, at this writing, were those
where the Medicaid director has expressed some interest in participating in the Demonstration
and/or States which previously conducted a section 1115 Medicaid waiver program that waived
the Medicaid IMD exclusion 1. In all, 20 States were identified to develop the estimate: Arizona,
California, Connecticut, District of Columbia, Delaware, Georgia, Louisiana, Massachusetts,
Maryland, Maine, Missouri, North Carolina, North Dakota, New Jersey, New York, Oregon,
Rhode Island, Tennessee, Texas, and Vermont.
Below, in Table 1, each State is listed for the average Medicaid psychiatric inpatient per bed per
day cost (column 2) and the estimated number of Medicaid IMD exclusion patients per year
(column 3) using the aforementioned calculation method 2. Multiplying the average per bed per
day cost by the estimated number of patients and this product by 3 years yields the estimated
total Medicaid cost for the 3 years of the Demonstration (column 4). Multiplying this total by
the current Federal matching share percentage (column 5) yields an estimate of the total Federal
matching amount needed over 3 years (column 6). Thus, if all 20 of these States were included
in the Demonstration, the sum total estimated Federal matching payment needed would be over
$72 million.
Mechanism to Limit, Reallocate and Stop Expenditures
Section 2707 of the Affordable Care Act requires that payment to States to reimburse the Federal
share of Medicaid costs under the Demonstration shall not exceed $ 75 million. Although the
statute authorizing the Demonstration has appropriated $75 million to pay the Federal share of
Medicaid payments provided under the Demonstration, the statute allows for the use of these
funds to pay Federal administrative and evaluation costs for the Demonstration. Assuming that
these costs may be as much as $8.5 million, the Federal share limit would be $66.5 million.
Participating States will be advised of the spending limitation and informed that once the
spending limit is reached, further Federal matching payments will stop and the State will be
responsible for the total cost of the Medicaid IMD excluded services.
CMS discontinued the use of the 1115 waiver program to allow States to conduct
demonstrations that waived the requirements of the Medicaid IMD exclusion, the last of 9 such
State demonstrations was phased out in 2009.
2
Per bed per day costs were updated for years 2011 and for years 2012 and 2013 using the
average market basket inflation rate for Medicare inpatient psychiatric services (Federal
Register, Vol. 76, No. 18, 27Jan11, Proposed Rule.)
1

Referring to Table 1, if all 20 States, in this example, were included in the Demonstration and if
all of the estimates are correct, the 3-year total Federal share amount would exceed the
Demonstration $66.5 million funding limit. A mechanism is needed to track predicted and
observed payments to help CMS, establish funding limits for each State and assist CMS in
providing information to the States when they are near their funding limit. This mechanism will
help CMS to ensure that the Federal Medicaid reimbursement is halted before the total funding
limit is reached.
As part of their Demonstration application, States will be required to provide the names of the
psychiatric facilities they selected to participate in the Demonstration with information about the
number of psychiatric beds, cost per bed per day, average length of stay, the estimated number of
emergency psychiatric adult Medicaid patients expected to be admitted each year at these
facilities, and the estimated Medicaid costs. At the beginning of the Demonstration, these
figures and estimate will be used to determine the 3-year limitations for the number of patients
and Federal share payments for each State. These estimates can be updated each quarter based
on the actual claims submitted by the States. In this way, both CMS and the States will be able
to assess their cumulative expenditures relative to the Demonstration funding limitation.
As the cost estimate is re-calibrated each quarter based on actual patient census and cost
experience, a mechanism can be used to reallocate spending limits to distribute funds equitably
across the States. Referring again to Table 1, the estimated 3-year Federal share amount (column
6) is divided by the average cost per day per bed (column 2) to yield an estimate of the 3-year
total number of inpatient days for each State (column 7). The next column in Table 1 lists the
ratio per-State of the inpatient day total to the total across all States or each State’s proportion to
the whole (column 8). Multiplying these percentages against the $66.5 million Demonstration
spending limit yields an apportioned 3-year Federal match spending limit for each State (column
9). Dividing that amount by the cost per bed per day provides the corresponding apportioned 3year inpatient day limit (column 10).
During the Demonstration, some States may experience higher or lower than expected patient
admissions. If the initial spending limits remain, some States could reach their funding limits
early and end participation, while others continue for 3-years without reaching their funding
limits. Thus it would be possible to have both left over funds and also States that ended
participation for lack of funds. The mechanism to reallocate expenditure limits will ensure the
equitable distribution of Federal matching funds, give each State the fullest opportunity to
participate in the Demonstration, and help to inform CMS and the States as to when funding will
end.

TABLE 1
Estimated Medicaid Payment (Total, State and Federal) Over 3 Years
And an Example of a Mechanism to Set Spending Limits
1

2
Avg.
$ per
bed
per
day*

3
Est.
IMD
Pts in
State

4
Estimated
3-Year Total
Medicaid
Dollars.*

5
Fed
Share
%

AZ

$713

197

$3,377,601

66%

CA

$716

1,210

$20,785,821

CT

$700

130

$2,176,441

6
Est. 3-Year
Fed Share
Dollars

7
Est. 3Year
Num
Inpatient
Days per
State

8
State %
of Total
# Pt.
Days

9
Apportioned
3-Year
Federal
Share Limit

10
Apportioned
3-Year
Inpatient Day
Limit

$2,229,217

4,734

2.62%

$1,743,125

4,372

50%

$10,392,911

29,038

16.08%

$10,691,486

26,815

50%

$1,088,221

3,109

1.72%

$1,144,668

2,871

ST

DC

$700

108

$1,806,175

70%

$1,264,323

2,580

1.43%

$949,932

2,382

DE

$742

109

$1,934,066

53%

$1,025,055

2,606

1.44%

$959,431

2,406

GA

$698

517

$8,647,723

65%

$5,621,020

12,397

6.86%

$4,564,424

11,448

LA

$690

585

$9,689,248

64%

$6,201,119

14,048

7.78%

$5,172,381

12,973

MA

$707

588

$9,984,558

50%

$4,992,279

14,113

7.81%

$5,196,129

13,032

MD

$690

401

$6,641,403

50%

$3,320,702

9,623

5.33%

$3,543,247

8,887

ME

$742

108

$1,914,917

64%

$1,225,547

2,580

1.43%

$949,932

2,382

MO

$701

336

$5,652,587

63%

$3,561,129

8,063

4.46%

$2,968,538

7,445

NC

$725

218

$3,798,984

65%

$2,469,339

5,237

2.90%

$1,928,362

4,836

ND

$742

87

$1,541,508

60%

$924,905

2,077

1.15%

$764,695

1,918

NJ

$690

465

$7,703,372

50%

$3,851,686

11,159

6.18%

$4,108,457

10,304

NY

$686

670

$11,021,145

50%

$5,510,572

16,073

8.90%

$5,918,077

14,843

OR

$742

42

$746,818

63%

$470,495

1,006

0.56%

$370,474

929

RI

$700

95

$1,598,465

53%

$847,187

2,283

1.26%

$840,690

2,109

TN

$691

236

$3,915,071

66%

$2,583,947

5,663

3.14%

$2,085,101

5,230

TX

$695

1,346

$22,438,126

61%

$13,687,257

32,302

17.88%

$11,893,150

29,829

VT

$658

80

$1,264,588

59%

$746,107

1,922

1.06%

$707,699

1,775

7,526

$126,638,619

$72,013,017

180,613

100%

$66,500,000

166,786

Total

Note: Products and sums are rounded to nearest whole number.
* 1 to 3-year cost calculations updated by a 2.8% avg. inflation rate (Federal Register, Vol. 76, No. 18, 27Jan11)
Total Federal
Avg. Cost
Avg. Fed $ Estimated total number of patient days that
Dollars
Per Pt Day
per Pt day
can be paid for under Demonstration
(for States
(for States
Available
listed)
listed)
$66,500,000

$701

$399

166,786

APPENDIX 2
Institutions for Mental Diseases
Section 4390 of the State Medicaid Manual (SMM) lists ten factors to be used cumulatively to
determine the facility's overall character as an institution for mental diseases (IMD):
1. The facility is licensed as a psychiatric facility for the care and treatment of individuals
with mental diseases;
2. The facility advertises or holds itself out as a facility for the care and treatment of
individuals with mental diseases;
3. The facility is accredited as a psychiatric facility by the JCAH;
4. The facility specializes in providing psychiatric/psychological care and treatment. This
may be ascertained through review of patients' records. It may also be indicated by the
fact that an unusually large proportion of the staff has specialized
psychiatric/psychological training or by the fact that a large proportion of the patients are
receiving psychopharmacological drugs;
5. The facility is under the jurisdiction of the State's mental health authority;
6. More than 50 percent of all the patients in the facility have mental diseases which require
inpatient treatment according to the patients' medical records;
7. A large proportion of the patients in the facility have been transferred from a State mental
institution for continuing treatment of their mental disorders;
8. Independent Professional Review teams report a preponderance of mental illness in the
diagnoses of the patients in the facility (42 C.F.R. 456.1);
9. The average patient age is significantly lower than that of a typical nursing home;
10. Part or all of the facility consists of locked wards.