Changes in Residential Substance Use Treatment Service Access Resulting From Recent Medicaid Section 1115 Waivers
Abstract
Medicaid stands to play a significant role in addressing the needs of individuals with a substance use disorder; however, many state Medicaid programs do not cover a full continuum of care. A growing number of states are taking advantage of Section 1115 demonstration waivers to augment their covered benefits, including experimenting with financing residential treatment services that previously were not eligible for reimbursement. Concerns over potential overuse of these services or increased spending due to this service expansion may be tempered by complementary delivery system transformation focused on reining in costs and improving care quality.
HIGHLIGHTS
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Twelve states received a Section 1115 waiver requesting exemption from the IMD exclusion to allow their Medicaid programs to reimburse residential treatment services.
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Pairing service expansion with delivery system transformation may best ensure the appropriate and efficient use of IMD treatment services for individuals with a substance use disorder.
Despite Medicaid expansions resulting in health care coverage for millions of individuals with a substance use disorder, covered benefits vary widely by state and are not comprehensive, which presents barriers to many seeking treatment for a substance use disorder. A full substance use continuum of care includes services that address the complete range of symptom severity: prevention and early intervention, outpatient, intensive outpatient, long-term and short-term residential, and inpatient medical management or detoxification (1). However, a recent survey of state Medicaid plans found that, although almost all states covered outpatient services, only 13 covered a full continuum of treatment services, with residential being the least likely service to be covered (2).
As one of the top payors of substance use treatment services, Medicaid stands to play a significant role in addressing the treatment needs of many individuals with a substance use disorder. Many states are experimenting with their benefits packages by applying for Section 1115 demonstration waivers that would allow them to finance services that have not previously been covered, such as residential treatment. Residential services refer to nonhospital settings that provide 24-hour monitoring; offer a safe, stable, supportive living environment; and deliver clinical services with varying degrees of intensity (3). According to the American Society of Addiction Medicine (ASAM), these services are appropriate for individuals who do not have physiological withdrawal symptoms or need support with acute general medical conditions but have other symptoms and problems (e.g., co-occurring psychiatric disorders, unstable housing) that are severe enough to warrant 24-hour care (4). The high prevalence of homelessness among individuals with a substance use disorder, frequent and repeated use of emergency department services, extended boarding in emergency rooms, and frequent readmission to the hospital all indicate unmet need for residential services.
Historically, public insurance has not covered residential services. One reason for this is a provision of the Social Security Act that prohibits Medicaid from financing services delivered in so-called institutions for mental disease (IMDs) or inpatient services for nonelderly adults in settings with more than 16 beds, commonly referred to as the IMD exclusion. Before the establishment of Medicaid in 1965, the United States went through a period of deinstitutionalization that was intended to shift federal dollars away from traditional inpatient, state-run hospital settings toward less restrictive community-based supports. States became the primary payors for residential services, which set a precedent for future federal programs. An unintended consequence of this shift was an incomplete continuum of care for individuals who might benefit from residential treatment services.
States that aimed to offer residential services had to find alternative means for doing so. Some state Medicaid programs have taken advantage of managed care “in lieu of” authority that enables use of Medicaid dollars for brief stays of no more than 15 days in IMDs for managed care Medicaid beneficiaries in lieu of other covered benefits, as long as such services are cost-effective and medically necessary. Other states have used federal substance abuse prevention and treatment block grant dollars to fund residential services. In addition, grassroots efforts to address the need for residential supports resulted in a patchwork of recovery residences. These residential settings (e.g., sober living homes, recovery homes, Oxford Houses) typically offer individuals a model of residential support based on 12-step principles. Although many individuals seek out these settings, their quality and effectiveness are understudied, and only a handful of states (Massachusetts, Florida, Delaware, Pennsylvania, Ohio) regulate or fund them.
Medicaid Section 1115 Demonstration Waivers
Description of state approaches.
Beginning in 2015, the Centers for Medicare and Medicaid Services (CMS) sent guidance to state Medicaid programs that encouraged them to apply for Section 1115 demonstration waivers aimed at improving their substance use treatment continuum. This guidance encouraged states to request exemption from the IMD exclusion, and as of August 2018, 12 states had received approval for this exemption: California, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, New Jersey, Utah, Vermont, Virginia, and West Virginia. [A table identifying how each of these states plans to incorporate residential services within its Medicaid continuum of care is available as an online supplement .]
All 12 states require that residential programs receive licensure through the state, and most proposed a phased implementation plan wherein different residential service levels are made available over the course of the demonstration. Only three states explicitly mention covered lengths of stay—90 days (California and Massachusetts) and 30 days (Maryland)—with options for extending based on medical necessity. This variance is likely due to changes in CMS guidance over time; earlier guidance required that applicants include explicit rules on day limits, whereas more recent guidance does not.
Many state waivers require that IMD providers offer medication-assisted treatment, either on site or via referral. This requirement was not previously standard practice, because of widespread adherence to strict abstinence-only models that have historically prohibited the use of these and other medications. Payment arrangements for residential services also vary by state. Some of the 12 states proposed to pay IMD providers using capitated per diem payments, whereas others, such as Indiana and Utah, proposed a bundled payment approach. No states were allowed to include room-and-board costs in their rate calculation, meaning that IMD providers can only be reimbursed for the clinical services that are delivered on site.
Implications for spending.
There is some concern that adding residential services to the list of covered benefits will result in unmanageable increases in spending for the Medicaid program. Using data from 26 states already implementing “in lieu of” policies, the U.S. Government Accountability Office (GAO) estimated the cost of financing IMD services nationally to be approximately $66 million over 5 years in both federal and state dollars (5). This is a small fraction of total annual Medicaid spending, which was $577 billion (combined federal and state contributions) in fiscal year (FY) 2017 alone (6).
Given that the GAO report is based on implementation of a narrower use of IMD services via the “in lieu of” policy, it is likely that this is an underestimate. However, in its report, the GAO noted that its estimate did not account for reduced utilization of other high-cost services, such as inpatient detoxification, due to increased utilization of residential services (5). Some evidence suggests that offering residential care can reduce hospital readmissions for individuals with a substance use disorder (7).
Role of delivery system transformation.
Pairing delivery system reform and service expansions could further reduce inappropriate utilization and rein in spending by directing patients to appropriate and necessary services. Some states have proposed such an approach. For example, California’s waiver includes the “Global Payment Program,” which promotes the use of global payments and care coordination interventions to improve the quality of care while reducing costs. Under this plan, public hospitals and their affiliated providers would enter into global payment agreements, realigning provider incentives to deliver appropriate, high-value care, including residential services when deemed medically necessary. The Whole Person Care Pilot, another provision of California’s waiver, is an intensive case management intervention targeted to address the needs of high-risk, high-need Medi-Cal beneficiaries, including those with a substance use disorder and/or who are homeless or at risk of homelessness. Teams of providers that include the local Medi-Cal health plan will focus on both the health and social determinants of participating patients.
Massachusetts’ waiver focused on increasing care coordination and the integration of behavioral health with general medical services by encouraging providers to enter into Medicaid accountable care organizations (ACOs). These ACOs must negotiate contracts with community-based behavioral health providers that will assist in the management of behavioral health services for ACO members. In some cases, the behavioral health provider is the primary care coordinator, particularly if a beneficiary is deemed to have severe behavioral health care needs. These ACOs will also seek to address the social determinants of health that may undermine the effectiveness of health care services. Beginning in January 2019, all ACOs will be required to have contracts with residential providers delivering IMD services for individuals with a substance use disorder. This arrangement is critical to achieving the goals of cost containment and quality improvement; ACOs are responsible for the costs of their attributed members, regardless of whether members receive care from an ACO member provider. ACOs that have contracts with residential providers will likely negotiate the price of services and be in alignment on medical necessity criteria.
Implementation Challenges and Solutions
These changes in Medicaid programs to enhance the use of residential treatment services reflect a significant step toward offering a full continuum of care for substance use disorders. However, states will face numerous challenges as they implement their proposed programs. Many newly eligible providers have not had third-party billing arrangements and may not have the infrastructure or technical capability to easily make this transition, particularly among smaller provider organizations (8). State agencies should offer training and technical assistance to these providers to ensure a smooth transition. Length-of-stay limits are determined by complicated formulas that meet CMS’s strict budget-neutrality requirements for Section 1115 demonstrations, rather than patient needs. States should monitor outcomes and amend stay limits as needed to ensure that the duration of care is appropriate.
Capacity issues may be a concern in the short term and in the long term. Although the full extent of unmet need for residential services is unknown, national estimates suggest that existing providers already operate at full or over capacity (9). As part of its waiver program, Utah proposed to conduct a capacity assessment for all covered levels of care, including residential services. Louisiana has explicit requirements for limits on travel distance to residential services, although these distances may still be prohibitive for many beneficiaries.
By incentivizing on-site clinical services, some residential providers will need to shift their approach to care. Those delivering low-intensity residential services (i.e., ASAM level 3.1) may have received per diem payments with fewer clinical requirements. This allowed them to offer supports that are typically not covered by a health plan (e.g., job training, social support, and employment coaching). These providers will need to add clinical services that are reimbursable, resulting in a shift in staffing patterns and possibly a reduction in nonreimbursable services. Similarly, these payments do not cover the cost of room and board, which may severely limit the number of new providers or beds that will become available. California included an option for counties to use Medicaid dollars to pay for bed days in sober living homes; however, no counties to date have opted in, partly because of these room-and-board payment restrictions.
Conclusions
Improving access to medically necessary residential treatment services for Medicaid beneficiaries with a substance use disorder could reduce utilization of costly inpatient and emergency department services. Pairing this service expansion with delivery system reforms that address costs and quality may further enhance cost savings and could mitigate the risk of misuse of residential services that originally motivated efforts to deinstitutionalize behavioral health services. Additionally, allowing providers to bill Medicaid for residential treatment services presents states with an opportunity to invest public dollars in emerging recovery support services that are not commonly considered billable services (e.g., recovery residences, recovery coaching).
State demonstration evaluations will offer a better understanding of how these innovations affect access to services, quality of care, and spending, as well as whether permanent changes to the IMD exclusion should be considered. Such change may already be forthcoming. The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), signed into law in October 2018, includes a provision that allows all state Medicaid programs to pay for IMD services for up to 30 days per calendar year until the end of FY 2023. Compared with state waivers, the changes in access to residential services included in the SUPPORT Act are more restrictive. Additionally, it is unclear whether the SUPPORT Act addresses potential issues of provider capacity or coordination of appropriate services across the continuum of care. An evaluation of these changes by CMS, coupled with those of state waivers, offers hope that future policy decisions regarding more permanent changes to IMD policy will be informed by these previous attempts.
Acknowledgments
The author thanks Haiden Huskamp, Ph.D., and Sharon Reif, Ph.D., for their comments and feedback on drafts of this column.
Supplementary Material
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References
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2.
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National Survey of Substance Abuse Treatment Facilities (N-SSATS): 2016. Data on Substance Abuse Treatment Facilities. Pub no (SMA) 17-5039. Rockville, MD, Substance Abuse and Mental Health Services Administration, 2017. https://www.samhsa.gov/data/report/national-survey-substance-abuse-treatment-facilities-n-ssats-2016-data-substance-abuse. Accessed Jan 7, 2019
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History
Received: 28 November 2018
Accepted: 13 December 2018
Published online: 13 February 2019
Published in print: May 01, 2019
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Funding Information
National Institute on Drug Abuse10.13039/100000026: P30- DA035772
This work was supported by funding from the Brandeis/Harvard NIDA Center to Improve System Performance of Substance Use Disorder Treatment (NIDA P30-DA035772).Ms. Miles reports no financial relationships with commercial interests.Metrics & Citations
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