Psychiatric News May 6, 2005
Volume 40 Number 9
© 2005 American Psychiatric Association
p. 23
Hospitals May Have to Repay Funds Spent on Children
Kate Mulligan
Federal auditors are requesting the return of Medicaid money spent on
health services for children hospitalized because of mental illness.
A new interpretation of the Institutions for Mental Diseases (IMD)
exclusion challenges the use of federal Medicaid dollars for the
nonpsychiatric care of children in psychiatric institutions.
The original IMD exclusion prohibited the use of federal funds for services
provided in IMDs with more than 16 beds to people under age 65. In 1972,
however, Congress passed an exception to that exclusion permitting those under
age 21 to receive "inpatient psychiatric hospital services."
The exception appears in the Social Security Amendments of 1972 (Public Law
92-603), which became effective on January 1, 1973.
Rep. Henry Waxman (D-Calif.) and Sen. Susan Collins (R-Maine) wrote federal
officials at the Centers for Medicare and Medicaid Services (CMS) and the
Department of Health and Human Services to protest audit results that would
require Virginia, New York, Texas, New Jersey, and California to repay $10
million that those states spent on medical services for institutionalized
children.
They cited a three-part definition of "inpatient psychiatric hospital
services" that does not preclude funding for medical services. They also
cited court cases and administrative rulings that have upheld the right of
children to receive medical services while in IMDs.
Waxman and Collins contended that the audits rest on a "flawed
interpretation of the law."
The statute exempts "inpatient psychiatric hospital services"
for children. Federal officials dropped the word "hospital" from
that phrase when they conducted the audits and ruled that children are not
entitled to medical services while in IMDs.
Waxman and Collins also pointed out that the audits have taken place during
a time of crisis in access to mental health services for children.
Mark Covall, executive director of the National Association of Psychiatric
Health Systems, told Psychiatric News that his organization is
working with Waxman's staff in an effort to change the interpretation of the
ruling. Federal officials had not responded to the letter by press time.
Selby Jacobs, M.D., chair of APA's Committee on Public Funding for
Psychiatric Services, placed the new ruling in the broad context of
governmental responsibility for the financing of health care.
"In the period between 1991 and 2001, Medicaid grew to be the largest
single payer for psychiatric services in the United States, accounting for 26
percent of total expenditures. Perhaps as a result, the program has become a
target for cost control by federal agencies, as part of the ongoing
cost-shifting battle between the federal and state governments.
"Federal strategies to cut the Medicaid budget range from legislative
initiatives, such as block grants, to administrative actions, such as these
audits of medical care for children in psychiatric hospitals. The auditors'
redefinition of services covered is destructive to the care of children with
serious emotional disorders in freestanding psychiatric hospitals and occurs
at a time of crisis in the availability of psychiatric beds, particularly for
children."
In November 2004, APA's Assembly voted to urge APA to work to terminate the
IMD exclusion itself.
Jeffrey Geller, M.D., argued at that meeting that ending the exclusion
would provide psychiatric patients with "their fair share of health care
dollars." 
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