Medicaid Loophole Restricts Critical Coverage for Many Addicts

Medicaid Loophole Restricts Critical Coverage for Many Addicts

By Paul Gaita 07/18/14

The states that have expanded Medicaid under the Affordable Care Act are scrambling to provide treatment for addicts.

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An obscure federal rule may have serious and far-ranging impact upon substance abuse treatment in states where Medicaid coverage has been expanded under the Affordable Care Act.

Under the new law, states are allowed to expand Medicaid coverage to low-income individuals, including those struggling with drug and alcohol addictions. However, treatment centers across the country are discovering that due to a restriction established in 1965—the year of Medicaid’s inception—residential addiction treatment in community-based programs will only be covered if the facility has 16 or fewer beds. The ruling was initially set in place to encourage deinstitutionalization, as well as to shift the cost of caring for patients back to the states.

Patients in state psychiatric hospitals and other “institutions for mental diseases”—defined as a hospital, nursing facility or other institution of more than 16 beds, including residential treatment programs for substance abuse—were excluded from Medicaid coverage, spurring a massive transfer from state hospitals to nursing homes and community-based programs, which could be reimbursed by the program.

While effective during the 1960s, when addicts and individuals in need of psychiatric care could still be hospitalized for indefinite periods of time under sometime deplorable conditions, the restriction now serves as a roadblock for the promise of widespread, all-inclusive health care coverage as stated in the Affordable Care Act. Treatment centers in the 26 states where Medicaid coverage was expanded are now scrambling to accommodate the ruling while still providing services to new enrollees.

An article in the New York Times revealed the many ways that states are attempting to deal with this problem. For example, California and New York are hoping to obtain waivers from the government to allow Medicaid reimbursement in larger facilities, while Kentucky is attempting to determine if programs with multiple-bed units must be considered a single facility. Others, like Washington, have resorted to downsizing, while treatment facilities in Illinois, like Chicago’s Haymarket Center, have covered the costs for 40 new enrollees this year.

However, such generosity has a financial limit. As Haymarket Center spokesman Jeffrey Collard noted, “I don’t know how long we can continue to do that—to provide services and not get paid for them.”

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Paul Gaita lives in Los Angeles. He has contributed to the Los Angeles Times, Variety, LA Weekly, Amazon.com and The Los Angeles Beat, among many other publications and websites. 

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