The Effect of the Medicaid Institutions for Mental Disease (IMD) Exception Waivers on Serious Mental Illness (SMI) Outcomes

Objective: To compare psychiatry-related and all-cause healthcare resource utilization (HCRU), costs, incarceration rates, and homelessness rates among states with and without an IMD exclusion waiver.
Methods: This retrospective claims analysis utilized Kythera Medicaid data (2016-2023). The SMI population was defined by ≥1 medical claim for SMI (index date) during the identification period (2017-2022) and continuous enrollment for 12 months pre-/post-index date. Patients were classified into two cohorts: those in states with (n=130,224) and without (n=3,102,971) an IMD waiver. Clinical/sociodemographic factors, HCRU, and costs were analyzed descriptively. Fixed-effect models estimated effects of IMD waivers on healthcare cost/utilization, incarceration rates, and homelessness rates while adjusting for patient-level and fixed-state characteristics.
Results: For adjusted psychiatry-related HCRU, the waiver cohort was 14% less likely to have inpatient (OR=0.86, p < .0001) and 26% less likely to have ED visits (OR=0.74 p < .0001) but had 78% longer stay in a psychiatric hospital (OR=0.78, p=.0589) than the non-waiver cohort. The waiver cohort was 9% less likely to have inpatient (OR=0.91) and emergency department (OR=0.91) visits (both p < .0001) and had 19% more outpatient visits (OR=0.19, p=0.0324). Psychiatry-related total costs were 41% lower in the waiver cohort (OR=-0.41, p=.0094). States with waivers had 11% fewer incarcerations than those without (OR=-0.12, p= < .0001); there was no significant difference in homelessness rates.
Conclusion: IMD waivers correlated with fewer psychiatry-related hospital admissions, ED visits and costs, despite longer hospital stays. They were also associated with reduced overall healthcare use and fewer inpatient and ED visits, increased outpatient care, and decreased incarcerations, suggesting significant societal benefits.