Medicaid IMD Exclusions and the Supply of Substance Abuse Treatment Facilities

As states continue to grapple with the opioid epidemic, policymakers are looking for ways to curb overdose deaths. One path is via expanded Medicaid coverage, with the expectation that increasing insurance coverage will extend access to much-needed treatment to those already struggling with addiction. Recent studies demonstrate that Medicaid expansions increase the use of buprenorphine for medication-assisted treatment (Saloner et al., 2018) and the number of admissions to treatment facilities (Meinhofer and Whitman, 2018). Despite these positive findings, peculiarities of Medicaid reimbursement rules may have led Medicaid expansions to have unintended consequences on the supply of substance abuse treatment facilities.

In this paper, we examine the impact of two state-level policies—exemptions from Medicaid Institution for Mental Disease (IMD) exclusions and ACA-induced Medicaid expansions—on the capacity decisions of substance abuse treatment facilities. As IMD exclusions prevent treatment centers with more than 16 beds from being eligible for Medicaid reimbursement, there is concern that these restrictions may limit the effectiveness of ACA-induced Medicaid expansions. However, several states received waivers from this rule, providing identifying variation to estimate the impact of these policies on treatment facility size. To the best of our knowledge, this is the first paper to explore the supply-side effects of Medicaid expansion on treatment centers, a critical pathway for treatment among those with opiate use disorders.