I sort of knew about this but didn't know the name of it (the Medicaid IMD exclusion) or the background behind it. IMD = Institution for Mental Diseases (lovely archaic terminology there)

"When Congress created Medicaid and the IMD exclusion, it did not want to allocate federal dollars for what was long-term, and in many cases, custodial care, says Covall. States responded by shifting patients away from state-funded hospitals and into psychiatric units of general hospitals, where Medicaid picked up the tab."


What is the IMD Exclusion?

As defined by statute, "[t]he term ‘institution for mental diseases’ means a hospital, nursing facility, or other institution of more than 16 beds, that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases, including medical attention, nursing care, and related services."[25]


Current federal law prohibits Medicaid reimbursement for any person over age 21 and under age 65 who resides in an institution for mental diseases (IMD), even for treatment unrelated to mental illness.[26] This prohibition is commonly referred to as the IMD Rule or IMD Exclusion. State and private psychiatric hospitals are IMDs as are nursing homes that specialize in caring for the severely mentally ill.

The text above keeps coming out very large and I don't know how to fix it.

All cites from from "Medicaid considering IMD Exclusion-Alternatives"Medicaid should repeal IMD Exclusion