States say what they really need is Medicaid for people in mental hospitals.

The Centers for Medicare & Medicaid Services (CMS) has decided to build long-term care (LTC) services into the fabric of a new regulation that will set standards for how Medicaid managed care plans and Children’s Health Insurance Program (CHIP) plans cover behavioral health care.

CMS has included LTC services in the definitions for “medical/surgical benefits,” “medical/surgical benefits,” “mental health benefits” and “substance use disorder benefits” in a new behavioral health parity final rule.

See also: Feds hint at coming mental parity suits

CMS is preparing to publish the regulations, which explain how the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) applies to Medicaid managed care plans and CHIP plans, on Wednesday in the Federal Register.

Most states now hire outside-managed care organizations to run parts or all of their Medicaid programs.

See also: Why some insurers might love Medicaid more than they love producers

The MHPAEA requires commercial health insurance plans, Medicaid managed care plans and CHIP plans that provide any mental health or substance use disorder benefits, along with medical benefits, to use comparable rules for providing the behavioral health benefits and the medical benefits.

The MHPAEA, and the new regulations, do not apply directly to Medicaid behavioral health services provided through traditional fee-for service arrangements.

In response to a draft of the Medicaid parity regulations, some insurers said CMS should encourage states to provide all Medicaid services, including behavioral health services, through a single managed care contract, to improve coordination of care. Other organizations, including Magellan Health Services Inc. (NYSE:MGL), a company that manages behavioral health services, said CMS should give states flexibility.

CMS says it will continue to let states decide whether to integrate behavioral health benefits with other health benefits or split the contracts.

In the earlier draft, CMS proposed excluding LTC services from the definitions it would be using for medical, mental health and substance use disorder benefits. ”A large majority of commenters opposed this approach,” CMS says.

Commenters told CMS that patients with serious behavioral health problems often need services over a long period of time. Some commenters predicted that states would get around parity requirements by classifying certain types of behavioral health services as LTC services.

“We agree with the commenters and have revised this final rule to include long-term care services in the definitions,” CMS says.

That should help Medicaid plan enrollees who live in LTC facilities get parity protection, and it should eliminate the possibility that states will treat medical LTC services and behavioral health LTC services differently, CMS says.

The National Association of Medicaid Directors (NAMD) told CMS in a comment letter that what state Medicaid programs really need is help with providing Medicaid benefits for people who are in institutions for mental disease (IMD).

In the preamble to the new final rule, CMS says a federal law forbids Medicaid programs from spending federal money on Medicaid enrollees ages 21 to 64 who are inpatients in mental institutions.

“The payment exclusion for Medicaid services provided to beneficiaries in IMDs is a statutory requirement established by Congress in 1965 and, therefore, beyond the scope of this regulation,” CMS says.

See also:

Mental health parity disclosure war: 4 battlefields

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