How the IMD Exclusion Connects to Our Homeless Crisis

Driving east on Hollywood Blvd two days ago, as my car was stopped at Vine, there was a young man hugging the wayfinding sign.  He was barefoot and clothed only in plaid flannel pajama bottoms.  His hair and beard, though not groomed, did not look particularly unkempt which made me think he had recently  wandered away from some place. 

My first thought was that there was a mother somewhere who was worried about him. A mother who was likely feeling helpless in her inability to prevent her son from ending up barefoot and half naked at the corner of Hollywood and Vine.

Dede’s compilation of mother’s stories will make it hard to breathe – and that should stimulate the indignation we need to press for change.

I am currently reading the book Tomorrow Was Yesterday, compiled by Dede Ranahan.  It’s hard to read; I can only take a few pages at a time without feeling enormously sad.  More than 60 stories are shared by mothers who have faced grief, loss, frustration, pain and tragedy as their sons and daughters confronted the American mental health system.  None of the stories, so far, have a happy ending.

That young man at the corner of Hollywood and Vine is not experiencing homelessness.  He is experiencing something far more tragic and ultimately life-threatening.

Housing is the easy answer

Everywhere you look, elected officials, policy makers, advocates  and even good ol’ Judge Carter is calling for more housing to address our homeless crisis. Yes, housing is critical but it is not the only solution. 

The elephant under the rug is the lack of sustained and recovery-oriented  inpatient treatment for people living with severe mental illness in our communities – all across America. 

How people find their way to living on the street, in a tent, or in their car is complicated.  Yes, housing costs are rising and wages are not keeping pace and the pandemic has exacerbated an already troubling situation in Los Angeles. 

But there is a significant percentage of people experiencing homelessness, who have battled mental illness, or substance abuse, or both, who need attention above and beyond a room key.  How many?  One in four, is the conservative number as reported by LAHSA using the federal HUD definition.

If  you have followed this blog, you will see that I have written about people with mental health conditions who have emerged from jail without a place to live.  Your heart will break as you read about a mother driving around the city looking for her daughter suffering from bi-polar. In my podcast, you’ll hear from two resilient mothers who have made a case that California lacks access to residential treatment options where people struggling with their mental illness can live and receive sustained and tailored treatment, for as long as it takes to stabilize and begin recovery. 

The young man hugging the wayfinding sign will not start his recovery journey in a shelter, or bridge housing or in his own apartment.  Maybe later; but not now.

I so appreciate the people who read this blog and ask: “how can I help?” 

Here is something you can do.   We have to shift the narrative away from the response that housing is the singular solution to homelessness and turn up the heat on the need for sustained and effective inpatient treatment for mental illness and substance use disorder.

Let’s put on our fifth grade hat to understand the “IMD Exclusion”

Truth be told,  researching and writing this blog has helped me collect my thoughts on a federal policy that is very confusing but incredibly impactful as it relates to our homeless crisis.  My goal is to make this accessible to lay people – so that you, and me – can keep asking the question: “do we have enough psychiatric treatment beds to meet the needs in our community?” 

The answer is no.  Here is one extremely detailed report from the L.A. County Department of Mental Health that attests to this.

The “IMD Exclusion” sounds like a label for a coronavirus variant. But it is really an antiquated discriminatory policy to prevent the delivery of treatment to people who need mental health care.

Here is one solution.  We need to ask our county, state and federal policymakers to eliminate the IMD Exclusion.

Ugh.  What the heck is that?  It sounds like a variant to the coronavirus.  How can I ask for something I don’t even understand?

The United States now has fewer state psychiatric treatment beds per capita than any other time in our nation’s history, according to a 2016 report by the Treatment Advocacy Center

One reason relates to the federal government’s policy that Medicaid (insurance for very low-income people) cannot be used to pay the expenses of someone living in a treatment facility that has more than 16 beds.  These are referred to as Institutes for Mental Disease (IMD).  The >16 facility would be “an institution” although it’s hard to understand why 16 is the magic number. 

How did we get here?

On Oct. 31, 1963, President Kennedy signed a bill meant to free many thousands of Americans with mental illnesses from life in institutions. It envisioned building 1,500 outpatient mental health centers to offer them community-based care instead. The bill would be the last piece of legislation Kennedy would ever sign; he was assassinated three weeks later.
  • There was great hope in the 1960’s after President Kennedy signed into law the Community Mental Health Act.  The hope was to shift resources from large institutions into community-based treatment.  This movement was not limited to the U.S.  As I have written about extensively in this blog, this was happening in Italy as well, and Trieste represents the “north star” in looking at how the commitment to community-based support  truly led to a qualitative improvement in the quality of life for their neighbors living with a mental illness.
  • During that decade alone, over 165,000 people were discharged from psychiatric institutions, but the community-based resources did not materialize in such a way as to absorb this influx.  (See American Psychosis, an excellent reference book, page 71.)
  • How this shift from the federal to state and local governments was going to be funded was at issue (and still is, to be frank).
  • One development during that decade that has had far-reaching consequences was the change to the Social Security Act. 
  • Under President Johnson, Medicare and Medicaid were created as part of a revision to the Act.  Medicare provides hospital insurance for people 65+ and is funded by the federal government.  The intent of Medicaid was to pay for medical care for poor people and is funded by a combination of the federal and state governments.  Neither was intended to serve as a funding source for mentally ill people.  The expectation was that the states would provide care for their mentally ill residents.
  • However, because states were caring for so many people in their state hospitals, the federal government wanted to make sure that the financial burden would remain with the states.
  • To protect against this this, the Medicaid rules stipulated that funds could not be used for people in mental institutions.  This became the Institutions for Mental Disease (IMD) exclusion.  Somehow, they arrived at the threshold of 16 beds constituting an institution.

Recent developments

There seems to be a growing awareness that repealing the IMD Exclusion, or making it easier for states to secure a waiver, is a policy worth pursuing to provide a higher level of care for people living with a mental illness in our country.  In this blog, I am raising this issue to equip my readers to learn more, and engage policy makers in discussion.  This is how we pursue change.

Just this week, a comprehensive report from the Manhattan Institute was issued, Medicaid’s IMD Exclusion:  The Case for Repeal.  It is a good read, and goes into much greater depth than this simple blog. 

So, arm yourself with this knowledge.  Keep asking the questions.  Impress upon our policy makers that our humanitarian crisis of homelessness is far more complicated than a shortage of affordable housing.  Stay tuned to this space.


Just today (2/26/21), Pete Earley has blogged about the significance of the Manhattan Institute report. This adds to the chorus of well-respected voices to take this policy change seriously. Another worthy read.

13 thoughts on “How the IMD Exclusion Connects to Our Homeless Crisis”

  1. Great article – and well researched as always Kerry!

    We have a 60 psych beds at our State hospital and 29 crisis beds. As you can imagine, they are always full. Before hurricane Katrina, our state hospital had 200 beds, and they were always full. We are not limited to short stays due to capitated insurance payments run by managed-care organizations like many state hospitals across the country. Our state has an “in lieu of” payment. Meaning, once insurance runs out (14 days), The state will continue to subsidize hospitals for as long as needed.

    The number one complaint I hear from psychiatrists is that there is nowhere to discharge people to. If we had proper discharge destinations in place, like residential treatment facilities (IMDs) it would significantly reduce the revolving door.

    What we really need is more rungs on the ladder to evenly disburse the load across a continuum of coordinated care. The state waivers contain requirements that incentivize the build out of a full continuum. AOT, ACT, FACT, a housing continuum, etc. What is the incentive for that kind of build out in fully repealing the IMD Exclusion?

    Would federal Repeal look like state waivers with an opt in clause? If so, would states opt in?

    Meanwhile, keeping up the pressure on states to apply for waivers not only requires states to build out MHR and housing, The waivers also require data collection which will be needed to build a strong case for full repeal. Hopefully, at that point, we will have finally achieved what President Kennedy envisioned in 1963. The trick is to prevent the pendulum from swinging from one extreme to another.

    Just my 2 cents 🙂

    1. Janet – thank you for being so vigilant on this issue. It is complicated, but I feel that we might be at an “inflection point” where policy makers can be convinced the current system is failing everyone. And, in addition to IMD beds, I think we need to be looking at a different type of housing — congregate/family style living for people where they can connect with peers, pets and purpose. This does not currently exist in our homeless/low income housing delivery system.

        1. I love this Barbara — PPP. That simplifies everything! And I looked at your website. Very inspiring. I am helping to start a community garden at a supportive housing community in Hollywood — formerly homeless residents living with a mental illness. I wish you were in the LA area – but I will blog about this experience after we can get some things coming out of the ground!

  2. There is a brand new psychiatric crisis residential hospital that is opening in March in Orange County that brings with it much hope. I couldn’t figure out why they only have 15 beds. Now I understand why this may be the case, thanks to your blog. The most commonly mentioned angle to address political reform has been to repeal the Lanterman-Petris-Short Act, a state law, which would increase psychiatric hold times. You have talked about this in your blogs. But now, I have learned about the IMD exclusion, a federal policy. It is interesting that Medicaid and Medicare were never intended as a source for the mentally ill. I want to understand this. There are so many layers. I agree that this is a humanitarian crisis that is much more complex than whether a person is inside or outside. I’m not saying people should remain outside; I’m saying that at the very least, ACT teams are needed. Staying tuned.

    1. Alia – this is fascinating about the 15-bed facility. You’ll see in the Manhattan Institute report I linked to that they make the case that economies of scale associated with the staffing support needed for a treatment facility often don’t pencil out with only 15 beds. I wanted to address the LPS Act in this blog, but it was already exceeding 1,000 words, my upper limit as I respect adult attention span 🙂 So more to come. I’m glad you are connecting the dots on this. Hope to see you soon!

      1. So much to understand! Thank you for being a pathfinder! I have been learning so much from your podcasts, blogs and the Trieste proposal! Especially about different ways of funding/billing mental health. I read the link you provided (not in full, I am still completing the reading) but it seems like minimal staff means the seriously mentally ill are being left out which may be the case in this new facility, as well. I read Janet’s post too and I wonder if California has an IMD exclusion waiver or some other kind of “in lieu of” or “opt-in” workaround or subsidy? I found an article that there was an application for a waiver made in 2019 by Mark Gale of NAMI LA County but I could not find the results of that application. Looking forward to seeing you and continuing the conversation 🙂

  3. Kerry,
    Thanks for your leadership on this issue.
    I continue to learn from your work and writing.

  4. Kerry, Thank you so much for this excellent article. Adding your voice to this is very important. We need to educate the public and the public’s representatives that they are missing a key element in meeting the need of some very ill people who have found city streets the only place of acceptance. I want to make sure we do not revert back to the days of large institutions that were mostly warehouses not healing environments. Eliminating the IMD exclusions is a first step. The next step is that we do not institutionalize rather develop treatment centers that meet the need of the very ill.

    1. Lauren, I so agree with you. I have visited some of the IMD’s in L.A. County, and they are not pleasant places. So let’s get this exclusion loosened and then continue to press the case for the type of community-based environment that promotes recovery and freedom in a dignified way.

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