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Addressing the Disparate Impact of the Federal Response to
the Opioid Epidemic
By Daniel J. Mistak, J.D., General Counsel, Community Oriented Correctional Health
When Medicaid was established in 1965, federal financial participation (FFP) was prohibited
for health care services provided to individuals in Institutions for Mental Disease ("IMDs") and
inmates of a public institution (the "Inmate Exception").These exclusions served important
roles in the advent of nationwide indigent health care: they created disincentives for
ineffectual and inhumane institutional treatment of individuals with mental health needs, and
they avoided incentives for local jurisdictions to transfer their own health care costs to the
newly minted state-federal payment system.
Much has changed since 1965. The advent of the Patient Protection and Affordable Care Act
(ACA); public health policy's focus on the Triple Aim of individual health, population health,
and cost containment; a growing opioid abuse epidemic; and better understanding of
treatment regimes have led to a reassessment of whether providing Medicaid coverage for
services in IMDs still poses the same risks it did in 1965. On July 27, 2015, the Centers for
Medicare and Medicaid Services (CMS) released a letter ("IMD Letter") to state Medicaid
directors inviting them to craft 1115 Medicaid waivers to enable states to use IMDs as a part of
a comprehensive plan to tackle the opioid abuse epidemic. This letter opened the door to
Medicaid reimbursement for care plans that include residential treatment.
1115 waivers crafted under the new CMS guidance, however, would still leave large numbers of
people affected by the opioid epidemic without access to the health care necessary for
recovery. These are individuals who have been placed into jails and prisons as a result of their
addiction. Indeed, without an accompanying letter from CMS that encourages states to draft
narrowly crafted 1115 waivers for services that would typically fall within the Inmate Exception,
the racial disparities that exist within our health and public safety systems could increase.
Given the historical context and the racialized consequences of not addressing the needs of
people in the criminal justice system, CMS should invite states to craft a narrow waiver of the
Inmate Exclusion similar to the IMD waiver. This Action Paper describes the historical context
of the IMD and Inmate Exception and provides recommendations for policy changes that
could both combat the opioid epidemic and reduce racial and economic disparities that
would be a consequence of failing to address the entire population affected by the opioid
Background to IMD and the Inmate Exception
The federal government has had many reasons to be skeptical of incentivizing the creation of
facilities that would cordon individuals off from the community. Arguably, the process of
"deinstitutionalization" began in 1955 with the introduction of the anti-psychotic medication
Thorazine. Ten years later, the introduction of Medicaid and Medicare provided a driving
force for further deinstitutionalization by codifying the IMD and Inmate Exclusions into law.
Following the revelations in the 1970s of the horrors at Willowbrook State School in Staten
Island—where developmentally disabled individuals were warehoused under appalling
conditions—and the Supreme Court's seminal decision in Olmstead v. L.C.
in 1999, public and
governmental opinion were decidedly opposed to the overuse of institutional settings.
The history of IMDs follows a different track than the history of inmates of public institutions.
While the IMD Exclusion incentivized treatment in the community, the Inmate Exception kept
health care costs for correctional facilities off the federal ledgers. Health care costs for
individuals who were held in state and county facilities, such as jails and prisons, were the
responsibilities of those jurisdictions, and the Inmate Exception aimed to keep it that way. In
1976, the Supreme Court ruled that correctional facilities that were deliberately indifferent to
the serious medical needs of incarcerated individuals violated the Eighth Amendment to the
Constitution, but the Inmate Exception meant that the costs of adequate health care would
always remain state or local costs.
The combination of these two exclusions created a two-tiered response to behavioral health
needs. For individuals with behavioral health needs, the struggle for effective community
treatment continued—and still continues to this day—but FFP was not denied as long as
treatment was not provided in an IMD. For individuals with behavioral health needs that
resulted in entanglement in the criminal justice system, including substance use disorder—
which only received treatment parity with the advent of the ACA—the benefits of services
funded by FFP were removed. IMDs shrank, but correctional facilities became warehouses for
individuals with behavioral health needs and no health care.
Today we see that jails have become de facto
behavioral health facilities. In these institutions,
public safety takes precedence over the effective treatment of behavioral health conditions—
minimizing the possibility of effectively meeting the health needs of these individuals or
helping avoid recidivism. Studies estimate that fourteen percent of male inmates and thirty-
eight percent of female inmates meet the criteria for serious mental illness (SMI), compared
to five percent in the general population.Sixty-eight percent of jail inmates demonstrate
signs of substance use disorder.It is estimated that two-thirds of the people that leave
correctional facilities will be arrested again. The implication is clear: Individuals in
correctional facilities are not having their behavioral health care needs met. Upon release
from the facility, their unmet needs mean that they will repeat the behaviors that resulted in
their initial entanglement in the criminal justice system.
This dual track is even more significant when considering the racial disparities of our
correctional system. Correctional facilities disproportionately hold young, poor, people of
color. Collectively, black and Hispanic populations are twenty-four percent of the general
population, but comprise fifty-four percent of the jail population. A black male born in 2001
has a thirty-two percent chance of spending time in prison at some point in his life. A Hispanic
male has a seventeen percent chance. A white male, on the other hand, only has a six percent
CMS Response to Opioid Crisis: A New Look at IMDs
Today, CMS and others are recognizing the need to change their approach to IMDs. Fifty
years after the Social Security Act was passed, we have entered a new era that is reshaping
the way health care is delivered, conceptualized, and administered. Since the 1960s, we have
come to understand that addiction is an illness, and not a moral failing. This means that we
need new approaches to addiction crises. The opioid abuse epidemic has become the
example par excellence
of our evolving understanding of addiction and drug abuse. New
tools, such as the American Society of Addiction Medicine's (ASAM) diagnostic criteria for
acuity of treatment, provide elegant means of assessing and responding to the needs of
individuals struggling with addiction. Indeed, the evolution of our response to substance
Addressing the Disparate Impact of the Federal Response to the Opioid Epidemic
abuse needs has re-surfaced questions regarding the utility of IMDs. For example, according
to the ASAM criteria, under certain DSM-IV diagnoses and levels of acuity, the appropriate
treatment regime should include a short stay in an IMD to effectively administer addiction
At the same time, we have come to understand that health care is best delivered through
what public health professionals call the Triple Aim: individual health, population health, and
controlling costs. All three parts of the Triple Aim must be undertaken simultaneously—
otherwise, the optimal outcomes will remain elusive. Tackling the opioid abuse epidemic
means not merely looking at the individual health of a consumer of health care services, but
also at population health outcomes. If the health of the population as a whole is not
considered, individual health and cost savings will both suffer.
This evolution in science and policy has placed CMS in a difficult situation. The ASAM criteria
clearly indicate that IMD services are necessary for some individuals with substance use
disorder. To effectively combat the opioid abuse epidemic, CMS can no longer act as though
an IMD is never appropriate for both health outcomes and health care savings. CMS' initial
response to the opioid epidemic has been laudable. On July 27, 2015, CMS invited states to
use their 1115 Medicaid waiver authority to include IMDs into the full panoply of services
available to states in their attempt to combat the opioid abuse epidemic. CMS has recognized
the value of IMDs in treating crises and in addressing substance use disorders.
The Inmate Exclusion
CMS' efforts, however, still fail to provide a means of treatment for a significant portion of the
population affected by the opioid use epidemic. As noted above, many of the individuals in
jail, who are disproportionately people of color, are there because of untreated behavioral
health disorders—including substance use disorders. Without creating a waiver that would
cover the entire population affected by the opioid epidemic, CMS will fail to effectively
address the population health impacts of the opioid abuse epidemic. Further, the separate
courses created by the IMD and Inmate Exclusion described above are further exacerbated by
this new policy. Many media outlets are already beginning to point out that the loosening of
the IMD restrictions only occurred upon the advent of the current prescription-opioid fueled
heroin epidemic, which has been largely affecting suburban and white populations.
Understandably, it would be bad policy to allow all health care services in the jail to receive
FFP, but CMS can limit the opportunities for exploitation of FFP by inviting states to craft
narrow waivers that would target FFP in certain circumstances. CMS already attempted to
limit the perverse incentives that would be associated with opening the flow of FFP to IMDs
by requiring that IMDs merely be one part of a comprehensive Substance Abuse Treatment. In
the same fashion, a narrowly crafted waiver of the Inmate Exclusion could eliminate the
perverse incentives associated with allowing FFP to flow to inmates of a public institution.
Conclusion: The Inmate Exclusion Waiver and its Implications
There are four clear ways that FFP could improve the health status of the population affected
by the opioid abuse epidemic, while simultaneously improving individual health status, and
decreasing the costs of combating the epidemic. A narrow Inmate Exclusion waiver would:
1. Allow states and counties to use FFP to work with Medicaid providers to both identify
patients in county jails who are receiving community-based opiate treatment and to
maintain their treatment protocols. Better coordinating care would reduce the risk
that inmate progress outside the jail would be squandered once inside the jail, thereby
Addressing the Disparate Impact of the Federal Response to the Opioid Epidemic
reducing both Medicaid spending and health disparities for justice-involved
2. Allow states and counties to use FFP for Medicaid providers to work with county jails
to develop opioid treatment and continuity of care plans for released or diverted
individuals subject to the ASAM criteria. Access to care upon release or diversion from
jail is essential to good health outcomes – especially in the crucial 24-to-72 hours
immediately following release or diversion. Delays in reactivating Medicaid increase
overall Medicaid costs, lead to treatment interruptions and can adversely impact
communities, especially when access to opioid treatment is hindered. Allowing the use
of FFP to prescribe and dispense treatment prior to the point of release or diversion
would reduce Medicaid spending and improve the health and safety of individuals and
3. Allow states and counties to use FFP to initiate medication-assisted therapy or other
forms of medically necessary and appropriate intervention for jailed individuals with
opiate addiction whose release is anticipated within 7-to-10 days. Many individuals
booked into county jails have previously undiagnosed and untreated disorders.
Allowing FFP to be used to cover the costs of treatment prior to release would
prevent medical disorders from deteriorating upon release and save federal dollars. A
disproportionate number of unintentional overdoses occur after release from jail.
Planned interventions can avoid these tragedies and improve overall health outcomes.
4. Allow states and counties to use FFP to reimburse peer counselors to facilitate reentry
and increase jailed individuals' health literacy. The Center for Medicare and Medicaid
Innovation has invested in a peer counseling demonstration project through the
Transitions Clinic Network, which has already demonstrated lower rates of Emergency
Department visits for individuals who participate in its program.
A letter from CMS encouraging states to develop 1115 waivers with these components is not
only essential for combatting the public health crisis that is the opioid abuse epidemic, but it
is also essential to ensuring that the IMD waivers will not have the unintended consequence of
increasing racial disparities.
The Social Security Act, 42 U.S.C. § 1396d(i) (1965) (describing the IMD). See also,
42 U.S.C. § 1396d(a)(29)(A)
(describing the Inmate Exception).
42 C.F.R. § 435.1009(a)(1)-(2) (stating "FFP is not available in
expenditures for services provided to [i]ndividuals who are inmates of public institutions . . or [i]ndividuals under
age 65 who are patients in an institution for mental disease").
2 Letter from Vicky Wachino, Director, Centers for Medicare & Medicaid Services, to State Medicaid Directors (July
E. Fuller Torrey, OUT OF THE SHADOWS: CONFRONTING AMERICA'S MENTAL ILLNESS CRISIS (1997).
4 527 U.S. 581 (1999).
5 Estelle v. Gamble
, 429 U.S. 97 (1976).
6 Henry Steadman, et al., Prevalence of Serious Mental Illness Among Jail Inmates
, 60 PSYCH. SERVS. 761 (2009).
7 Jennifer C. Karberg, Substance Dependence, Abuse, and Treatment of Jail Inmates, 2002
, Bureau of Justice
8 Andrew Papchristos, Recidivism and the Availability of Health Care Organizations
, 3 JUST. Q. 31 (2014).
9 Thomas P. Bonczar, Prevalence of Imprisonment in the U.S. Population, 1974–2001
(Bureau of Justice Statistics,
10 See, e.g.,
Andrew Cohen, How White Users Made Heroin a Public-Health Problem
, ATLANTIC MONTHLY, August 12,
Katharine Q. Seelye, In Heroin Crisis, White Families Seek Gentler War on Drugs
, N. Y. TIMES Oct. 30, 2015 at
11 Emily A. Wang, et al., Engaging Individuals Recently Released From Prison Into Primary Care: A Randomized Trial,
102 AM. J. OF PUB. HEALTH e22-e29 (Sept. 2012).
Addressing the Disparate Impact of the Federal Response to the Opioid Epidemic
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