Medicaid Funding Now Open for Seniors in Mental Health Facilities, Starting October 2025

The new “Improving Access to Institutional Mental Health Care Act” is basically a cleanup crew for Medicaid rules, specifically targeting how we fund mental health care for older adults. Right now, there’s a big, decades-old hurdle: Medicaid generally won’t pay for medical services if the patient is 65 or older and staying in an Institution for Mental Diseases (IMD). This bill, tucked away in Section 2, strikes that age-based exclusion from the Social Security Act. Essentially, it means that starting October 1, 2025, Medicaid can cover medical care for seniors in these mental health institutions, just like it does for other facilities.

Clearing the Age Hurdle for Care

Think of this change as fixing a weird loophole. If a senior in an IMD needed a routine check-up, treatment for a broken bone, or management for a chronic condition like diabetes, Medicaid couldn't cover the medical side of things because of where they were located. This meant that either the state or the patient’s family had to pick up the tab, or, more likely, the care simply wasn't delivered as needed. By removing the exclusion that references patients "65 years of age or older," the bill aims to ensure that seniors in IMDs get the same access to necessary medical care as everyone else in the Medicaid system.

The Real-World Cost and Trade-Off

While this sounds like a clear win for access—and it is, particularly for the older adults and their families struggling with costs—it’s not without a catch. When the federal government opens up a new funding stream, states pay a share, and the total bill goes up. This bill will definitely increase costs for both federal and state Medicaid budgets, meaning taxpayers will ultimately be footing a larger bill for institutional care. The change is structural, affecting sections like 1905(a) of the Social Security Act, but the impact is fiscal.

The Institutionalization Question

The bigger policy discussion here revolves around institutionalization. For years, policy has pushed states toward community-based care—helping people live independently rather than being placed in facilities—because it’s often better for the patient and sometimes cheaper. By making institutional care for seniors in IMDs more financially viable through Medicaid funding, this bill could inadvertently encourage states to rely more heavily on these institutions instead of investing in robust community support systems. It makes it easier to keep a senior in an IMD than to find and fund appropriate care outside of it. It’s a classic trade-off: improved access to medical care within existing institutions versus the risk of slowing the shift toward better, less restrictive community-based alternatives. We won't see this fully play out until the October 1, 2025, effective date, but it’s the kind of detail that matters when states decide where to spend their limited healthcare dollars.