Congress must take steps to ensure availability of therapeutic residential care

Around the country, there is a lack of appropriate placements for the most traumatized and hard-to-place foster youth–a shortage that has reached crisis proportions in many states, including Texas, Washington, and Illinois. These children are spending days, weeks or even months in offices and hotels or languishing in inpatient psychiatric units where there is no semblance of normal life. These young people have been damaged by our negligence and now deteriorate daily without the treatment they need and deserve.  Unfortunately, recent federal legislation is likely to worsen the crisis by withdrawing federal funding for children placed in some of the best therapeutic residential settings.

An unforeseen consequence of the much-heralded Family First Prevention Services Act (FFPSA) of 2018 may exacerbate the shortage of therapeutic placements in many states. FFPSA had twin goals: to shift resources from foster care to family preservation, and within foster care, to shift resources from congregate care settings (anything other than a foster home) to foster homes.  However, the framers of the act did recognize that some children need more intensive care than a foster home can provide, and for them FFPSA defined a new category of placement called a Quality Residential Treatment Program (QRTP). QRTP’s must have a trauma-informed treatment model, involve families, be accredited by an approved organization, and provide at least six months of aftercare. A child can be placed in a QRTP only if a qualified professional determines that the child’s needs cannot be met in a foster home, and the placement must be approved by a judge. Other than specialized settings for teen parents, children who have been sex-trafficked, and supervised independent living settings for foster youths aged 18 and older, QRTP’s are the only non-family placements that can be funded under FFPSA.

Unfortunately, in creating QRTP’s, Congress unintentionally created a conflict with a provision of the Medicaid law that may sharply limit the number of children who can benefit from this new category of therapeutic placement. The problem is that federal Title IV-E foster care funding pays for room and board, but not the costs of medical, dental, behavioral and mental health care for children in foster care. States generally extend Medicaid to all foster youths, allowing the program to cover those costs. But the “IMD exclusion,” a provision included in the original 1965 legislation creating the Medicaid program, prohibits federal Medicaid dollars to be used to pay for any care or services to anyone under 65 who is a patient in an “institution for mental diseases” except for in-patient psychiatric services provided to children under 21. An Institution for Mental Diseases (IMD), as defined by Section 1905(i) of the Social Security Act, is 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.” (For more on the IMD exclusion, see Fact Sheets by the Legal Action Center and the Training and Advocacy Support Center.)

This “IMD exclusion” reflects the sentiment at the time of Medicaid’s creation in 1965 against the large public institutions where the mentally ill were warehoused at the time. The provision was a driving force behind the transformation of public mental health care from an inpatient to an outpatient model, often known as “deinstitutionalization.” But now, many high-quality therapeutic residential programs have more than 16 beds distributed between separate units or cottages on one campus, and in many states these are exactly the facilities that qualify to be licensed as QRTP’s. Without a legislative fix, QRTP’s of over 16 beds may be considered IMD’s and children placed there will not be eligible for federal Medicaid funding for any of their care, including medical, dental, behavioral and mental health services, whether delivered inside or outside the residential program.  States will then have to pay the entire costs of all care for foster children placed in these settings.

Decisions as to whether a facility is an IMD are made on a facility by facility basis based on federal law, regulations and guidance. But the definitions of IMD’s and QRTP’s, as well as the guidance provided by the Center for Medicare and Medicaid Services (CMS) in the State Medicaid Manual section 4390 on how to determine if a facility is an IMD, suggests that QRTP’s are likely to be considered IMD’s. When California wrote to CMS arguing that its “short-term residential treatment programs” (which they were hoping to designate as QRTP’s) should not be considered IMD’s, CMS responded that it was  “unable to provide California the blanket assurance requested that STRTPs are not IMDs.” While a state Medicaid agency can elect not to consider a facility to be an IMD, CMS can essentially overrule these decisions by requiring a state to review the status of these facilities based on its guidance.

Even before the current crisis over QRTP’s, the IMD exclusion had resulted in the loss of Medicaid coverage for foster children living in therapeutic residential facilities in at least two states. For years, Minnesota was using residential programs that would have met the definition of QRTP’s as an alternative to, or a step down from psychiatric hospitalization. But, as reported by the Star-Tribune, after a review ordered by federal officials, 11 treatment centers with a total of 580 beds lost about $4.5 million in federal Medicaid funding–a cost that had to be picked up by counties. Utah went through an “IMD sweep” in 2010, which resulted in its replacing most of its residential treatment centers serving children in foster care with facilities having less than 16 beds.

The Association of Children’s Residential and Community Services (ACRC) has been contacting states to find out how they are dealing with the IMD/QRTP issue. They found that states fall into several groups:

• Some states are not concerned about the IMD problem because they are not planning to implement QRTP’s. Some already rely on facilities that are exempt from the IMD exclusion (Psychiatric Residential Treatment Facilities or facilities with fewer than 16 beds) or will use state funds to pay for children placed in residential care.
• Some states are proceeding on the hope that their QRTP’s will not be declared to be IMD’s even if they have more than 16 beds. This includes six states where all of the programs that have been approved as QRTP’s have more than 16 beds.
• Some states are discussing whether to limit the size of their QRTP’s but have not yet decided whether to do so. In many of these states, the majority of the potential QRTP’s have more than 16 beds–or the majority of the QRTP beds are in facilities with more than 16 beds.
• Some states are trying workarounds to avoid the IMD designation. Two states have decided to separately license cottages that are on the same campus, which enables them to use the bed count for the individual cottage rather than the entire facility, thus potentially avoiding an IMD designation. Another state has classified all residential facilities as serving youth at risk of sex trafficking, one of the allowable uses of congregate care. Whether these workarounds will be accepted by CMS or the Administration for Children and Families (in the case of the latter state) remains to be seen.

Colorado has decided to limit its QRTP’s to 16 beds or less, and a FAQ document from the Colorado Department of Human Services provides an interesting case study in how one state has tried to address the QRTP issue. Hoping to find a way to license its existing residential facilities as QRTP’s, Colorado’s Medicaid and child welfare agencies worked together to analyze the federal IMD criteria and its application to QRTP’s. These agencies “explored every possible argument that would allow Colorado to confidently move forward with QRTPs without risking an IMD designation.” But ultimately they agreed that the only way to avoid the designation was to reimburse only QRTP’s with 16 beds or less. Currently almost all of Colorado’s residential facilities that could have been designated as QRTP’s have more than 16 beds. Instead of creating smaller programs, the state is planning to serve fewer children in residential facilities. The question is whether they will have appropriate options for those children who have been determined to need therapeutic residential care. There is considerable concern that they will not.

Without legislation exempting QRTP’s from the IMD exclusion, states will be faced with the choice of paying the full costs of care for children in therapeutic residential care or scrapping their current facilities and starting from scratch. Vulnerable children may end up in greater numbers in hotels, offices, and hospital beds or bouncing between foster homes that are not equipped to care for them.

According to ACRC, there is no evidence that residential programs with 16 beds or less produce better outcomes than programs with a higher capacity. As a matter of fact, there are reasons to think that a larger campus would be able to offer more services (like therapeutic riding or other specialized therapeutic modalities) that would not be possible to offer on a smaller campus. It is also possible that the IMD/QRTP conflict might result in more foster youth receiving a higher level of care through Psychiatric Residential Treatment Facilities (PRTF’s). These are facilities that deliver an inpatient level of care outside a hospital and they are not considered IMD’s. They are exempted from the IMD exclusion and Medicaid can pay all costs for these facilities, including room and board. So FFPSA might have the perverse result of having more children in a more restrictive, less homelike setting.

On July 23, ACRC sent a letter to the House and Senate leadership asking them to pass legislation by October 1, 2021, exempting Qualified Residential Treatment Programs (QRTPs) from the Institution for Mental Diseases (IMD) exclusion. In the letter, ACRC argues that that “without the exemption for QRTPs, thousands of children in foster care who are vulnerable will be pushed into more restrictive placements, non-therapeutic shelters, unlicensed or unstable settings, or they will bounce from placement to placement without addressing their true needs – which is opposite the intent of the FFPSA.” So far, about 540 organizations have signed onto the letter, and more signatures are coming in daily.

Many groups concerned with the mentally ill have long been advocating for an end to the IMD exclusion altogether, arguing that it is behind the nationwide shortage of psychiatric beds. Rep. Grace Napolitano, Democrat from California, has introduced a bill (H.R. 2611) to eliminate it. CMS and ACF during the Trump Administration also proposed eliminating the exclusion specifically for QRTP’s in its budget for 2021. There are strong arguments for eliminating this exclusion, but the urgency of the QRTP problem requires immediate action, rather than waiting to change a policy that has lasted 50 years.

Unfortunately, there is opposition to lifting the IMD restriction among powerful and wealthy advocates whose ideology appears to blind them to the reality facing our most vulnerable children. William Bell of Casey Family Programs, the nation’s most influential child welfare funder and a leading force behind the Family First Act, urged Congress in testimony to “stand firm” in resisting modifications to the IMD rule. In the real world, where staff work face-to-face with wounded children, the picture looks very different.

The IMD exclusion for QRTP’s threatens to eliminate one of the most promising avenues to address the desperate shortage of therapeutic residential placements for foster youth that already exists in many states. On the state level, legislators must open their hearts and their minds to the pleas of those who are on the front lines caring for our most troubled children. They must increase funding for the therapeutic residential programs the most vulnerable foster youth so desperately need. Congress must help by exempting QRTP’s from the IMD exclusion, enabling the federal government to ensure access to therapeutic residential care–and ensure that the legislation they authored and passed can actually be implemented by states.