States could seek Medicaid funding for limited mental institution stays

States could request federal approval to cover care in mental institutions through Medicaid. This would cover Medicaid enrollees ages 21–64 with at least one mental disorder. Federal payments would cover at most 30 days, consecutive or not, per 12 months. States would have to meet spending and care requirements. The option would apply to calendar quarters beginning on or after January 1, 2027.

Participating states would have to maintain state and local spending on outpatient and community care. The spending requirement would cover services for Medicaid enrollees ages 21–64 with a mental disorder. Annual spending from nonfederal funds would have to stay at or above fiscal year 2023 levels. States would report before their plan is approved and maintain spending throughout their participation.

Participating states would have to require checks before and during care to choose the right treatment setting. These safeguards would apply to patients covered through this option. Placements would have to support a return to the community. Institutions would screen for physical illness, substance use disorders, and suicidal thoughts, and arrange treatment on site or through local partners.