National Alliance on Mental Illness
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HHS Inspector General Releases Reports on Individuals with Severe Mental Illnesses in Nursing Homes

For Immediate Release, January 31, 2001
Contact: Chris Marshall

This past week, the Office of Inspector General (OIG) at the federal Department of Health and Human Services released a pair of reports documenting the placement of non-elderly adults with severe and persistent mental illness in nursing homes. These reports found a range of deficiencies in federally mandated screening processes and in systems designed to determine spending on mental illness treatment services delivered in nursing homes.

While the findings by the OIG are not necessarily conclusive, they do point to conclusions that NAMI advocates have known for quite some time. First, states are continuing to rely on Medicaid funded nursing homes as an inappropriate alternative to state psychiatric hospitals. This is true not just for former state hospital residents who went directly into nursing homes, but also for younger adults with severe mental illnesses who have ended up in nursing homes because of the lack of affordable housing and community supports.

In NAMI's view, there is ample data to support the conclusion that supported housing and evidence-based service models such as the Program for Assertive Community Treatment (PACT) is both less costly and more effective than a nursing home placement. Finally, these reports also point to a disturbing lack of access to effective treatment for non-elderly adults with severe mental illness in nursing homes. NAMI therefore views this report as critically important in pushing states toward investing in more cost effective and humane alternatives to nursing homes for non-elderly adults with severe mental illnesses - particularly supported housing and PACT.

Specifically, these OIG reports found that the primary mechanism for monitoring whether non-elderly adults (ages 16-64) with severe mental illnesses are appropriately screened and placed in nursing homes is inadequate. Thus, the OIG concluded that existing data sources for determining the number of younger nursing home residents with severe mental illnesses is seriously flawed. The reports also found that more than one-third of the mental illness treatment services provided in nursing homes were inappropriate. More importantly, the reports found that state mental health agencies are not able to determine where non-elderly adults with severe mental illness are receiving long-term care services.

The question of non-elderly adults with mental illnesses residing in nursing homes has been major concern for policymakers and NAMI advocates alike. Reforms enacted by Congress in 1987 required Medicaid funded nursing homes to screen residents and new admissions for serious mental illnesses and to find alternative placements for individuals identified as seriously mentally ill (a process known as PASRR). In these reports, the OIG concludes that little has changed since then. This issue is expected to increase in intensity in the wake of the U.S. Supreme Court's decision in the L.C. v. Olmstead case. That decision places new obligations on states to place individuals with severe disabilities into integrated community settings with an appropriate level of services.

HCFA Data Termed Inconsistent

The OIG concluded in these reports that data collected by the federal government from states is inconsistent. For example, separate methods for surveying states found that non-elderly residents with severe mental illnesses comprised 1.6% or 20% of the nursing home populations respectively. Likewise, data on Medicaid expenditures showed wide inconsistencies between states. These results are likely a result of the historical behavior of certain states that heavily relied on nursing homes for placement of non-elderly adults with severe mental illnesses after the closure or downsizing of state psychiatric hospitals.

Adherence to Federal Medicaid PASRR Rules Termed Inadequate

One of these new reports includes findings from OIG inspectors of 19 facilities in 5 states. These inspections found that less than half of the sampled residents had been screened to identify a mental illness. Likewise, only 41% of these facilities had done screening to confirm a level of severity needed to warrant nursing home level services (this second level of screening was repealed in 1996). Thus, the OIG concludes that the federal PASRR system functions with little federal or state oversight.

Reimbursement for Mental Illness Services Questioned

The OIG found that 27% of psychiatric services provided in nursing homes were unnecessary, resulting in an estimated $22.6 million in inappropriate reimbursements in 1999. The report concludes that more than half of these unnecessary services went to individuals whose cognitive limitations made them unable to benefit from mental illness treatment services. Further the OIG claims that 9% of services lacked any documentation as to a psychiatric diagnosis. Finally, the OIG inspectors found that 39% of psychological tests administered in nursing homes are medically unnecessary.

You may find the full texts of these OIG reports here.