Directing the department of health and human services to increase the number of inpatient psychiatric beds at each state mental health institute

Description

House File 2292 requires the Department of Health and Human Services (HHS) to apply to the Centers for Medicare and Medicaid Services (CMS) for a waiver of Medicaid’s institution for mental diseases (IMD) exclusion by July 1, 2027. No later than one calendar year after receiving approval for the waiver, the HHS is required to double the number of inpatient psychiatric beds at the Cherokee Mental Health Institute (MHI) and Independence MHI based on the number of beds that were at each MHI on June 30, 2025.

Background

The Cherokee MHI provides acute psychiatric care for adults ordered into the custody of the State for purposes of competency restoration, adults who have been acquitted of a crime by reason of insanity, and similarly situated adults. Currently, the Cherokee MHI has 36 adult beds at the facility.

The Independence MHI provides acute psychiatric care for adults, adolescents, and children, including specialized treatment of behaviorally complex youth. Currently, the Independence MHI has 56 beds at the facility, of which 36 are designated as adolescent beds and 20 are designated as adult beds.

An IMD is a hospital, nursing facility, or other institution of more than 16 beds that is primarily engaged in providing a diagnosis, treatment, or care of persons with mental diseases. Medicaid’s IMD exclusion prohibits the federal government from providing federal Medicaid funds to states for services rendered to certain Medicaid-eligible individuals who are patients at IMDs. Federal law includes exceptions to the IMD exclusion for children under the age of 21 and individuals aged 65 and older. States can request a Section 1115 waiver to provide Medicaid coverage for individuals aged 21 through 64 with a serious mental illness or substance use disorder for short-term stays in IMDs. States may claim federal financial participation (FFP) for stays up to 60 days as long as the average length of stay is 30 days or less, as determined by the midpoint assessment. Currently, a Medicaid-eligible individual’s stay at an IMD is covered by their managed care plan for up to 15 days in a month through In Lieu of Services (ILOS).

Assumptions

Contracts

• The CMS will approve the application for a waiver of Medicaid’s IMD exclusion.
• Iowa Medicaid will need an amendment with the current waiver technical assistance contract.
• The waiver technical assistance contract is billed at $257.50 per hour.
• Amending the waiver technical assistance contract will require 2,000 hours of work in FY 2027 to submit the waiver to CMS, 1,000 hours of work in FY 2028 to account for implementation, and 500 hours of work annually through FY 2031.
• Costs incurred while amending the waiver technical assistance contract will be paid through State and federal funds in equal shares.
• Actuarial services will be required to implement the federal waiver.
• Actuarial services’ costs will be paid through State and federal funds in equal shares.
• The actuarial services contract estimates a cost of $100,000 for implementing requirements of the Bill. Of the actuarial services cost, $80,000 will be incurred in FY 2027 and $20,000 will be incurred in FY 2028.
• Iowa Medicaid will amend a contract with the University of Iowa evaluating and researching Iowa’s Section 1115 waiver.
• Amending the University of Iowa contract to include the waiver for the IMD exclusion will increase costs by $550,000 annually.
• The State is eligible for 50.0% FFP on the University of Iowa contract.

Medicaid

• The proportion of Medicaid-eligible individuals who will qualify for Medicaid funding under the waiver for the IMD exclusion to noneligible individuals will not change from the proportion in FY 2024.
• In 2024, there were 61 Medicaid-eligible individuals who would have qualified for Medicaid funding under the waiver for the IMD exclusion admitted to the Cherokee MHI.
• In 2024, there was one Medicaid-eligible individual who would have qualified for Medicaid funding under the waiver for the IMD exclusion admitted to the Independence MHI.
• The average length of stay for Medicaid-eligible individuals at the MHIs will increase to 30 days as a result of the waiver for the IMD exclusion.
• All beds will be occupied.
• The State will pay 30.66% of Medicaid costs, while federal funds will cover 69.34% of the costs for Medicaid-eligible individuals who qualify for the IMD exclusion waiver.
• The State will pay 36.67% of Medicaid costs, while federal funds will cover 63.33% of the costs for traditional Medicaid.
• The cost per day for residents at the MHI will not change from the cost in effect in FY 2024.
• The reimbursement per day for residents at the Cherokee MHI under the waiver for the IMD exclusion will be $893.75.
• The reimbursement per day for residents at the Independence MHI under the waiver for the IMD exclusion will be $918.18.
• The Medicaid IMD revenue to the MHIs, as permitted under Iowa Code section 218.97, will increase by $2.9 million.
• The revenue returned to the General Fund, as required by Iowa Code section 218.78, will increase by $9.5 million. Of that revenue, $736,000 is from Medicare, $4.5 million is from Medicaid, and $4.3 million is from other revenue sources.
• Expenditures for Medicaid will increase by $7.4 million.
• The increased bed access and reimbursement at the MHIs will result in fewer placements at other inpatient psychiatric facilities, which will reduce Medicaid expenditures by $3.1 million.
• The net increase to Medicaid expenditures will be $4.3 million.

Cherokee MHI

• There will be one-time implementation costs at the Cherokee MHI, including infrastructure modifications, information technology (IT) equipment, additional fleet vehicles, pharmacy medication cabinets and associated IT equipment for three wards, and psychiatric safe furniture for three wards. Figure 1 shows the one-time costs to the HHS for the Cherokee MHI to implement the Bill for FY 2028.

Figure 1 — Cherokee MHI One-Time Costs for FY 2028

One-Time Need Cost

Infrastructure Modifications

North Ward 3 Remodel $ 1,135,000 North Ward 7 Remodel 860,000 North Ward 8 Remodel 1,985,000 DAS Project Management 995,000 IT Equipment 200,000 Additional Fleet Vehicles 75,000 Pharmacy Medication Cabinets and Associated IT 300,000 Psychiatric Safe Furniture 150,000 Total $ 5,700,000 Note: Totals may not sum due to rounding.

• In FY 2028, the HHS estimates that expenditures for new full-time equivalent (FTE) positions will total $2.8 million at the Cherokee MHI and $3.5 million at the Independence MHI to have staff prepared prior to FY 2029.
• The Cherokee MHI will need an additional 105.0 FTE positions to implement the Bill beginning in FY 2029. Figure 2 shows the required personnel and their salaries for FY 2029.

Figure 2 — Cherokee MHI Personnel Salaries for FY 2029 Job Classification Cost Per FTE FTE Positions Total Activities Specialist 1 $ 91,000 3.0 $ 273,000 Administrative Support Assistant 3 72,000 1.0 72,000 Behavioral Health Professional 2 144,000 1.0 144,000 Cook 1 55,000 1.0 55,000 Food Service Worker 53,000 4.0 211,000 IT Specialist 3 109,000 1.0 109,000 IT Support Worker 3 69,000 1.0 69,000 IT Specialist 2 95,000 1.0 95,000 Laundry Worker 1 58,000 2.0 116,000 Licensed Practical Nurse 95,000 11.0 1,046,000 Maintenance Repairer 73,000 4.0 291,000 Nurse Clinician 119,000 1.0 119,000 Nurse Supervisor 131,000 2.0 262,000 Pharmacy Technician 69,000 1.0 69,000 Physician (Psychiatrist) 452,000 1.0 452,000 Physician Assistant/Nurse Practitioner 151,000 3.0 454,000 Registered Nurse 114,000 22.0 2,502,000 Resident Treatment Technician 79,000 4.0 317,000 Resident Treatment Worker 69,000 36.0 2,485,000 Social Worker 3 96,000 5.0 478,000 Total 105.0 $ 9,620,000 Note: Totals may not sum due to rounding.

• There will be ongoing costs at the Cherokee MHI to implement the Bill, which will total $1.5 million annually beginning in FY 2029. These ongoing costs include payroll costs related to overtime, food supplies, pharmacy and other medical services, and miscellaneous supplies.

Independence MHI

• There will be one-time implementation costs at the Independence MHI, including infrastructure modifications, IT equipment, additional fleet vehicles, pharmacy medication cabinets and associated IT equipment for three wards, psychiatric safe furniture for three wards, and office supplies. Figure 3 shows the one-time costs to the HHS for FY 2028 to implement the Bill.

Figure 3 — Independence MHI One-Time Costs for FY 2028

One-Time Need Cost

Infrastructure Modifications

Cromwell Children’s Unit and School $ 7,995,000 Reynolds Building (Wards B and C) 500,000 Witte Building (Ward 22) 50,000 DAS Project Management 138,000 IT Equipment 700,000 Additional Fleet Vehicles 75,000 Pharmacy Medication Cabinets and Associated IT 300,000 Psychiatric Safe Furniture 180,000 Office Furniture 150,000 Total $ 10,087,000 Note: Totals may not sum due to rounding.

• The Independence MHI will need an additional 132.0 FTE positions to implement the Bill beginning in FY 2029. Figure 4 shows the required personnel and their salaries for FY 2029.

Figure 4 — Independence MHI Personnel Salaries for FY 2029 Job Classification Cost Per FTE FTE Positions Total Accounting Clerk 2 $ 63,000 1.0 $ 63,000 Activities Specialist 1 91,000 6.0 545,000 Administrative Support Assistant 1 58,000 1.0 58,000 Administrative Support Assistant 2 63,000 1.0 63,000 Behavioral Health Professional 2 144,000 3.0 433,000 Custodial Worker 53,000 6.0 316,000 Driver 60,000 2.0 120,000 Education Aide 66,000 2.0 132,000 Educator 101,000 6.0 607,000 Food Production Supervisor 83,000 1.0 83,000 Food Service Worker 53,000 2.0 105,000 IT Specialist 3 109,000 1.0 109,000 IT Support Worker 3 69,000 1.0 69,000 Laundry Worker 1 58,000 2.0 116,000 Licensed Practical Nurse 95,000 10.0 951,000 Maintenance Repairer 73,000 2.0 146,000 Nurse Supervisor 131,000 5.0 656,000 Physician (Psychiatrist) 452,000 1.0 452,000 Physician Assistant/Nurse Practitioner 151,000 4.0 605,000 Purchasing Assistant 1 66,000 1.0 66,000 Registered Nurse 114,000 20.0 2,274,000 Resident Treatment Technician 79,000 8.0 635,000 Resident Treatment Worker 69,000 40.0 2,761,000 Social Worker 3 96,000 5.0 478,000 Treatment Program Administrator 138,000 1.0 138,000 Total 132.0 $ 11,982,000 Note: Totals may not sum due to rounding.

• There will be ongoing costs at the Independence MHI to implement the Bill, which will total $1.9 million annually beginning in FY 2029. These ongoing costs include payroll costs related to overtime, food supplies, pharmacy and other medical services, miscellaneous supplies, and professional services.

Fiscal Impact

The total anticipated expenditures for HF 2292 are estimated to be $595,000 for FY 2027, of which the State cost is $298,000 and the federal cost is $298,000. For FY 2028, expenditures are estimated to be $22.3 million, of which the State cost is $22.2 million and the federal cost is $139,000. For FY 2029, expenditures are estimated to be $30.0 million, of which the State cost is $26.8 million and the federal cost is $3.2 million.

In addition, HF 2292 is expected to increase the Medicare, Medicaid, and other revenue returned to the General Fund under Iowa Code section 218.78 by $9.5 million annually beginning in FY 2029. Medicaid revenue retained by the MHIs under Iowa Code section 218.97 is expected to increase by $2.9 million annually.

Figure 5 shows the breakout of expenditures to implement HF 2292 in FY 2027. Figure 6 shows the breakout of the total expenditures to implement HF 2292 in FY 2028. Figure 7 shows the breakout of the total expenditures to implement HF 2292 for FY 2029, as well as the anticipated revenues and total fiscal impact.

Figure 5 — Estimated Costs for FY 2027 for House File 2292

Expenditure State Federal Total

Waiver Technical Assistance Contract $ 258,000 $ 258,000 $ 515,000 Actuarial Services 40,000 40,000 80,000 Total $ 298,000 $ 298,000 $ 595,000 Note: Totals may not sum due to rounding.

Figure 6 — Estimated Costs for FY 2028 for House File 2292

Expenditure State Federal Total

Waiver Technical Assistance Contract $ 129,000 $ 129,000 $ 258,000 Actuarial Services 10,000 10,000 20,000 Cherokee One-Time Costs 5,700,000 0 5,700,000 Cherokee FTE Positions 2,782,000 0 2,782,000 Independence One-Time Costs 10,087,000 0 10,087,000 Independence FTE Positions 3,471,000 0 3,471,000 Total $ 22,178,000 $ 139,000 $ 22,317,000 Note: Totals may not sum due to rounding.

Figure 7 — Estimated Costs for FY 2029 for House File 2292

Expenditure State Federal Total

Waiver Technical Assistance Contract $ 64,000 $ 64,000 $ 128,000 University of Iowa Contract 275,000 275,000 550,000 Medicaid Expenditures 1,458,000 2,854,000 4,312,000 Cherokee Ongoing Costs 1,507,000 0 1,507,000 Cherokee FTE Positions 9,620,000 0 9,620,000 Independence Ongoing Costs 1,900,000 0 1,900,000 Independence FTE Positions 11,982,000 0 11,982,000 Total Expenditures $ 26,806,000 $ 3,193,000 $ 29,999,000 Medicaid Revenue Retained by MHIs $ -2,887,000 $ 0 $ -2,887,000 MHI Revenue Returned to the General Fund -9,500,000 0 -9,500,000 Grand Total $ 14,419,000 $ 3,193,000 $ 17,612,000 Note: Totals may not sum due to rounding.

Source

• Department of Health and Human Services