“It is no longer the 1960s, and there is no longer the same stigma against the treatment of mental health,” said GOP Rep. Michael Burgess, a doctor representing Dallas’ affluent northern suburbs who sponsored a House bill to change the rule.

The House passed it Dec. 12. It would give states the option to treat Medicaid patients suffering from addiction for up to a month in a mental hospital on the government’s dime. The Senate Finance Committee approved a similar provision in November, so its prospects of enactment are good.

Burgess’ co-sponsor was Ritchie Torres, a Democrat from New York City’s poorest section, the South Bronx, who has spent time in the hospital for his own mental health struggles.

Public health groups including the Treatment Advocacy Center and the National Alliance on Mental Illness, as well as state Medicaid directors, support the change.

They say the 1965 rule barring Medicaid, the federal-state health care program for the poor and lower-middle income, from funding hospital treatment has had unintended consequences: a lack of psychiatric beds for people who need them. Instead, they said, many vulnerable people end up on the streets, in emergency rooms, in jails or dead.

They say the policy also perpetuates discrimination against people who suffer from drug addiction and mental illness compared to those with physical conditions, for which there’s no such exclusion.

Republicans in Congress agree. Democrats are divided.

New Jersey Rep. Frank Pallone, the top Democrat on the Energy and Commerce Committee that shepherded the bill, resisted the change, wary of a return to institutionalizing people with mental illness instead of caring for them in their homes, ideally, with a team of specialized health and social workers.

“We know that one of the best ways to help people in recovery is to ensure they have access to care in their communities,” he said.

Pallone ultimately relented because Republicans agreed to improve Medicaid coverage for some incarcerated people with substance use disorder.

But fears of reinstitutionalization have also animated civil rights advocates who support the restriction on Medicaid funds. They fear a slippery slope back to warehousing the sick and point to states like California and New York that are already experimenting with forcing patients into care.

Lifting the Medicaid rule would reduce pressure to do what’s really needed, said Lewis Bossing, senior staff attorney at the Bazelon Center for Mental Health Law: increase services in communities.

“People have better outcomes in terms of reduced hospitalization rates, reduced criminal legal system involvement, increased employment, increased measures of social integration when they’re served in the community, … versus having to be at an institution to get care,” he said.

The rise and fall of the mental hospital

States started building mental health hospitals in the 1800s, aiming to provide people with severe mental illness with care instead of throwing them in jail.

But the hospitals soon became overcrowded, understaffed and underfinanced. Abuse was rife, according to an investigation published in Life Magazine in 1946: Patients were restrained for days, thrown into solitary confinement, starved and sometimes beaten to death.

More than half a million people were in state mental health hospitals in 1963, half of them in facilities housing more than 3,000 people, President John F. Kennedy said in a speech that year.

Kennedy laid out a plan for states to build comprehensive community mental health centers, with federal support. They would combine diagnostic services, emergency psychiatric units, inpatient and outpatient services and rehabilitation.

The law establishing Medicaid two years later prohibited federal money from paying for care in mental health care facilities with more than 16 beds to avoid pouring money into what Kennedy called outdated institutional care. The rule now covers people between 21 and 64 years old.

Many state hospitals closed but the community mental health system, as Kennedy envisioned it, never came to fruition, advocates on both sides of the debate say.

Those who don’t want the Medicaid funding ban repealed would like states and the federal government to focus on building that system, while those who want to see the policy gone say both community and hospital care are needed to provide people with what they need, depending on their circumstances.

A person diagnosed with mental illness and substance use disorder needs inpatient care for doctors to stabilize them, argued Sen. Bill Cassidy (R-La.), a gastroenterologist and top member of the two committees with power over the policy.

“The people who were so opposed to this because they still want to do it in an outpatient [facility], you wonder if they’ve ever actually lived with somebody who is seriously psychotic,” Cassidy said.

Over the last decade, the Centers for Medicare and Medicaid Services has started allowing states to use federal dollars to pay for care in mental health hospitals for a limited time, as long as they obtain a waiver. Thirty-six states now have a waiver to treat people with substance use disorder and a dozen states have a waiver for treating other mental illnesses in psychiatric hospitals.

California found that its waiver to provide medication-assisted treatment for people with substance use disorder in mental hospitals helped individuals “who need a relatively intensive level of care for short-term stabilization of acute needs,” said Ann Carroll, the California Department of Health Care Services’ spokesperson.

Even so, the system as it stands is failing to provide state-of-the-art care to many patients. One-third of the 1.5 million Medicaid enrollees with opioid use disorder, for example, did not receive medication treatment in 2021, according to the HHS inspector general.

The 2018 SUPPORT Act, a landmark law meant to provide prevention, treatment and recovery for people with opioid addiction, gave states a new, albeit temporary, choice to provide care in psychiatric hospitals for up to a month without having to obtain a waiver.

That option, which only South Dakota and Tennessee have taken, expired in September. The SUPPORT Act reauthorization bill the House passed in mid-December would reup the option and make it permanent.

Pallone argued at a House Energy and Commerce hearing this summer that the low uptake showed that the waivers were sufficient. But Burgess and other Republicans said the waivers were burdensome and that making the option permanent would incentivize more states to use it.

The Senate Finance Committee also voted in November to make the option permanent. Sen. Maggie Hassan (D-N.H.), who introduced the legislation with Republican Sens. John Thune of South Dakota and Marsha Blackburn of Tennessee, emphasized the 30-day limit and the requirement to provide medication. She described medication treatment — using drugs like buprenorphine to wean patients off stronger opioids — as “the gold standard for treating addiction.”

It’s a rare issue on which Republicans aren’t at odds with the public health establishment.

A repeal of the funding ban wouldn’t mean a return to the 1965 mental health care model “because that is just not where the system is today, that’s not where the clinical understanding is today and that’s not where any of the conversation is today,” said Jack Rollins, the director of federal policy at the National Association of Medicaid Directors.

Forced care and the slippery slope

But there’s still a powerful perception among many in the public that mental hospitals are akin to prisons and that opening the door to voluntary care will lead to forced treatment.

When some people think of mental hospitals, they see the one in “One Flew Over the Cuckoo’s Nest,” the 1962 novel by Ken Kesey, or its 1975 film adaptation in which Jack Nicholson played a patient who was saner than the nurse caring for him.

“A faulty assumption is that [mental health institutions] are like therapeutic settings. We know there’s a history in this country of institutions not being particularly therapeutic places,” Bazelon Center for Mental Health Law’s Bossing said.

He pointed to reports in recent years from Washington’s disability rights watchdog alleging abuse and neglect at one public and one private mental health hospital in the capital. Representatives of the institutions said they were investigating the accusations and would make changes if necessary.

In 2021, Virginia announced and quickly reversed a decision to close five of the state’s eight psychiatric hospitals to new admissions due to overcrowding and understaffing.

And reinstitutionalization, albeit on a small scale, is happening.

New York has sent about 130 people per week, involuntarily, to hospitals for psychiatric evaluation since May as part of a plan by Mayor Eric Adams to treat people who are unable to meet their basic needs.

On the other side of the country, California Gov. Gavin Newsom has included ways to compel people into care in his mental health system overhaul. In March, Californians will decide on a $6.4 billion bond proposal Newsom has pitched to build nearly 25,000 psychiatric and addiction beds.

Representatives of community mental health organizations in California plan to oppose the changes.

In New York City, a group of civil rights lawyers filed a class-action suit against Adams’ directive and want more data on its implementation to see whether it’s disproportionately affecting people of color.

Weighing the politics

Still, Newsom and Adams are reacting to growing public and political pressure caused by a massive crisis of homelessness and drug addiction.

Drug use spiked during the Covid pandemic, as evidenced by the record levels of fatal overdoses — now more than 100,000 a year.

Homelessness rose by 12 percent between 2022 and 2023 nationwide as rents surged and pandemic-era aid ended. More than 650,000 people were experiencing homelessness on a single night in January 2023, according to the Department of Housing and Urban Development.

California is home to the most unhoused people of any state — some 181,000 people — followed by New York, with some 103,000.

Politicians fear open-air drug markets and tent encampments in their cities could hurt them at election time.

And they’re increasingly confident that caring for more of those suffering on the streets in mental hospitals won’t become a similar political liability.

“It doesn’t have to become a warehouse, you know, ‘One Flew Over a Cuckoo’s Nest’. Absolutely not. That’s wrong, it should not happen,” Cassidy said.

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