In 1991 psychiatrist Barry Perlman, M.D., became aware that Medicaid-eligible patients were relapsing after being discharged from St. Joseph’s Medical Center in Yonkers, N.Y. He discovered that once discharged, they had to wait approximately 60 days for government staffers to process their Medicaid application, and during that time they did not have any way to get their prescribed medications, explained Perlman, director of the medical center’s psychiatry department.

Perlman is also vice president of the New York State Psychiatric Association (NYSPA) and chair of the New York State Mental Health Services Council.

This problem exists for Medicaid patients nationwide, according to Perlman and spokespersons at several other mental health and advocacy organizations and at the federal Health Care Financing Administration. Each of the spokespersons said that his or her agency or association has no data on this issue and has not seen any research on it.

When asked if HCFA was studying the impact of the Medicaid coverage gap, a spokesperson who did not want to be identified said, "HCFA is continually urging states to simplify their Medicaid processes and shorten their waiting periods. However, Medicaid is a federal/state partnership program, and it is administered largely by the states."

Also nonexistent are any state or national standards to prevent this gap in care from happening, according to Clarke Ross, deputy executive director for public policy at the National Alliance on Mental Illness.

"With Medicaid and Medicare, there must be discharge planning; however, there are no standardized requirements. Thus each facility defines what this means," Ross said.

In the early 1990s, Perlman tried to solve this problem in New York by working for the passage of legislation that would stipulate presumptive eligibility for Medicaid-eligible patients. Unfortunately, the legislature passed only a study bill that instructed the New York State Office of Mental Health to research and comment on the issue.

Perlman was more successful in helping to remedy the situation in Westchester County, where he practices. The county began using some of the money saved after state hospital beds were eliminated to establish a countywide program to provide Medicaid-eligible patients with psychiatric medications until their benefits kicked in.

Fred Osher, M.D., director of the Center for Behavioral Health, Justice, and Public Policy at the University of Maryland School of Medicine, where he is an associate professor of psychiatry, maintains that a presumptive eligibility bill is needed.

In contrast, Chris Koyanagi, policy director at the Bazelon Center for Mental Health Law in Washington, D.C., said, "Although presumptive eligibility is a good idea, I don’t think it’s realistic because it would require changing federal law. Instead, states should adopt policies and funding to provide critical services during this time gap."

There are two critical questions about the Medicaid treatment gap: Why don’t patients receive medications from other sources? and Why aren’t Medicaid-eligible patients receiving Medicaid benefits in the first place?

Perlman responded to the first query by explaining, "CMHCs generally do not have pharmacies, hospitals are unable to afford to dispense free medications in large quantities over time, and samples or compassionate-use programs of pharmaceutical companies, while helpful, do not represent systematic solutions to the problem."

He added, "Nonactive Medicaid status occurs for many reasons including lapsed eligibility; never having applied, as is the case with many homeless patients; and not being able to get the documentation together and/or navigate the complex series of steps required. And finally, many get services through emergency rooms, and it is of no consequence to them that the hospitals receive no remuneration."

Regarding lapsed eligibility, it is easy to understand how this might occur, considering the requirements. "Medicaid recipients verify their income annually or more frequently by resubmitting a full application; by verifying a few items such as income, current address, and other health insurance; or by other methods, explained Chuck Milligan, a vice president at the Lewin Group research firm.

Milligan noted that reverification is not an issue for individuals who live in the vast majority of states where SSI recipients automatically receive Medicaid; however, this population comprises less than 30% of all Medicaid beneficiaries.

Lapsed eligibility may also occur for patients in IMDs and correctional facilities. (IMD is the acronym the Social Security Act uses when referring to "institutions for mental disease," which are mental illness treatment or care facilities with at least 16 beds.) In fact, when people are incarcerated, their Medicaid benefits are terminated.

Medicaid eligibility continues when a person enters an IMD, although the Medicaid program cannot pay for inpatient care in the IMD unless the person is aged 65 or older. Thus, only in a case where the person fails to recertify his or her eligibility while in the IMD would eligibility lapse, explained Lee Partridge, director of Health Policy at the American Public Human Services Association, one of whose affiliates is the National Association of State Medicaid Directors.

So for patients who have to reapply or apply initially for Medicaid, is there any time limit within which Medicaid must respond? There is, according to Terry Savela, a vice president of the Lewin Group, who said, "States are obligated to make decisions regarding Medicaid eligibility within 90 days where a disability determination is required or 45 days where no such determination is needed. On average, states take about 30 to 45 days; however, the Social Security Administration takes considerably longer to make SSI [Supplemental Security Income] eligibility decisions."

These time frames do not include the time it takes for the applicant to file the complex application.

Jeff Singer, president and chief executive officer of Health Care for the Homeless, which provides primary and mental health care, offered a detailed account of why it takes from 90 days to a year for patients in Maryland to receive their Medicaid benefits: "First, Medicaid-eligible individuals have to wait on line at 7 a.m. in hopes of seeing an eligibility worker. Often only 10 to 15 people are seen per worker each day, so if they are not chosen, they will have to keep coming back. Once chosen, they will have to provide documentation of income, expenses, and disability. To get this documentation, they have to go several other agencies and a physician. Then they have to go back to the eligibility worker. Finally, the application must be approved by two different state agencies, which don’t always communicate," said Singer.

"Many state and local administrators as well as correctional facility administrators mistakenly believe that they must terminate inmate government benefits," said Collie Brown, assistant director of the National Gains Center, which works nationally to improve the delivery of services to inmates with co-occurring mental health and substance abuse use disorders.

Mark Binkley, J.D., general counsel for the South Carolina Department of Mental Health, agreed. "Federal law does not stipulate that state Medicaid agencies disenroll Medicaid recipients in correctional facilities," he said. "Instead, administrators could simply suspend benefits, allowing these benefits to be reinstated upon the inmates’ release."

Osher noted, however, that "states have the authority to terminate Medicaid benefits when an indivdual is in a correctional facility, and many adopt policies that do so." Thus, what typically happens is that "upon being released, some inmates are given a one- or two-week supply of medication, but that’s all. No one assists them or follows up to ensure they receive care and medication," explained Brown.

Not surprisingly, many released inmates have difficulty getting connected to appropriate services, including a source for their psychiatric medications, said Brown.

"I’d estimate that of the 3,200 jails in the U.S., the majority do not have adequate discharge-planning protocols including a medication policy. Why? Because it’s expensive to supply medication for inmates being released."

Brown has a two-step solution: "Correctional facilities can suspend, not terminate, benefits, as they do in Oregon. Secondly, representatives from SSI, Medicaid, and other agencies can go to the correctional facility and assist inmates in filling out any needed paperwork before they are discharged."