In December 1987, Congress approved legislation designed to improve the quality of services furnished to residents of nursing homes by strengthening the standards which such homes must meet in order to be reimbursed under the federal-state Medicaid program. Since mental health treatment is generally not available in nursing homes, this practice is not in the best interest of people with mental illnesses. The average length of stay for persons with a serious mental illness is about twice the average length of stay for physically ill persons. The law adopts a two-step approach to address the problem of inappropriate placements of people with mental illnesses in nursing homes. It restricts new admissions and requires a screening of those who are already placed to determine whether they should be transferred to a more appropriate setting.
Similar provisions apply to persons with mental retardation.
The law also required that nursing homes conduct annual resident assessments to determine the residents' needs and then provide services to ensure the resident maintains the highest practicable physical, mental and psychological well-being. States are required to develop appropriate rates of payment for nursing homes to take into account this new requirement. The implementation of this Act has been extremely slow. The regulations were then published in draft form in March 1990. In May 1990, HCFA finalized its nursing facility resident assessment instrument guidelines.