The Centers for Medicare and Medicaid Services (CMS) announced on August 9 that it is now accepting applications from state Medicaid directors to participate in a demonstration project authorized by section 2707 of the Affordable Care Act (ACA) under which the institution for mental diseases (IMD) exclusion can be waived. That exclusion has prohibited Medicaid federal financial participation for individuals aged 21 through 64 in psychiatric hospitals and other facilities defined as IMDs in CMS rules. The unintended consequence of that antiquated exclusion, which has existed since 1972, is that such individuals often receive emergency psychiatric care in overcrowded emergency rooms in general, acute care hospitals, which may not be cost-effective and appropriate for them. The new demonstration project opportunity offers $75 million in federal funds over three years through a competitive solicitation to states to provide Medicaid coverage to such individuals for emergency services in private inpatient psychiatric facilities. Applications are due October 14, 2011.  States that are selected will be required to collect and report data that will be used in a rigorous evaluation of the impact and the cost-effectiveness of the demonstration project.