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The Institutions for Mental Diseases (IMD) waiver provides a pathway for states to expand substance use disorder (SUD) treatment by allowing federal Medicaid dollars to pay for services in psychiatric residential facilities (). The Medicaid legislation prohibits the use of federal Medicaid funds to pay for services provided to adults in “Institutions for Mental Diseases,” defined as hospitals, nursing facilities, or other facilities with more than 16 beds that primarily offer psychiatric treatment for mental health or substance use disorders (42 U.S.C. § 1396d(i)). This is known as the IMD exclusion, which had the goal of preventing states from shifting the cost of long-term psychiatric care to the federal government (), and over time, contributed to unequal access to mental health care by restricting Medicaid reimbursement for adults ages 21–64 in inpatient and residential psychiatric facilities (). Estimates suggest that approximately 92% of the 580 psychiatric hospitals nationwide have more than 16 beds, placing them within the IMD definition. Together, these hospitals operate roughly 63,000 beds (). In the absence of a waiver, federal Medicaid funds generally cannot be used to cover residential care in these facilities, which may limit access to Medicaid beneficiaries. This highlights the potential for IMD waivers to expand access to this likely underserved population. Individuals with substance use disorders, particularly those with co-occurring physical and mental health conditions, often benefit from short-term treatment in residential facilities before transitioning to outpatient or community-based services (; ). Section 1115 of the Social Security Act gives the Secretary of Health and Human Services authority to approve experimental or demonstration projects that promote Medicaid program objectives. Specifically, the IMD Section 1115 waiver allows states to use federal Medicaid funds for residential treatment in IMD facilities. States must apply for waiver approval through the Centers for Medicare & Medicaid Services (CMS). CMS issued two guidance letters related to the IMD waiver, one in 2015 (Centers for Medicare & Medicaid Services, 2015), and a second guidance letter in 2017 (Centers for Medicare & Medicaid Services, 2017), which emphasized requirements to ensure access to medication for opioid use disorder (MOUD). Although MOUD is highly effective, reducing cravings and withdrawal symptoms while lowering the risk of opioid overdose (, ), it remains substantially underutilized, particularly in residential treatment settings (). Adoption of waivers across a large number of states could be an opportunity to expand access to these medications.