The Omnibus Reconciliation Act of 1987 (OBRA) and P.L. 100-203, Section 4211(c)(7), and OBRA 1990 contain provisions with major implications for persons with mental illness or intellectual disabilities who are applying to or residing in a nursing facility. The provisions were designed to eliminate the practice of inappropriately placing persons with mental illness, intellectual disabilities and related conditions in Medicaid-certified nursing facilities.

This Act mandates the department as the state mental health and intellectual disability authority to establish preadmission screening and resident review (PASRR) for all persons applying for admission to or residing in a nursing facility. Through the PASRR evaluation, the department determines whether (1) the person requires nursing facility level of care and, if so, (2) whether the person also requires specialized services (active treatment).

Specifically, the PASRR program must ensure that the following conditions are met.

Note that on October 19, 1996, the President signed into law P.L. 104-315, which amends Title XIX of the Social Security Act to repeal the requirement for an annual resident review. The amendment requires nursing facilities to notify the state mental health or intellectual disability authority, as applicable, of a significant change in the physical or mental condition of a resident who has a serious mental illness or intellectual disability. The change in condition must affect either the resident's need for continued nursing facility placement or for specialized services. A review and determination under Section 1919(e)(7) of the Act must be done promptly after the nursing facility notifies the state mental health or intellectual disability authority of the significant change in condition.