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It was created to further outline the uses and resposibilities of medicaid, specifically with IMDs. It places more responsibility on the states for middle-aged people in need of this type of care, rather than the federal government. These changes and specifications occurred throughout the 1970's and 80's, when mental health was becoming more of an understood issue, and treatment of those with mental diseases was being improved.

It is funded through member states' voluntary contributions, and in cases where additional funding is needed, they look for money in other areas or from other contributions.