(CNN) The Centers for Medicare and Medicaid Services may now allow for states to pursue Medicaid reimbursements for short-term inpatient treatment in mental health facilities despite a decades-old exclusion, Health and Human Services Secretary Alex Azar announced Tuesday.

In a letter to state Medicaid directors, CMS detailed a new Medicaid waiver opportunity through which states may bypass longstanding reimbursement restrictions on inpatient psychiatric treatment, which apply to mental health facilities with more than 16 beds. Azar said the original policy has posed a "significant barrier" to people getting the treatments they need.

"There are so many stories of Americans with serious mental illness, and their families, that end in tragic outcomes because treatment options are not available or not paid for," Azar told the National Association of Medicaid Directors on Tuesday. "More treatment options are needed, and that includes more inpatient and residential options that can help stabilize Americans with serious mental illness."

In order to receive a waiver, states must guarantee that their efforts are budget-neutral to the federal government. They must also ensure that this doesn't come at the expense of community-based mental health care, and are taking steps to improve the long-term needs of people with severe mental illness after their release from a treatment facility.

"Inpatient treatment is just one part of what needs to be a complete continuum of care, and participating states will be expected to take action to improve community-based mental health care," Azar said