June 18, 1997
"Parity in Coverage of Mental Health Services
in an Era of Managed Care"
Bernard S. Arons, M.D., Director, Center for Mental Health Services (CMHS), Substance Abuse and Mental Health Services Administration (SAMHSA), U.S. Department of Health and Human Services
CMHS supports the improvement of systems of mental health care to ensure high quality and comprehensive services. Within the area of parity for mental health insurance coverage, the Center works closely with NIMH to assure effective coordination and avoid duplication. CMHS and NIMH share results of studies related to mental health insurance coverage and are cooperating in improving the quality of actuarial estimates of policy options for increasing such coverage.
Parity is an important public health issue. People in need who are unable to obtain services or who exhaust benefits available through their own health insurance often seek help from the public system. As private coverage declines, the burden on the public system increases. Some receive help that is too little or too late, and care is disjointed, discontinuous, uncoordinated, and inconsistent.
Issues of parity also are not limited to mental disorders. In any year, 21% of those with a mental disorder also have substance abuse or dependence.
SAMHSA has initiated a three-part effort to develop information on parity issues and disseminate it to employers, policy makers, and others.
First, the agency is tracking trends in insurance coverage. Under the agency's managed care initiative, SAMHSA has contracted with Foster Higgins, the American Association of Health Plans, and the American Managed Behavioral Healthcare Association. The objective is to gain additional information about mental health/substance abuse (MH/SA) benefits and services that are available. The surveys gather information on employer-provided health insurance, on HMOs, and carve-out specialized behavioral health care programs. These efforts already are adding to the evidence that the problem of differential coverage for MH/SA services is growing worse.
Second, the agency is conducting studies on insurance parity. SAMHSA has commissioned Mathematica Policy Research to analyze the cost of providing mental health and substance abuse insurance coverage that is comparable to coverage provided for general health. The study, available in Fall 1997, will:
- summarize previous estimates of costs of providing expanded coverage for MH/SA services;
- update such estimates and separately assess costs of alternative policy options for increasing coverage of MH/SA services;
- describe current state parity legislation; and
- describe the effects on utilization and costs of MH/SA services in states having such legislation.
Third, SAMHSA is communicating with employers and others about insurance parity. Although some employers have generous MH/SA benefits as part of their health insurance plans, information about such plans is limited. As part of future plans, CMHS intends to develop detailed reports on the experience of a limited number of such employers and benefit packages, utilization, costs, and work force effects.
CMHS also is developing ways to disseminate what we know about current insurance practices and the costs of providing equitable MH/SA coverage to a wider audience. This reflects the belief that improvements in insurance coverage are as much a matter of education as of legislative mandates.
Understanding the issues and consequences of insurance parity is crucial to our overall goal of better quality MH/SA care for everyone.
Michael F. Hogan, Ph.D.; Director, Ohio Department of Mental Health
The state of Ohio offers two perspectives on the issue of parity or nondiscriminatory coverage for mental health treatment.
First, like all states, Ohio maintains a state-financed mental health system in the absence of adequate commercial health insurance. This system is reformed, but the taxpayer costs of needed public care are substantial, and a separate governmentally administered system increases stigma for consumers.
Second, Ohio offers nondiscriminatory mental health and substance abuse treatment coverage (that is, insurance that is comparable to coverage for other illnesses) to state employees and their dependents. Reviewing Ohio's experience illustrates the cost and quality implications of nondiscriminatory mental health coverage.
The relationship between private/commercial health insurance and public costs
Since the nineteenth century, state governments have borne the primary responsibility for maintaining mental health services for people who could not get private care. (The federal government helps finance this system primarily through Medicaid, and in many states such as Ohio counties have a significant financial and management role. States provide most financing for this system, and typically are legally responsible for its operation.)
In Ohio, the overall cost of the public mental health system is about $1billion yearly. The system cares for about 250,000 individuals annually. Under 1988 legislation sponsored by then State Senator (now U.S. Congressman) David Hobson, Ohio reformed its system by moving from institutional care to community support, and from state administration to local management at the county level. This reform has been very successful, placing Ohio in a leadership position among the states, although many states now have adopted comparable reforms.
Maintaining a separate public system is increasingly problematic, however. The great majority of individuals with a serious mental illness receiving publicly sponsored care have lost commercial health insurance because of unemployment and because the costs of their care exceeded limits in their policies. They are now caught in a Catch-22 situation, unable to regain private health coverage because of "pre-existing conditions" and dependent on public services (for example, Medicaid coverage for their medication costs) that are oriented to low-income persons. As a consequence, the reformed public mental health system has disincentives to wellness and employment that resemble disincentives in the welfare system.
Ohio's experience with parity coverage for state employees
Ohio offers another perspective on parity mental health coverage because the state offers such coverage to all state employees and their dependents. The history of this five-year-old program illustrates the impact of providing such insurance.
Like many large employers in the late 1980s, Ohio offered relatively generous mental health insurance coverage to its employees compared with the coverage available to many Americans. The limits on coverage, however, were greater than those for care of physical illness (greater co-pays and deductibles, limits on covered services, and lower annual and lifetime limits). Paradoxically, state costs under this fee-for-service program also were increasing rapidly.
In response, the state has phased in a managed care program which has simultaneously eliminated all annual and lifetime coverage limits and reduced co-pays to $10 per outpatient session and $100 per episode of hospitalization. The range of available benefits also has been increased, for example, by adding coverage for residential treatment. Costs are contained and care is coordinated by the managed care firm that administers the benefit (currently, United Health Care).
Under this parity/managed care program, state costs have been reduced below anticipated levels, access to care has been increased over the levels under fee-for-service care, and satisfaction is high. Ohio's experience with providing parity coverage suggests that providing nondiscriminatory coverage will not increase costs for employers already providing a moderate mental health benefit, if managed care is utilized.
Darrel A. Regier, M.D., M.P.H.; Associate Director for Epidemiology and Services Research; National Institute of Mental Health, National Institutes of Health
In its report accompanying the 1997 appropriations bill (Senate Report No 104-368), the Senate Appropriations Committee requested that the National Advisory Mental Health Council (NAMHC) report on what is known about the costs of providing equitable coverage for people with mental illness--particularly those illnesses that are "severe and clearly identifiable, diagnosable, and treatable." The NAMHC also was asked to report on current efforts by the National Institute of Mental Health (NIMH) to investigate managed care arrangements relevant
Current information concerning how parity and/or managed care affect mental health utilization and costs is both inconsistent and inconclusive, and national data are not yet available. Prior estimation efforts within the past five years, made in response to Congressional interest and requests by both public and private sponsors, were hampered by many factors. Among those factors were reliance on outmoded economic and actuarial models using data from the pre-managed care era, and lack of empirical information on current practice patterns.
To overcome many of these limitations, a special NAMHC workgroup is developing a new comparative empirical database that can inform economic assumptions and models for estimating national effects of parity and managed care on the costs of mental health services. The database builds on cost and utilization data from several states that have implemented parity, and on updated empirically based models that use the experience of managed care in the context of generous (parity) mental health benefits. Although the workgroup's study is far from complete, the major results to date are these:
- Very recent findings, based on empirical studies and economic simulations across diverse populations, managed care approaches, and parity structures suggest that the introduction of parity in combination with managed care results in lowered costs and lower premiums (or, at most, very modest cost increases) within the first year of parity implementation.
- These findings do not support earlier concern about potentially high financial costs caused by parity. Prior estimates were based on fee-for-service (FFS) models that are no longer valid for a market dominated by managed care and likely to become even more so.
- The parity experience of states studied to date suggests that introducing parity nationwide would induce insurance companies to introduce managed behavioral health care approaches wherever they are not already in place.
- The national introduction of parity (as defined in the Domenici-Wellstone parity amendment to H.R. 3666) in private health insurance will not have uniform effects across states; the effects on mental health service costs and access will depend in large measure on the extent of managed care and parity already in place in those states.
- Other important and related research and policy issues include how managed care, whether parity-driven or not, affects access to mental health care and the quality and outcome of that care for all Americans who require it. These issues, as well as the expansion and refinement of findings to date, will be addressed in the NAMHC workgroup's final report.
If you have questions or comments on the LC/NIMH Decade of the Brain Project, please contact: [email protected].
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