Chapter 6
Organizing and Financing
Mental Health Services

Overview of the Current Service System

The Costs of Mental Illness

Financing and Managing Mental Health Care

Toward Parity in Coverage of Mental Health Care


Appendix 6-A: Quality and Consumers’ Rights


Financing and Managing Mental Health Care

History of Financing and the Roots of Inequality

Private health insurance is generally more restrictive in coverage of mental illness than in coverage for somatic illness. This was motivated by several concerns. Insurers feared that coverage of mental health services would result in high costs associated with long-term and intensive psychotherapy and extended hospital stays. They also were reluctant to pay for long-term, often custodial, hospital stays that were guaranteed by the public mental health system, the provider of“catastrophic care.” These factors encouraged private insurers to limit coverage for mental health services (Frank et al., 1996).

Some private insurers refused to cover mental illness treatment; others simply limited payment to acute care services. Those who did offer coverage chose to impose various financial restrictions, such as separate and lower annual and lifetime limits on care (per person and per episode of care), as well as separate (and higher) deductibles and copayments. As a result, individuals paid out-of-pocket for a higher proportion of mental health services than general health services and faced catastrophic financial losses (and/or transfer to the public sector) when the costs of their care exceeded the limits.

Federal public financing mechanisms, such as Medicare and Medicaid, also imposed limitations on coverage, particularly for long-term care, of“nervous and mental disease” to avoid a complete shift in financial responsibility from state and local governments to the Federal government. Existence of the public sector as a guarantor of“catastrophic care” for the uninsured and underinsured allowed the private sector to avoid financial risk and focus on acute care of less impaired individuals, most of whom received health insurance benefits through their employer (Goldman et al., 1994).

Goals for Mental Health Insurance Coverage

The purpose of health insurance is to protect individuals from catastrophic financial loss. While the majority of individuals who use mental health services incur comparatively small expenses, some who have severe illness face financial ruin without the protection afforded by insurance. For people with health insurance, the range of covered benefits and the limits imposed on them ultimately determine where they will get service, which, in turn, affects their ability to access necessary and effective treatment services. Adequate mental health treatment resources for large population groups require a wide range of services in a variety of settings, with sufficient flexibility to permit movement to the appropriate level of care. A 1996 review of the evidence for the efficacy of well-documented treatments (Frank et al., 1996) suggested that covered services should include the following:

  • Hospital and other 24-hour services (e.g., crisis residential services);
  • Intensive community services (e.g., partial hospitalization);
  • Ambulatory or outpatient services (e.g., focused forms of psychotherapy);
  • Medical management (e.g., monitoring psychotropic medications);
  • Case management;
  • Intensive psychosocial rehabilitation services; and
  • Other intensive outreach approaches to the care of individuals with severe disorders. Since resources to provide such services are finite, insurance plans are responsible for allocating resources to support treatment. Each type of insurance plan has a different model for matching treatment need with insurance support for receiving services.

Patterns of Insurance Coverage for Mental Health Care

Health insurance, whether funded through private or public sources, is one of the most important factors influencing access to health and mental health services. In 1996, approximately 63 percent of the U.S. population had private insurance, 13 percent had Medicare as a primary insurer (with about 7 percent also having supplemental private insurance), 12 percent had Medicaid (2 percent had dual Medicaid/Medicare), and 16 percent were uninsured (Bureau of the Census, 1996) (Table 6-3).

Most Americans (84 percent) have some sort of insurance coverage—primarily private insurance obtained through the workplace. However, its adequacy for mental health care is extremely variable across types of plans and sponsors. Of the more than $32 billion spent for mental health services for people with private insurance, more than $18 billion came from that insurance, almost $12 billion came from client out-of-pocket payments, and more than $2 billion came from other private sources. For these more than 167 million people, the per capita expenditure was $193 per person per year (Table 6-4).

Slightly more than 13 percent of the U.S. population are entitled to Medicare, which includes mental health coverage. The nearly $10 billion spent for mental health coverage under Medicare for nearly 31 million people reflects an average per capita expenditure of $320 per year.

Nearly 12 percent of U.S. adults (27 million low-income individuals on public support) receive Medicaid coverage (with more than 2 percent having dual Medicare/Medicaid coverage). With per capita expenditures of $481 a year for mental health services, the average cost of this coverage is 2.5 times higher than that in the private sector. An explanation for this higher average cost is the severity of illness of this population and greater intensity of services needed to meet their needs.

Finally, more than $12 billion (other than Medicaid funds) from state/local government and more than $1 billion from other Federal government block grant and Veterans Affairs funds contribute a total of almost $14 billion to cover mental health services for the uninsured. Most (75 percent) of the uninsured are members of employed families who cannot afford to purchase insurance coverage. Individuals with severe and persistent mental illness who are uninsured have the highest annual costs, leaving few resources for treatment for those with less severe disorders (see Table 6-4). By applying the technique of Frank and colleagues (1994) to 1996 funding patterns, it is estimated that public sector costs for seriously mentally ill patients receiving care in the public sector (about 5.1 million people or 1.9 percent of the population) are about $2,430 per year. As a result, although it is only a rough estimate, only about $40 per year per capita is available for those uninsured with less severe mental illness.

State mental health policymakers have begun to blend funding streams from Medicaid and the state public mental health expenditures under Medicaid“waivers,” which offer the potential of purchasing private insurance for certain public beneficiaries who have not been eligible for Medicaid. This new option has recently been raised as a means of concentrating public mental health services on forensic and other long-term intensive care programs not covered by private insurance (Hogan, 1998). Given the extremely low level of funding for the uninsured with less severe mental illness, the recently implemented Federal legislation to fund a State Child Health Insurance Program (CHIP) could result in considerably increased coverage for previously uninsured children. It is noteworthy that CHIP benefits vary from state-to-state particularly for mental health coverage.

Traditional Insurance and the Dynamics of Cost Containment

From the time they were introduced in 1929 until the 1990s, fee-for-service (indemnity) plans, such as Blue Cross/Blue Shield, were the most common form of health insurance. Insurance plans would identify the range of services they considered effective for the treatment of all health conditions and then reimburse physicians, hospitals, and other health care providers for the usual and customary fees charged by independent practitioners. To prevent the overuse of services, insurance companies would often require patients to pay for some portion of the costs out-of-pocket (i.e., co-insurance) and would use annual deductibles, much as auto insurance companies do, to minimize the administrative costs of processing small claims.

For most health insurance plans covering somatic illness, to protect the insured, costs above a certain “catastrophic limit” would be borne entirely by the insurance company. To protect the insurer against potentially unlimited claims, however,“annual” or“lifetime limits”—often as high as $1 million—would be imposed for most medical or surgical conditions. It was expected that any expenses beyond that limit would become the responsibility of the patient’s family.

In contrast, in the case of coverage for mental health services, insurance companies often set lower annual or lifetime limits, for reasons discussed in the following paragraphs, to protect themselves against costly claims leaving patients and their families exposed to much greater personal financial risks. The legacy of the public mental health system safety net as the provider of catastrophic coverage encouraged such practices. Further, when federal financing mechanisms such as Medicare and Medicaid were introduced, they also limited coverage of long-term care of“nervous and mental disease” to avoid shifting financial responsibility from state and local government to the Federal government.

Economists have observed that for potential insurers of mental health care or general health care, two financial concerns are key: moral hazard and adverse selection. The terms are technical, but the concepts are basic. Moral hazard reflects a concern that if people with insurance no longer have to pay the full costs of their own care, they will use more services—services that they do not value at their full cost. To control moral hazard, insurers incorporate cost-sharing and care management into their policies. Adverse selection reflects a concern that, in a market with voluntary insurance or multiple insurers, plans that provide the most generous coverage will attract individuals with the greatest need for care, leading to elevated service use and costs for those insurers independent of their efficiency in services provision. To control adverse selection, insurers try to restrict mental health coverage to avoid enrolling people with higher mental health service needs.

Both forces are at work in the insurance market, and they tend to be stronger for coverage of some mental health services than for some general health services. There is evidence of moral hazard, for example, from the RAND Health Insurance Experiment, which showed that increased use of insured services in response to decreased out-of-pocket costs for consumers (known as“demand response”) is twice as great for outpatient mental health services (mostly psychotherapy) as for all ambulatory health services taken together (Manning et al., 1989). The RAND study did not include a sufficient number of individuals who used inpatient care or who were severely disabled to make a determination of the effect of changes in price on hospital care or on outpatient use by individuals with severe mental disorders.

While these economic forces are important, insurer responses to them may have been exaggerated. In the fee-for-service insurance system, for example, some insurers have addressed their concerns about moral hazard by assigning higher cost-sharing to mental health services. Coverage limitations, imposed to control costs, have been applied unevenly, however, and without full consideration of their consequences. In particular, higher cost-sharing, such as placing a 50 percent copayment on outpatient psychotherapy, may reduce moral hazard and inappropriate use, but it may also reduce appropriate use. Limits on coverage may reduce adverse selection but leave people to bear catastrophic costs themselves.

In addition, such measures do not address the issue of fairness in coverage policy. In particular, although similar levels of price response and presumed moral hazard occur in other areas of health care, mental health coverage is singled out for special cost-sharing arrangements. There may be a rationale for some level of differential cost-sharing, but such policies are fair only if the benefit design policies are applied to all services in which demand is highly responsive to price.

Managed Care

Managed care represents a confluence of several forces shaping the organization and financing of health care. These include the drive to deliver more highly individualized, cost-effective care; a more health-promoting and preventive orientation (often found in health maintenance organizations, or HMOs); and a concern with cost containment to address the problem of moral hazard. Managed care implies a range of financing and payment strategies that depart in important ways from traditional fee-for-service indemnity insurance. Managed care strategies have resulted in dramatic savings in a wide range of settings over the past decade (Bloom et al., 1998; Callahan et al., 1995; Christianson et al., 1995; Coulam & Smith, 1990; Goldman et al., 1998; Ma & McGuire, 1998).

Major Types of Managed Care Plans

Health maintenance organizations were the first form of managed care. Originally developed by the Kaiser Foundation to provide health services to company employees, these large group practices initiated contracts to provide all medical services on a prepaid, per capita basis. Medical staff members were originally salaried and not paid on a fee-for-service basis, as is the case in most other financing arrangements. However, in recent years, some HMOs have developed networks of physicians—so-called Independent Practice Associations, or IPAs—who are paid on a fee-for-service basis and function under common management guidelines.

Health maintenance organizations initially treated only those mental disorders that were responsive to short-term treatment, but they reduced copayments and deductibles for any brief therapy. There was an implicit reliance on the public mental health system for treatment of any chronic or severe mental disorder—especially those for whom catastrophic coverage was needed.

Preferred Provider Organizations (PPOs) are managed care plans that contract with networks of providers to supply services. Providers are typically paid on a discounted fee-for-service basis. Enrollees are offered lower cost-sharing to use providers on the“preferred” list but can use non-network providers at a higher out-of-pocket cost.

Point-of-Service (POS) plans are managed care plans that combine features of prepaid (or capitated) and fee-for-service insurance. Enrollees can choose to use a network provider at the time of service. A significant copayment typically accompanies use of non-network providers. Although few plans are purely of one type, an important difference between a PPO and a POS is that in a PPO plan, the patient may select any type of covered care from any in-network provider, while in a POS, use of in-network services must be approved by a primary care physician.

In Carve-out Managed Behavioral Health Care, segments of insurance risk—defined by service or disease—are isolated from overall insurance risk and covered in a separate contract between the payer (insurer or employer) and the carve-out vendor. Even with highly restrictive admission criteria, many HMOs have recently found it cost effective to carve out mental health care for administration by a managed behavioral health company, rather than relying on in-house staff. This arrangement permits a larger range of services than can be provided by existing staff without increasing salaried staff and management overhead costs. Carve-outs generally have separate budgets, provider networks, and financial incentive arrangements. Covered services, utilization management techniques, financial risk, and other features vary depending on the particular carve-out contract. The employee as a plan member may be unaware of any such arrangement. These separate contracts delegate management of mental health care to specialized vendors known as managed behavioral health care organizations (MBHOs).

There are two general forms of carve-outs: payer carve-outs and health plan subcontracts. In payer carve-outs, an enrollee chooses a health plan for coverage of health care with the exception of mental health and must enroll with a separate carve-out vendor for mental health care. Examples of payer carve-outs include the state employee health plans of Ohio and Massachusetts. In health plan subcontracts, administrators of the general medical plan arrange to have mental health care managed by a carve-out vendor or MBHO; the plan member does not have to take steps to select mental health coverage. Examples of payer carve-outs include health plans associated with Prudential and Humana.

The Ascent of Managed Care

Over the past decade, the pace of change in U.S. health insurance has been striking. In 1988, insurance based on fee-for-service was the predominant method of financing health care. But in the ensuing decade, various management techniques were added such that insurance that used“unmanaged fee-for-service” as its payment mechanism plummeted from 71 percent to 15 percent (HayGroup, 1998). Managed care arrangements (HMO, PPO, or POS plans), which fundamentally alter the way in which health care resources are allocated, now cover the majority (56 percent) of Americans (Levit & Lundy, 1998). During the 1988–1998 decade, PPO plans rose from being 13 percent to 34 percent of primary medical plans, with a similar rapid rise in HMO plans from 9 percent to 24 percent. Point-of-service (POS) plans rose more slowly as the principal medical plan, from 12 percent in 1990 to 20 percent in 1998 (HayGroup, 1998).

Managed care has also made significant inroads into publicly funded health care. Between 1988 and 1997, Medicaid enrollees in managed care rose from 9 percent to 48 percent, while Medicare enrollees in managed care increased from 5 percent to 14 percent. Most Medicaid and Medicare managed care growth has occurred since 1994. In Medicaid, growth is primarily focused on the population receiving Temporary Aid to Needy Families support (as opposed to the population with severe and chronic mental illness, eligible for Medicaid because of Supplemental Security Income-eligible disability) (HayGroup, 1998).

In 1999, almost 177 million Americans with health insurance (72 percent) were enrolled in managed behavioral health organizations. This represents a 9 percent increase over enrollment in 1998 (OPEN MINDS, 1999). This administrative mechanism has changed the incentive structure for mental health professionals, with“supply-side” controls (e.g., provider incentives) replacing“demand-side” controls (e.g., benefit limits) on service use and cost. In addition, the privatization of service delivery is increasing in the public sector. As a result of these changes, access to specific types of mental health services is increasingly under the purview of managed behavioral care companies and employers.

It is difficult to know precisely how many people are enrolled in various forms of carve-out plans. Recent reports estimate that 35 percent of employers with more than 5,000 employees have created payer carve-outs, while only 5 percent of firms with fewer than 500 employees have adopted them (Mercer/Foster-Higgins, 1997). A survey of 50 large HMOs revealed that roughly half of HMO enrollees were enrolled in carve-out plans (OPEN MINDS, 1999). The carve-out concept has also been adopted by a number of state Medicaid programs. At most recent count, 15 states are using payer carve-out arrangements to manage mental health care (Substance Abuse and Mental Health Services Administration [SAMHSA], 1998). More than 20 states use carve-out arrangements to manage non-Medicaid public sector services.

As the states have adopted Medicaid managed care for mental health, at least two distinct models have emerged. States that entered managed care early have tended to issue contracts to private sector organizations to perform both administrative (payments, network development) and management (utilization review) functions. States that entered managed care more recently have tended to contract administrative functions with Administrative Services Organizations (ASOs), while retaining control of management functions. Under any of these arrangements, financial risk for the provision of care to a particular population can be distributed in a variety of ways (Essock & Goldman, 1995).

As the foregoing discussion indicates, mental health services associated with private insurance, public insurance, and public direct-service programs often have managed mental health care arrangements that are organized differently than are overall health services. These arrangements have emerged mostly within the past decade. The next section describes how the ascent of managed care has shifted patterns of resource allocation toward financial incentives aimed at providers, organizational structure, and administrative mechanisms and away from the use of benefit design (e.g., using copayments and annual deductibles) meant to encourage consumer cost-sharing. As a result, cost control and care management are accomplished through a more complicated set of policies than at any time in the recent past, and benefit design is no longer the only factor in determining service allocation or predicting costs to a health insurer.

Dynamics of Cost Controls in Managed Care

In a managed care system, the moral hazard of unnecessary utilization need not be addressed through benefit design. Utilization typically is controlled at the level of the provider of care, through a series of financial incentives and through direct management of the care. For example, managed care reduces cost in part by shifting treatment from inpatient to outpatient settings, negotiating discounted hospital and professional fees, and using utilization management techniques to limit unnecessary services. In this fashion, at least theoretically, unnecessary utilization, the moral hazard, is eliminated at the source, on a case-by-case basis.

Adverse selection may be addressed through regulations, such as mandates in coverage that require all insurers in a market to offer the same level of services. In this way, no one insurer runs the risk that offering superior coverage will necessarily attract people who are higher utilizers of care. Efforts to regulate adverse selection may not produce the intended effect, however, when insurers who offer the same services use management techniques to control costs by restricting care to those who use services most intensely—effectively denying care to those who most need it. In such instances, patients with the greatest needs might become concentrated in plans with the most generous management of care. This may lead to financial losses for such plans or encourage them to cut back on services for those who need care most or to divert resources from other beneficiaries.

As managed care grows, the structure of the industry changes, with companies merging and disappearing. Managed behavioral health care organizations now cover approximately 177 million Americans, with only three companies controlling 57 percent of all insured persons (or 91 million covered lives) (OPEN MINDS, 1999). However, the range of management controls currently applied to enrollees in covered plans extends from simple utilization review of hospitalizations on an administrative services only (ASO) contract to prepaid, at-risk contracts with extensive employee assistance plan (EAP) screening and networks of eligible mental health specialists and hospitals providing services for discounted fees. If and when mental health service benefits expand, it is possible for managed behavioral health plans to tighten the level of supply-side controls to maintain costs at a desired level.

Some consumers and consumer advocates have expressed concern that the management measures used to cut the costs of health care may also lower its quality and/or accessibility. Although this issue was addressed by the President’s Advisory Commission on Consumer Protection and Quality in the Health Care Industry and by current Patient Bill of Rights legislation, more research is needed to understand the effects of industry competition on costs, access, and quality. (See Appendix 6-A for Patient Bill of Rights.)

Managed Care Effects on Mental Health Services Access and Quality

Managed care demonstrably reduces the cost of mental health services (Ma & McGuire, 1998; Goldman et al., 1998; Callahan et al., 1995; Bloom et al., 1998; Christianson et al., 1995; Coulam & Smith, 1990). That was one of its goals—to remove the excesses of overutilization, such as unnecessary hospitalization, and to increase the number of individuals treated by using more cost-effective care. This was to be accomplished through case-by-case“management” of care. The risk of cost-containment, however, is that it can lead to undertreatment. Research is just beginning on how managed care cost-reduction techniques affect access and quality. Excessively restrictive cost-containment strategies and financial incentives to providers and facilities to reduce specialty referrals, hospital admissions, or length or amount of treatment may ultimately contribute to lowered access and quality of care. These restrictions pose particular risk to people on either end of the severity spectrum: individuals with mental health problems may be denied services entirely, while the most severely and persistently ill patients may be undertreated. These risks must be seen, however, in the context of similar problems inherent in fee-for-service practice. Access and quality problems and the failure to treat those most in need predate managed care.

Impact on Access to Services

Despite considerable concern that managed care cost reductions may inappropriately restrict access to mental health services, the actual impact of these reductions has received relatively little systematic study. In addition, there are currently no benchmark standards for access to specialty mental health services.5 A system to measure access and track it over time is clearly needed. Establishing targets for treated prevalence6 is also problematic because the appropriate level and type of service utilization for specific population groups is only beginning to be documented (McFarland et al., 1998).

The term “access to mental health services” refers generally to the ability to obtain treatment with appropriate professionals for mental disorders.7

Having health insurance—and the nature of its coverage and administration—are critical determinants of such access. But so are factors such as the person’s clinical status and personal and sociocultural factors affecting desire for care; knowledge about mental health services and the effectiveness of current treatments; the level of insurance copayments, deductibles, and limits; ability to obtain adequate time off from work and other responsibilities to obtain treatment; and the availability of providers in close proximity, as well as the availability of transportation and child care. In addition, because the stigma associated with mental disorders is still a barrier to seeking care, the availability of services organized in ways that reduce stigma—such as employee assistance programs—can provide important gateways to further treatment when necessary.

A small number of studies provide a limited picture of access to managed behavioral health care. It has been found that the proportion of individuals receiving mental health treatment varies considerably across managed behavioral health plans (National Advisory Mental Health Council, 1998). Some long-term case studies of managed care’s impact on access find that the probability of using mental health care—especially outpatient care—increases after managed behavioral health care is implemented in private insurance plans (Goldman et al., 1998).

Impact on Quality of Care

The quality of care within health systems has been assessed traditionally on three dimensions: (1) the structure of the health care organization or system; (2) the process of the delivery of health services; and (3) the outcomes of service for consumers (Donabedian, 1966). Many of these dimensions are being tapped in current efforts to assess—and, it is hoped, ultimately improve—the overall quality of mental health care in the United States. These include the use of accreditation practices, clinical- and systems-level practice guidelines, outcome measures and “report cards,” and systems-level performance indicators. For example, to maximize the potential mental health benefit of patients’ contact with the primary health care sector, which 70 to 80 percent of all Americans visit at least once a year, guidelines and treatment algorithms have been developed. The Agency for Healthcare Research and Quality (AHRQ) has developed comprehensive guidelines for the treatment of depression in primary care settings (1993) as well as recommendations for the treatment of schizophrenia (Patient Outcome Research Team, Lehman & Steinwachs, 1998). Also funded by the Agency is the Depression PORT that will soon release findings on the quality and cost of the treatment of depression in managed, primary care practice (Wells et al., in press). In addition, multiple studies are now under way to develop better coordination between primary care physicians and mental health specialists for management of both chronic and acute mental disorders (Katon et al., 1997; Wells, 1999). These studies are described in more detail in Chapters 4 and 5.

Current incentives both within and outside managed care generally do not encourage an emphasis on quality of care. Nonetheless, some managed mental health systems recognize the potential uses of quality assessment of their services. These include monitoring and assuring quality of care to public and private oversight organizations; developing programs to improve services or outcomes from systematic empirical evaluation; and permitting reward on the basis of quality and performance, not simply cost (Kane et al., 1994, 1995; Institute of Medicine, 1997; President’s Advisory Commission on Consumer Protection and Quality in the Health Care Industry, 1997). In the public sector, the Center for Mental Health Services (CMHS), in conjunction with the Mental Health Statistics Improvement Program, has developed a Consumer-Oriented Report Card. Designed to obtain a consumer perspective on access, appropriateness, prevention, and outcome, it is being tested in 40 states under CMHS grant support.

Efforts are ongoing within managed behavioral health systems to develop quality-reporting systems based on existing administrative claims data, which measure aspects of the process of care as well as some clinical outcome data (American Managed Behavioral Healthcare Association, 1995; American College of Mental Health Administrators, 1997; National Committee for Quality Assurance, 1997).

The first comparative study of quality indicators within the managed behavioral health care industry (Frank & Shore, 1996) has revealed very diverse practices. For example, across the responding companies, expected outpatient followup visits within 30 days after hospital discharge for depression occurred among 92 percent of patients in one plan, but only 39 percent in another. One indicator of inadequate hospital treatment or discharge planning is rapid hospital readmission after discharge—an event that occurred in 2 percent to 41 percent of discharges. Another indicator of quality is the proportion of patients with schizophrenia who received a minimum of four medication visits per year; this figure ranged from 15 percent to 97 percent. Measures of access (treated prevalence rates) also varied widely. Although methodological problems probably contribute to the variation among companies, these data raise concerns about real differences in quality among managed behavioral health care companies. They also underscore the need to improve quality measurement.

In a more positive vein, investigators recently found that rates of readmission after hospital discharge were not adversely affected by the 1993 transition to a managed behavioral health carve-out for Massachusetts state employees. In fact, the proportion of cases receiving outpatient followup (within 15 or 30 days) actually increased for patients with major depressive disorder, despite substantial reductions in inpatient utilization and costs. However, because the study was based on the plan’s administrative claims data, only limited conclusions could be made about the quality of care provided (Merrick, 1997).

Clinical outcome data systems, although more expensive and complicated than administrative data systems, have much greater potential for evaluating how programs and practices actually affect patient outcomes. Several managed care companies are currently testing the feasibility of implementing systemwide collection of clinical outcome data, to be managed through newly developed comprehensive clinical quality information systems (Goldman, 1997; Goldman et al., 1998).

Another way to measure quality takes into account outcomes outside the mental health specialty sector. Two recent studies suggest that when management and financial incentives limit access to mental health care or encourage a shift to general health care services for mental health care, disability may increase and work performance decline (Rosenheck et al., 1999; Salkever, 1998). These losses to employers may well offset management-based savings in mental health specialty costs. Findings such as these raise concern about the use of shortsighted cost-cutting measures that may contribute to less appropriate and less effective treatment, reduced work function, and no net economic benefits.

Many of the administrative techniques used in managed care (such as case management, utilization review, and implementation of standardized criteria) have the potential to improve the quality of care by enhancing adherence to professional consensus treatment guidelines (Berndt et al., 1998) and possibly improving patient outcomes (Katon et al., 1997). However, little is known about what happens when management is introduced into service systems in combination with high cost-sharing (often the case with non-parity mental health benefits) (Burnam & Escarce, 1999). These combined limitations on services may seriously inhibit the provision of full and necessary treatment and lower the quality of care. The differential impact on service use on the basis of gender or other sociocultural factors is unknown.

In summary, managed behavioral health plans differ considerably in their access and other aspects of quality in mental health care. Current practices often provide little incentive to improve quality. There is, however, some evidence that access and quality can be maintained or improved after managed care is introduced (Merrick, 1997). This is particularly important because some evidence suggests that limitations in mental health access affect people’s well-being and result in decreases in work performance, increased absenteeism, and increased use of medical services (Rosenheck et al., 1999). Outcome assessments which focus on functional improvements are particularly important in the mental health area because of the ease with which management practices have been able to reduce treatment intensity and cost of mental health services.

5 Between the early 1980s and 1990s—prior to the dominance of managed care—about 5.8 percent of U.S. adults used some type of specialty mental health outpatient services in any year. This rate now can be used as one reference point for assessing subsequent changes in access to mental health services, although there is no evidence on the appropriateness of this care.

6 Researchers and administrators often report access in terms of treated prevalence or penetration rates. These rates reflect the proportion of individuals in a given population (e.g., members of a particular managed behavioral health care plan) that use specialty mental health and/or substance abuse services in 1 year.

7 This phrase has many additional dimensions and meanings to consumers, health care providers, and health services researchers. These include (a) waiting time for emergency, urgent, and routine initial and followup appointments; (b) telephone access, including call pickup times and call abandonment rates; (c) access to a continuum of services, including treatment in the least restrictive setting; (d) access to providers from a full range of mental health disciplines; (e) choice of individual provider; (f) geographic access; and (g) access to culturally competent treatment.

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