‘Carve-Out’ Plan Providing Equal Mental Health Coverage Reduces Costs, Study Finds
A case study appearing in the new issue of Health Affairs concludes that one large employer's decision to use a separate managed care organization to provide equal coverage for mental health and substance abuse services led to lower costs. The study, led by Samuel Zuvekas of the Agency for Healthcare Research and Quality, examined the impact of a state mental health parity law on a large employer, which chose to comply with the law by using a managed care "carve-out" arrangement to provide mental health and substance abuse benefits through a separate managed care organization. Because of confidentiality issues, researchers did not disclose the name of the employer, the state involved or the specific years of the study. They found that from the 12 months prior to the implementation of the carve out to the three years afterward, the employer's mental health treatment costs declined nearly 40%, even though the number of workers treated for mental illnesses rose almost 50%. For employers and spouses, costs remained steady, while expenses for children and adolescents dropped 64%. The study attributed the decline in costs to shorter lengths of stay for inpatient mental health treatment. It also found that managed care did not restrict access to outpatient treatment; the number of people using such treatment increased nearly 50% "with no change in the average number of visits" (AHRQ release, 5/14). The study concludes, "Clearly, increased management of health services offset parity's increase in benefits" (Zuvekas et al., Health Affairs, May/June 2002). Last month President Bush endorsed federal mental health parity legislation, although he did not clarify whether he supports covering all disorders or only the most severe. Business groups and insurers have raised concerns that mental health parity would lead to increased health costs (California Healthline, 4/30).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.