At this week’s daylong White House Conference on Mental Health, Tipper Gore called mental illness “the last great stigma of the 20th century.” She bemoaned the practice of most insurance companies to give mental conditions less coverage than physical ones. “It’s high time our health plans treat all Americans equally,” said President Clinton. In insurance circles, the word for treating mental and physical conditions alike is parity. But while it’s a worthy goal, the administration’s plan for parity is unlikely to work.
The plan would require the 285 private insurance plans that make up the Federal Employees Health Benefits Program to cover treatment for mental illness on the same basis as other medical conditions. A plan in the FEHBP could not limit the length of stay in a psychiatric hospital or the number of visits to a psychiatrist — unless stays and visits were similarly curtailed for physical illnesses such as heart attacks or broken legs.
For the roughly 9.5 million federal employees and their dependents under the FEHBP plans, parity is intended to remove the constraints managed care has imposed on psychiatric care. These limits have gotten so severe over the past decade that some very sick patients have been kicked out of the hospital prematurely, only to be readmitted. At Baltimore’s Sheppard Pratt hospital, the rate of readmission within 30 days of discharge has doubled in the past seven years. Meanwhile the average length of stay has decreased from 30 days to seven while doctors waste hours haggling with poorly trained “utilization reviewers” for a few extra inpatient days or outpatient visits.
Similar constraints have applied to the medications we can prescribe. Most health plans have restrictive formularies that exclude some of the most expensive new breakthrough psychiatric drugs. Some formularies won’t even carry Prozac. A month’s supply of Prozac or related serotonin reuptake inhibitors, which are not yet available as generics, costs about $160 a month. The typical patient takes the medication for six to 12 months, a lot to pay out of pocket. It’s unlikely that such scrimping would occur in the treatment of heart disease or cancer.
Covering mental illness makes economic sense for employers. A four-year study of program effectiveness at McDonnell Douglas yielded a four-to-one return on investment after considering medical claims, absenteeism and turnover. According to Rutgers University, treatment for addiction reduces absenteeism by more than half, and also reduces days on disability and insurance claims for illnesses. Psychiatric benefits help businesses’ bottom line by helping them to offset the cost of general medical care, retain valuable workers, prevent costly accidents, reduce absenteeism and improve morale and productivity.
For family members with schizophrenia or employees with bipolar illness, new antipsychotic medications such as risperidone, olanzepine or quetiapine may be excluded because of cost despite the fact that they have fewer side effects than earlier drugs and are more effective in preventing relapse. The cost of depriving patients of these medications is considerable in terms of suffering, of course, but also in terms of money. “[This] has obvious implications for employment, school, and social functioning, as well as substantial costs involved for inpatient treatment via what has been referred to as a ‘revolving door,’ ” said Steven Hyman, director of the National Institute for Mental Health. Citing these very factors, the Health Care Financing Administration last year urged Medicaid directors to add the novel antipsychotic medications to their formularies.
Yet even though better access to psychiatric care is both clinically and economically wise, employers are reluctant to insure psychiatric treatment because of concerns about misuse and costs and the assumption that care is available through public hospitals and clinics. Old stereotypes of psychiatry as endless therapy or custodial care get in the way of clear thinking about benefits. The White House conference should be commended for trying to dispel these notions.
But a look at the history of the FEHBP shows why the administration’s well-meaning proposal won’t work. Back in the mid-1960s, the FEHBP was one of the few national private insurance plans which did provide broad and unrestricted coverage for treatment of mental disorders. By the 1970s, costs for treatment of mental disorders stabilized at between 7% and 8% of total health costs under the federal employees high-option Blue Cross/Blue Shield Plan. Soon this Cadillac plan attracted many federal employees with psychiatric conditions who knew their mental health bills would be high.
Such so-called adverse selection led to cost and premium spirals through the 1980s. Inevitably, insurers had to impose limits on the number of days a patient could remain in the hospital and how many times he could see his psychiatrist after discharge. Then, in the late 1980s, managed care tore through mental-health treatment and the concept of the “behavioral health-care carve-out” was born. Carve-out firms such as Merit Behavioral Health Care and Value promised to manage costs via intensive review of how patients used services. And save money they did. According to the Hay Group, an actuarial firm, the value of behavioral health care benefits in the last decade declined 54.7%, to $70 per covered individual from $154. The value of general health benefits during the same period declined only 11.5%, to $2,154 from $2,326.
This rationing of care was what sparked Mrs. Gore and others to take up the cause. Twenty-two states have passed “parity” legislation since 1990, including five so far this year. Parity bills are pending in nine more states, including California and New York. Earlier this year, Sens. Pete Domenici (R., N.M.) and Paul Wellstone (D., Minn.) introduced the Mental Health Equitable Treatment Act. This bill’s definition of parity is more modest than the White House plan’s. It would require private insurance plans to provide full parity only for the most severe mental illnesses, such as schizophrenia, bipolar illness and major depression.
We doubt that any of these efforts will solve the problem of restricted access to necessary care. Politicians can stop insurance companies from imposing formal limits on care, but they can’t prevent managed care’s micromanagers, the gatekeepers for particular medical decisions, from turning the screws even tighter on hospitals, doctors and expensive medications. Insurance companies will still aim to keep mental-health costs to no more than 3% or 4% of the health dollar; parity coverage would suggest a figure of 6% to 8%.
The true value of the parity debate is to underscore the need for insurance reform. We favor medical savings accounts paired with high-deductible catastrophic insurance. Each federal employee — and every American worker — should be able to choose among competing health insurance plans and purchase a policy with pretax dollars. Adverse selection can be avoided by requiring the same package of benefits across plans that would qualify for the deductible for catastrophic coverage. The premium savings that accompany high deductibles can go into a tax-sheltered MSA. If the president and Mrs. Gore want to treat all diseases equally, the answer is not more mandates, but more freedom for individuals to work directly with their physicians without meddling managers.
Dr. Sharfstein is CEO of Sheppard Pratt Health System, a Baltimore hospital. Dr. Satel, a psychiatrist, is a senior associate at the Ethics and Public Policy Center and a lecturer at Yale School of Medicine.