Out of the Shadows: Confronting America's Mental Illness Crisis by E. Fuller Torrey

Author:E. Fuller Torrey
Language: eng
Format: epub
Published: 2008-09-05T04:13:00+00:00

Managed Care or Mangled Care

Even before President Clinton proposed national health care reform in 1993, it had become evident that something was going to have to change in the organization of American medicine. Health costs had reached 12 percent of the nation's gross domestic product in 1990 and were projected to go to 18 percent by the year 2000. States spent approximately $100 billion on health costs in 1991, and this figure was projected to reach $244 billion by 2000. For many businesses, employee health costs were escalating rapidly and consuming an increasing share of profits.

The "managed care" solution to rising health care costs came from the business community. With managed care, employees must go through a gatekeeper to get reimbursed for most medical care. In its simplest form, managed care is a process of getting prior approval for a hospitalization, operation, or consultation with a specialist. In its more complex form, a managed care company assumes responsibility for managing medical services for a group of employees or Medicaid patients and then contracts with physicians and other medical providers for services. The contract may be on a fee-for-service basis or an annual per person capitated fee.

Businesses using managed care companies have achieved impressive health care savings, including savings on mental health benefits. IBM decreased mental health spending from $521 per employee per year in 1990 to $375 in 1993, and Alcan Aluminum, from $170 in 1991 to $71 in 1993.70 The vast majority of employees whose mental health benefits have been affected under managed care were using these services for psychotherapy or for the treatment of alcohol and drug abuse problems. Savings came from limiting hospitalizations and restricting the duration of psychotherapy. Managed care companies sprouted and grew virtually overnight, with the largest share of mental health benefits contracts going to Value Behavioral Health, Merit Behavioral Care (formerly Medco), Human Affairs International, U.S. Behavioral Healthcare, and Green Spring Health Services (which merged with Charter Medical Corporation to form Magellan Health Services).

Many such companies are subsidiaries of insurance (e.g., Aetna), pharmaceutical (e.g., Merck), or other large corporations and the managed care companies continue to merge, buy each other out, and change their names on a frequent basis. Mental health benefits may be managed separately from general health benefits (a "carve-out") or they may be managed together (an "integrated" or "carve-in" system). By 1995, managed care companies had assumed responsibility for mental health benefits for 58 percent of all Americans covered by health insurance.

States, faced with rapidly rising Medicaid costs for general health services, observed the savings of private sector companies using managed care, and many decided to go the same route for state residents on Medicaid. Because of extensive federal Medicaid regulations, however, the states first had to obtain waivers from the federal government setting aside selected Medicaid regulations such as one guaranteeing that Medicaid recipients will have a "free choice of providers." Under most managed care systems, patients do not have this free choice. Arizona was the first state to obtain a Medicaid waiver from the federal government.

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