Copyright 1999 Federal News Service, Inc.
Federal News Service
OCTOBER 21, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH:
1306 words
HEADLINE: PREPARED STATEMENT OF
ROLAND
STURM, PH.D.
RAND
BEFORE THE HOUSE COMMITTEE ON
GOVERNMENT REFORM
SUBCOMMITTEE ON CRIMINAL JUSTICE, DRUG POLICY AND HUMAN
RESOURCES
SUBJECT - EFFECTS OF SUBSTANCE ABUSE PARITY IN
PRIVATE INSURANCE PLANS
UNDER MANAGED CARE
BODY:
I am a senior economist at RAND and director of economic and policy
research in the UCLA/RAND Center on Managed Care. RAND is a nonprofit
institution that helps improve policy and decisionmaking through research and
analysis. This statement is based on research funded by the Robert Wood Johnson
Foundation and the National Institute on Drug Abuse. The opinions and
conclusions expressed are mine and do not necessarily reflect those of RAND or
the research sponsors.
My research has focused on costs and utilization
patterns for substance abuse treatment in today's health care
environment. New data are needed to inform policy decisions about substance
abuse treatment because the health care delivery system has
changed dramatically. For most privately insured Americans, behavioral
health (which includes mental health and
substance abuse care) is now managed by specialized managed care companies.
Treatment patterns have changed dramatically, and patterns criticized in the
past as excessively costly, such as automatic 28-day inpatient stays, are almost
nonexistent.
These changes in how substance abuse treatment is delivered
mean that legislation will have different consequences today than it would have
had 20 years ago. However, estimates of the cost consequences of proposed
legislation, including reports by the Congressional Research Service1,2 or the
Substance Abuse and Mental Health Services Administration2,3,
were based primarily on actuarial assumptions, which reflect utilization
patterns from the 1970s and 1980s. Many of those do not reflect today's
mental health or substance abuse treatment system in the
private sector4-6.
The results that I present here are based on a study
published in the Journal of Behavioral Health Services and
Research7. We examined the use and costs of substance abuse treatment in 25
managed care plans that currently offer unlimited substance abuse benefits with
minimal co-payments ("parity" level benefit) to their enrollees
in 38 states. However, care is managed and services must be preauthorized and
received through a network provider to be fully covered, a typical service
arrangement in employer-sponsored plans.
Providing unlimited substance abuse
benefits in these plans costs employers slightly more than $5.00 per plan member
per year in insurance premiums paid to providers. Employees account for the
largest costs, child dependents the smallest; thus limits on substance abuse
care have the most substantial cost consequences for employees. In terms of
benefit limits, a $10,000 annual cap on benefits would reduce the cost of
unlimited benefits by only 6 cents. A $5,000 annual cap would reduce the cost to
$4.33 per member per year.
Based on a sample of several hundred
employer-sponsored plans that were active in 1997, we estimate that about
three-quarters of plans have caps for substance abuse of $10,000 or less.
Changes in copayments or deductibles have cost reduction effects similar to the
caps,, but the resulting payments to providers are always lower than the costs
of providing the parity benefit (about $5 dollars per member
per year).
To put these numbers into perspective, the additional costs of
adding full parity benefits for substance abuse treatment to a
plan that previously offered no substance abuse benefits is in the order of 0.3
percent, based on a total annual health maintenance
organization insurance premium of $1,500 per member. Expanding existing
substance abuse benefits in a plan would have a correspondingly smaller effect.
Note that the numbers reflect payments to providers (the part counted as the
medical loss ratio); administrative fees or insurance profits are in addition.
We find no evidence that substance abuse mandates or parity
could lead to health premium increases in the order of several
percentage points in managed care plans. We also concluded that limiting
substance abuse benefits saves very little in managed behavioral
health care plans, but affects a substantial number of patients
who need additional care (see the figure). Substance abuse patients are quite
costly, on average twice as costly as typical mental health
care users; thus the same limits affect relatively more substance abuse patients
than mental health patients, leaving the former at risk for a
large part of their treatment costs. However, overall plan costs are small
because substance abuse patients are rare in privately insured populations.
(Image)
In the private sector, individuals with substance abuse problems
are much more likely to become ineligible for insurance. Employees, who account
for a relatively larger share of substance abuse benefits than other type of
members, are the most likely to lose coverage8. Patients who exceed benefits and
lose insurance coverage are likely to end treatment prematurely, thereby
reducing both their chance of recovery and the probability of maintaining
employment. Parity legislation by itself will probably not
remedy this problem.
Cost and use data from comprehensively managed plans
currently offering unlimited parity-level substance abuse
treatment provide no support for excluding substance abuse from
parity efforts because of cost reasons. It is unclear how
decoupling mental health and substance abuse care in terms of
benefits can save much money. However, decoupling is likely to create
difficulties in coordinating treatment and lead to less efficient care. Since a
high proportion of individuals have both MH and SA problems, poor coordination
of care is a significant concern.
Our results suggest that
parity for substance abuse treatment in employer-sponsored
health plans is not very costly under comprehensively managed
care, which is the standard arrangement in today's marketplace. However, this
result does not apply to unmanaged indemnity plans and may only hold for large
employers, but not for individuals or for small groups buying insurance. Our
data also reflect a fairly "typical" employed population. Some industries may
attract higher than average rates of substance abusers, resulting in somewhat
larger treatment costs. Of course, providing comprehensive substance abuse
treatment benefits in those industries would also have the largest social impact
on reducing consumption and lowering the indirect social costs of substance
abuse.
REFERENCES
1. O'Grady MJ, Mental Health Parity:
Issues and Options in Developing Benefits and Premiums, CRS Report for Congress,
96-466 EPW, U.S. Library of Congress. Congressional Research Service, 1996 2.
Hay/Huggins Co. Inc., Health Care Benefit Value Comparison
Model, HCBVC Version 6.5, PC Model Users Guide Documentation, Prepared for
Congressional Research Service, Hay/Huggins, Washington, D.C., 1995 and later
updates 3. Sing M, Hill S, Smolkin S, Heiser N: The Costs and Effects of
Parity for Mental Health and Substance Abuse
Insurance Benefits. DHHS Publication 98-3205. Rockville, MD: Center for
Mental Health Services, SAMHSA, 1998. 4. Sturm R, How Expensive
Is Unlimited Mental Health Care Coverage Under Managed Care?
Journal of the American Medical Association 1997;278(18):1533-1537. 5. Sturm,
R., Goldman, W., McCulloch, J. Mental Health and Substance
Abuse Parity: A Case Study of Ohio's State Employee Program.
The Journal of Mental Health Policy and Economics, 1:129-134,
1998. 6. Goldman W, McCulloch J, Sturm R: Costs and Utilization of
Mental Health Services Before and After Managed Care. 1998
Health Affairs, 17(2):40-52. 7. Sturm, R., Zhang, W., &
Schoenbaum, M. How Expensive Are Unlimited Substance Abuse Benefits Under
Managed Care? Journal of Behavioral Health Services and
Research, 26(2), 203-210, 1999. 8. Gresenz CR, Sturm R, Who Leaves Managed
Behavioral Health Care?, Journal of Behavioral
Health Services and Research, 26(4), 389-398, 1999.
END
LOAD-DATE: October 26, 1999
