Copyright 1999 The New York Times Company
The New
York Times
June 24, 1999, Thursday, Late Edition - Final
SECTION: Section C; Page 2; Column
1; Business/Financial Desk
LENGTH: 831 words
HEADLINE: Economic Scene;
Solutions can
becomeproblems for mental illness insurance.
BYLINE:
By Michael M. Weinstein
BODY:
THE White
House conference earlier this month on mental illness highlighted the
Administration's campaign, led by Tipper Gore, to achieve
"parity for all" -- requiring health insurers
to provide the same coverage for mental illness that they
provide for physical illness. Bills in Congress would do the same.
The
call for parity raises two questions. Is coverage of
mental health the same as that of physical
health? And who should decide? Almost all employer-based
policies impose higher co-payments and other stricter limits on coverage of
mental illness. Critics often blame bias -- an irrational stigma attached to
mental problems -- or ignorance, misjudging the plight of the "worried well" or
glibly dismissing the value of "taking cures."
Bias and ignorance are
only a small part of the story. A new study by Richard G. Frank of Harvard
University and Thomas G. McGuire of Boston University shows that powerful
economic forces compel plans to discriminate between physical and mental
health. Congress may still want to proceed. But markets will counteract
parity in ways that advocates will almost surely not like.
About 30 percent of Americans experience some diagnosable mental
disorder in a typical year. Only about 25 percent of them receive treatment.
About 4 percent of the population suffers in any year from the most severe
problems: schizophrenia, manic depression and major depression. But only between
30 and 55 percent of them receive treatment. Given the yawning need, why don't
employers offer parity?
The Frank-McGuire study offers two economic
reasons. First, adverse selection. A plan that offers generous coverage of
mental health would attracts people with expensive mental health problems. In
health care, a few patients always account for a large fraction of expenditures.
The disparity is exaggerated for mental health, where 5 percent of such patients
may account for 30 percent or more of costs. So a plan whose lavish benefits
attract the sickest mentally ill people invites bankruptcy.
One way to
diminish adverse selection is for government to impose parity. That way, plans
could not easily tailor their benefits to push the chronically mentally ill onto
other insurers. But health plans that offer equal physical and mental benefits
would butt up against a second insurance problem, moral hazard: changes in
behavior that are caused by the presence of insurance.
People with
health insurance buy more medical treatments than do the uninsured. But studies
of patients in fee-for-service plans show that the impact of insurance on demand
for treatment was twice as large for treatment of mental problems as for
physical problems, Mr. McGuire said in a recent interview. Part of the reason
can be traced to the fact that nonsevere forms of mental illness are hard to
diagnose and leave therapists wide discretion over course of treatment. He
concludes that some of the insurance-induced demand is for mental health
services that patients did not deem very valuable when asked to pay themselves.
Here's a sobering estimate: about 12 percent of the population with no
diagnosable mental disorders receive treatment and account for nearly a third of
all visits for mental health. If parity drives up
mental health costs and premiums, the danger is that more
employers will drop coverage and more workers will turn it down because it will
have become too expensive.
The Frank-McGuire study, then, decisively
concludes that coverage of mental health is different from that of physical
health. So should insurance coverage treat the two types of patients
differently? Mr. Frank and Mr. McGuire used to think so, at least for patients
with nonsevere mental problems.
But they have changed their minds, for a
reason advocates will find upsetting. The difference between then and now, they
say, is the explosive rise of managed care. Under managed care, contractual
niceties, like co-payments, deductibles and lifetime limits lose their
importance because every expenditure, regardless of contractual obligations, is
subject to second-guessing. So managed care has all the tools it needs to
control costs even if Congress requires parity.
"Parity," Mr. Frank
said, "is affordable only because managed care exists." But making parity work
by driving patients into the scrupulous oversight of managed care is probably
not what many of its advocates have in mind.
There are grounds for
government to dictate the list of benefits that every private plan offers as one
way to dull their ability to tailor benefits to drive away the chronically ill.
But the prospect of legislators selling priority of place to medical
specialities bearing campaign gifts is hardly inspiring. Perhaps a better idea
would to turn the task over to a blue ribbon panel that would hand its
recommendations over to legislatures for an up and down vote without amendment.
That would put politicians in charge, but mute the craven features of the
current system.
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GRAPHIC: Drawing (Niculae Asciu)
LOAD-DATE: June 24, 1999 
