Mental illnesses affect nearly 25% of Americans.
- Over 50 million adults -- at least 22 percent of the U.S. adult
population -- suffer from mental disorders or substance abuse disorders on an
annual basis.
- 18 million Americans are affected by depression on an annual basis --
twice as many as are affected by coronary artery disease. A recent study
examining six major medical conditions -- including hypertension, diabetes,
lung diseases, and arthritis -- found only severe heart disease to be
associated with more disability and interruption of daily functioning than
depression.
Individuals with mental illnesses face blatant health insurance
discrimination.
- Nearly 98% of private sector health insurance plans impose some form
of unfair, discriminatory limits on mental illness treatment, such as higher
copayments, fewer allowable outpatient visits and inpatient days, and lower
annual and lifetime benefits caps than are provided for other medical
illnesses.
The high costs to society of untreated and undertreated mental illnesses are
well-documented.
- A National Institute of Mental Health sponsored-study revealed that mental
and addictive disorders cost over $300 billion annually. This includes
productivity losses of $150 billion, health care costs of $70 billion and
other costs (e.g., criminal justice) of $80 billion. In 1990, our nation’s
direct medical care costs and indirect costs from mental illnesses, alcohol,
and drug abuse totaled more than $313 billion. That was more than cancer ($104
billion in 1987), respiratory disease ($99 billion in 1990), AIDS ($66 billion
in 1991), or coronary artery disease ($43 billion in 1987).
- The MIT Sloan School of Management reported in 1995 that clinical
depression costs American businesses $28.8 billion a year in lost productivity
and worker absenteeism.
Parity in mental illness coverage could help states save money.
- In its 1993 landmark report to the Congress, the National Mental
Health Advisory Council concluded that parity coverage for severe mental
illnesses would result in a net savings of $2.2 billion a year. It stated,
"The enormous but often hidden costs of untreated or undertreated severe
mental illnesses which are now borne by the general health care system and
society at large, can be appreciably reduced."
- A State of California study (1994) demonstrated that for every $1 spent to
treat alcohol and drug disorders, taxpayers were saved $7 in future costs.
Savings of $1.5 billion were largely due to reductions in health care costs
and crime.
Advances in medical science have yielded successful and cost-effective
treatments for mental disorders in the last two decades.
- Major depression, a common clinical problem in primary care, can be
treated successfully with antidepressant medications and psychotherapy in 65
to 80% of all cases - a success rate which exceeds many current common medical
treatments for non-psychiatric illnesses.
- Clozapine treatment for schizophrenia, approved by the FDA in 1990, saves
an average of $23,000 in treatment costs per patient annually, largely by
reducing the need for hospitalization. An estimated $1.6 billion has been
saved with clozapine treatment.
Studies demonstrate that providing equitable coverage of treatment for mental
illness is affordable.
- A 1998 SAMHSA study finds that state parity laws have had a small
effect on premiums. Based on an updated actuarial model, SAMHSA reports that
full parity for mental health and substance abuse services in private health
insurance plans that tightly manage care would increase family insurance
premiums less than one percent. The premium increase for a composite of health
plans that reflects insurance coverage nationwide (e.g., fee for service,
HMOS) would average 3.6 percent. In this composite, parity limited to
substance abuse treatment would raise premiums 0.2 percent, while parity for
mental health services would raise premiums by 3.4 percent. SAMHSA also finds
that employers have not attempted to avoid parity laws by becoming
self-insured.
- A 1997 RAND study states that mental health parity is affordable under
managed care carve-outs. According to the report, even the most costly change
- eliminating both limits on dollar amount incurred and on inpatient days and
outpatient sessions - would raise costs annually only $7 per enrollee in a
plan without deductibles and with minimal copayments of $10 per outpatient
visit and $100 per hospitalization. Removing the typical average annual dollar
limit of $25,000 will increase insurance payments only by about $1 per
enrollee per year.
- A 1996 study (Milliman & Robertson) found that the likely effect of
parity would be to increase typical plan premiums by a modest 2.5 % to 3.9 %.
A Coopers& Lybrand analysis, excluding substance abuse, found a 2.6 %
premium increase. These estimates are borne out by the Congressional Budget
Office (CBO), which projected similar (i.e., 4 %) premium increases for the
federal Domenici-Wellstone parity amendment. According to CBO’s estimate,
employers would bear the cost of only 1.6 % of the estimated premium increase.
- Insurers and employers could easily offset the modest premium costs
associated with parity. For example, an insurance plan could reduce or largely
cover the cost of the premium increase by increasing outpatient visit and
prescription drug copayments by just $5. Or the plan could impose a modest
increase in the annual deductible, on the order of $30 to $60 per year (or
just $2.50 to $5 per month).
States with parity laws prove that equitable coverage of mental illness
results in minimal cost increases.
- Nineteen states (Arkansas, California, Colorado, Connecticut,
Delaware, Georgia, Indiana, Maine, Maryland, Minnesota, Montana, New
Hampshire, North Carolina, Rhode Island, South Dakota, Tennessee, Texas,
Vermont and Virginia) have enacted various types of parity laws.
- The available inpatient data from 1993 to 1995 from the Maryland Health
Resources Planning Commission show that all payors in Maryland experienced a
year-by-year decrease in the length of inpatient stays in psychiatric units of
general hospitals despite the requirements of the state’s 1994 parity law.
(Bazelon Center for Mental Health Law, 1996 Report)
- A 1997 National Institutes of Health (NIH) 1997 report found that "the
cost of parity was low" in Maryland’s managed care environment. For the
state’s most experienced managed care company, "the proportion of the total
medical premium attributable to the mental health [parity] benefit actually
decreased by 0.2% after implementation of full parity."
- A large managed care organization in Minnesota, Allina Health System,
reported that the state’s 1995 parity law would add only 26 cents per member
per month for its 460,000 enrollees. Also in Minnesota, after a year under the
parity law, Blue Cross/ Blue Shield even had a premium reduction of 5%-6% in
its small business health plans. (Bazelon Center, 1996 Report)
- A 1997 survey of 11 of the 18 insurance carriers and health plans in New
Hampshire representing the majority of commercially covered lives in the state
found that no carrier or health plan reported concerns expressed by either
employers or consumers related to the implementation of the state’s 1994
mental health parity law, nor did carriers attribute any change in premium to
the parity law.
- Since North Carolina’s parity law for state employees was implemented in
1992, mental health payments as a portion of total health payments has
decreased from 6.4% to 3.4% for the fiscal year ending 1996. This represents a
47% reduction in costs. In the same time period, there has been a 64%
reduction in hospital days paid.