The Problem With Using Managed Care for Mental Health Treatment

The potential for confidentiality breaches and fewer benefits are troublesome

Young female counselor talks with client
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Managed care is taking over as the predominant method of financing mental health care in the United States, but not without problems. To determine if managed care is the solution to spiraling health care costs or simply creates more problems, it's helpful to consider how mental health has been financed in the past.

How Mental Healthcare Was Previously Funded

Mental health care in the United States has historically been funded both privately and publicly.

State mental hospitals were funded by state governments to house and care for mentally ill individuals. Other individuals paid out of pocket for treatment. This combination of public and private funding continued until the period following World War II. Many companies were looking for ways to attract workers that didn't involve raising salaries. Benefit plans were developed where employers contributed toward funding health care for their employees.

These employer plans grew more costly as medical costs increased. Other countries nationalized their health care systems into a single payor system subsidized by the government. The United States continued on its unique course and employers and insurance companies struggled to find ways to cut health care costs. The currently dominant method of cost-cutting is managed care.

Basics of Managed Care

Managed care refers to a system where an insurance company or other entity "manages" the payment of health care dollars and keeps any money which they do not spend on care.

Often there is an incentive to deny the care and keep the money, and that's what seems to happen. Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are two forms of managed care. Other models exist, and new hybrids seem to emerge every few months.

Many managed care companies erect hurdles to providers in order to discourage requests for further care.

 One company, for example, requires mental health professionals to fill out a two-page form after every four sessions with a client. Another company recently "improved" its system by replacing a two-page form with a six-page form. To make things even more difficult, every company has a different set of forms. These forms require detailed information on sensitive matters which was formerly kept private. Who has access to this information? Who knows?

The Fee-for-Service Had Flaws, Too

It should be noted that there were abuses in the old "fee-for-service" system. Inpatient facilities were known to keep patients until their insurance ran out. One reason that 28-day inpatient treatment programs became a standard for substance abuse treatment is that most insurance companies wrote 28 days of coverage into the policies. Managed care has largely stopped this practice by carefully monitoring inpatient care. Some would say that this monitoring has been too strict, but it has made a huge difference in inpatient costs

Managed care has also turned the incentives around. In many cases, providers are now paid not to see patients. Many HMOs have "capitated" contracts with mental health provider groups.

The group is paid a small fee per member per month to handle all of the mental health needs for a certain population. (This can be as small as 50-75¢ per member per month, but it is often a slightly larger amount). The provider usually collects only a small additional "co-pay" if he does see a patient. A group of providers often makes the most money by seeing as few patients as possible for as few sessions as possible.

This change in incentives is not all bad. In the past therapists and physicians were paid only to see patients. This system was called "fee for service" and it encouraged patients to be seen for as many sessions as necessary.

Did it encourage too many sessions? Some would say so.

Managed Care Bias Against Mental Health Care

Managed care plans (and most traditional insurance) discriminate against mental health care. Benefits for "medical" problems are usually much more comprehensive than mental health benefits. As a result, an organization called the National Coalition of Mental Health Professionals and Consumers even started a petition drive to encourage health policy makers to outlaw managed care in mental health. This is one of the more extreme positions in this debate, but more and more professionals and consumers are abandoning managed care for less burdensome (and more confidential) arrangements.