Looking Into the Health Reform Crystal Ball: Seeing More Constructive, Less Expensive Management Scenarios

Elsewhere in this issue, Garfield et al. (1) note that, in the United States today, adults with mental disorders are less likely to be insured than are adults in the population at large. They also review reports showing that rates of use of mental health services by individuals with mental disorders requiring treatment are much higher for those with insurance than for those without insurance (one in five receiving services versus one in two receiving services, respectively, during a recent 3-year period). The contribution of Garfield and colleagues is projection of the volume of increased use in mental health services with the advent of insurance reform, given that many individuals with mental illnesses who currently are uninsured will become insured. Among individuals with more severe mental illnesses, they predict that nearly 3.7 million will gain coverage under insurance reform. Considering less debilitating forms of mental illness, they predict an additional 27.6 million will gain coverage. While not everyone in need of services who is newly insured will seek services, many will. One can question the various cutoffs and assumptions that went into the models used by Garfield et al. (concerning the number of people who will seek services, etc.), but the bottom line is clear: insurance reform will have the desired consequence of opening treatment to huge numbers of needy individuals, and individuals with more severe mental illnesses, because they will have been more likely to have been uninsured, will represent a disproportionately large amount of the increased demand for services, especially among newly insured individuals covered by Medicaid. This means that market forces are about to shift dramatically, and managed care entities, including state Medicaid offices, are about to face huge payment challenges and strategic opportunities.

Given the near ubiquity of state budget deficits and the federal government's similar predicament, finding funds to pay for expanded Medicaid care will be particularly challenging. As this pent-up demand for mental health services is unleashed, what will the supply side look like? One can imagine scenarios where already scarce resources, such as child psychiatrists, can fill their case loads many times over without seeing individuals who are most in need and for whom payment is less than under private insurance (the current situation for many Medicaid beneficiaries). Any provider who wishes to avoid seeing the most needy, most challenging clients might be able to do so because of increased access to services by newly insured individuals in need of help although less ill. Absent appropriate management incentives, similar skimming and dumping can also be expected at the level of the health plan, e.g., “Certainly, madam, you may enroll with us, but we have no specialized services for people with schizophrenia, much less any for those who find themselves pregnant; but you are very welcome to come to our life skills groups and get into our (very long) line to see a psychiatrist.” Without more thoughtful attention, utilization management strategies may amount to little more than “pay low and go slow.”

As we enter an era with expanded access and the accompanying need for more appropriate utilization management, both researchers and policy makers have a huge opportunity to help design what “better utilization management” might look like—management tools and accompanying payment incentives to help ensure that the pregnant woman with schizophrenia gets to the front of the line quickly. We should also ensure that her services include both pharmacotherapy and psychosocial services—both evidence-informed—so that mother and baby thrive and so that disastrous and costly health outcomes are averted. We have not picked a rare scenario as a case in point; about 60% of women with serious mental disorders have children (2). We must design systems that use protocols and incentives so that providers step forth to provide appropriate services to individuals most in need.

The health insurance reform crystal ball is murky with respect to particulars, but the need for more constructive, less expensive management scenarios for Medicaid services comes through clearly under all scenarios because of state budget shortfalls and the crushing federal deficit. No one foresees a sudden increase in psychiatrists, hence demand will increase competition for scarce clinical resources. Can we facilitate good care for those who need it most, rather than proceeding with the usual solutions that increase waiting times and offer care to those who happen to get to the front of the line?

Bringing mental health care coverage to a huge new cohort of individuals will result in positive outcomes if we design our systems and payment incentives to ensure timely access to appropriate services. Twentieth-century managed care experience taught us that managed care entities could control costs very effectively by setting rates low. (State Medicaid agencies did not need a managed care provider to do this, but private insurers did.) The fallout, of course, was that what had been networks of comprehensive clinics, licensed psychologists and social workers, and board-certified psychiatrists increasingly became networks of less expensive, master's-level clinicians.

As these managed care entities grew, they became large enough to contract with entire states. Because state Medicaid rates were already low, there was little to squeeze in terms of rate setting. While we do not have precise figures, as individuals who have watched this industry grow and respond, we've seen low renewal rates for managed behavioral health care contracts with states, suggesting that vendors have not lived up to states' hopes and expectations. When behavioral health benefits have been “carved in” to the general health plans, those general health plan vendors often have opted to “carve out” the behavioral health component to a managed behavioral health care vendor. The more layers, the trickier the payer's oversight becomes and the more management hands are in the till.

The immediate challenge for payers, including states, is to solve the access problem while bending the cost curve. Neglect is cheap in the short term, but costly over time. We must ensure that managed care practices in the early 21st century evolve to create incentives for providers to offer early and inexpensive care when possible, assure ready access to those most in need (often, individuals with multiple and complex physical and mental disorders), and use the most cost-effective treatments available. Managed care entities can provide oversight and resources to ensure that care can be timely, appropriate, and coordinated. They must find providers who will deliver effective and, often, team-based care and reward them for doing so. With health care reform, fewer practitioners may have the potential to maintain a livelihood while opting out of managed care networks. We can hope that we are on the cusp of seeing skilled providers more open to participating fully in such networks. The challenge for managed care entities will be to implement objective ways to identify such providers, steer appropriate clients to them, and compensate them appropriately for the complex care coordination required.

We face unparalleled opportunities for system reform and for system decimation. Let us design management and oversight strategies to ensure that 21st-century managed care relies less on needless oversight of routine care for “simpler” patients—an all-too-frequent problem in the earlier era of managed care—and ever more on judicious facilitation of access to coordinated, evidence-informed care for the most needy individuals.