Managed Care May Improve Access But Hurts Quality, Says Economist

After 15 years of managed behavioral health care, the verdict is in—and it’s not a simple one.

“There is no single happy or sad verdict,” said Richard G. Frank, Ph.D., at APA’s Institute on Psychiatric Services in Chicago last month. “Proponents and opponents of managed behavioral health care will find something in the data. There is grist in the mill for everyone.”

He is the Margaret T. Morris Professor of Health Economics in the department of health care policy at Harvard Medical School and a research associate with the National Bureau of Economic Research.

Frank presented an economic analysis showing that compared with fee-for-service medicine, managed behavioral health care has widened access to mental health services, lowered cost, and diminished somewhat the economic burden of mental illness on households. It also appears to have contributed to better adherence to treatment guidelines for depression.

He also said that managed behavioral health care has significantly changed for the better in terms of the national debate about mental health parity. He referenced reports from the federal Congressional Budget Office effectively refuting arguments—from the insurance industry and elsewhere—that parity would “break the bank.”

But in terms of quality of care for patients with severe and persistent mental illness, the picture is different. Managed behavioral health care does not appear to have offered any improvement in the quality of treatment for patients with schizophrenia, and there is some evidence that quality has diminished. In the care of patients with complex illnesses, managed behavioral health care has been especially poor. For patients with conditions such as breast cancer, involving both medical and psychiatric complications, managed behavioral health care appears to have exacerbated the fragmentation of services.

“The care of complex illness may be the Achilles’ heel of managed behavioral health care,” Frank said. Frank confined his analysis to the effect of managed behavioral health care on patients, payers, and the health care system. He did not address its economic effect on psychiatrists and other clinicians, which he acknowledged has been profound.

But even there he said there was reason for faith in market forces, and he predicted that psychiatrist fees under managed care would likely rise in coming years.

Frank said all evidence indicates that managed behavioral health care has cut costs by 15 percent to 40 percent over fee for service. These savings have been achieved by reducing inpatient usage, outpatient visits, and provider fees.

But all the savings that were possible in these areas have been achieved. “You can’t cut anymore,” he said.

He noted that shortages of psychiatrists on manage care provider panels—due in part to insufficient reimbursement—would have to be corrected by an increase in provider fees. “Now, I think you will see the market going the other way,” Frank said. “I predict a real rise in psychiatrist fees.”

Using data from the federal Department of Health and Human Services, Frank showed statistics demonstrating that rates of treatment for mental illness have increased for patients in both public and private insurance programs from 10.58 in 1987 to 17.68 in 1996.

Meanwhile, overall spending by mental health patients fell 23 percent between 1987 and 1996, after having doubled between 1977 and 1987.

Frank noted that during the period between 1987 and 1996, there has been a remarkable expansion in the “technology of treatment” for mental illness, notably in the form of psychopharmacology. He presented statistics suggesting that the same period saw a substantial improvement in the rates of compliance with treatment guidelines for depression.

This included the combined use of medication and psychotherapy, but with a tilt toward pharmacology. “Adherence to guidelines has increased, and the cost of achieving clinical response [to treatment for depression] has declined,” Frank said.