President George W. Bush broke ranks with free-market supporters, the small business community, and Republican leaders in the House, endorsing legislation forcing health insurers to treat psychiatric and physical diseases equally.
Critics say the legislation addresses a non-problem, could open the door to massive fraud, and would increase the number of people unable to afford private health insurance.
In a speech delivered April 29 at the University of New Mexico, Bush promised to work with Republican Sen. Pete Domenici of New Mexico, who was at his side. Domenici, whose daughter suffers from mental illness, has long championed federally enforced parity guaranteeing that insurance for mental disorders is as comprehensive as that offered for other illnesses.
“Mental disability is not a scandal,” Bush said. “They deserve a health care system that treats their illness with the same urgency as a physical illness.”
Mental Health Politics
In 1996 Congress passed “mental health parity” legislation requiring employers who had more than 50 employees and who included mental health coverage in their insurance benefits mix to offer the same annual and lifetime benefits for mental health care as for standard health care, such as surgery and physician visits. The law went into effect in 1998 and expired last year.
Many mental health advocates believe the Mental Health Parity Act of 1996 did not work as intended. They support more comprehensive mental health parity legislation.
Merrill Matthews, director of the Council for Affordable Health Insurance (CAHI), explained, “One reason for the Mental Health Parity Act’s limited impact is that it contains a provision exempting employers for whom compliance would increase health care expenses by more than 1 percent.
“In addition, proponents believe many employers are escaping by imposing limits not specifically addressed in the law. For example, under the law employers can still hold down costs by limiting the number of inpatient or outpatient care days and by imposing higher co-payments for mental health services. Finally, employers with 50 or fewer employees are exempted from the legislation.”
A Non-Problem?
Many health insurance experts say coverage of mental diseases is already sufficiently widespread and oppose imposition of another expensive mandate on employers. Karen Ignani, president and chief executive officer of the American Association of Health Plans, was quoted by the Associated Press as saying, “With so much at stake, it is more important than ever to use diligence and discretion when it comes to adding costly new mandates to an already overburdened system.”
Ninety percent of employers cover significant mental conditions that cause functional impairment, said a representative of the Health Insurance Association of America (HIAA).
According to a 1998 employer survey published in the journal Health Affairs, 91 percent of small firms (10-499 employees) and 99 percent of large firms offer mental health and substance abuse coverage in their most-used medical plans. Mental health and substance abuse coverage was included in 87 percent of indemnity plans, 88 percent of HMOs, 97 percent of Point of Service (POS) plans, and 93 percent of Preferred Provider Organizations (PPOs).
Small business groups exempt from the Mental Health Parity Act come under state law rather than federal law. Most states have a mental health mandate of some sort.
HIAA has warned that a broad mandate for parity would amount to a “hidden tax on businesses and workers.” Advocates of mental health parity, however, think coverage would cost less in the end because the mentally ill would be able to get the full range of treatment they need to resume fully productive lives.
Open Door to Fraud
Matthews questions whether another mental health parity mandate would be good for patients, the uninsured, and the mental health industry.
“While it could help some patients,” says Matthews, “it would drive up the cost of health insurance and force more people into the ranks of the uninsured.” He also notes mental health care has been subject to widespread abuse over the years, causing state and federal officials to exclude or close down a number of mental health facilities. “So before acting,” suggested Matthews, “Congress needs to consider whether new mental health parity legislation would do more harm than good.”
The Centers for Medicare and Medicaid Services (CMS), formerly the Health Care Financing Administration (HCFA), knew someone was up to no good as far back as 1997. The average yearly cost for each senior citizen receiving mental health services had jumped from $1,642 in 1993 to more than $10,000 by 1997. Former Medicare administrator Nancy-Ann DeParle contended at the time that 90 percent of the patients had no mental illness serious enough to qualify for special treatment. “You walk into these places and people are playing bingo and eating lunch,” DeParle said.
No Free Lunch
A 1998 study sponsored by the National Advisory Mental Health Council (NAMHC) Parity Workgroup, a division of the federal National Institute of Mental Health, estimated mental health parity would add less than 1 percent to the cost of a health insurance policy for an HMO.
A 1998 study by Mathematica Policy Research Inc. estimated a 3.6 percent price increase across all plans, with a range of 0.6 percent increase for HMOs up to 5 percent for fee-for-service plans.
A 1997 analysis by the actuarial firm Milliman & Robertson for the National Center for Policy Analysis, examining the cost of a typical mental health mandate (not specific legislation), concluded mental health parity legislation tends to drive up costs by 5 to 10 percent.
According to the Congressional Budget Office (CBO), for every 1 percent increase in insurance costs, the number of uninsured increases by 200,000 people. This means a new national mental health insurance mandate could cause between one million and two million people to lose their health insurance.
Matthews suggests Congress and state legislatures can override insurers’ limits, but that action comes at a price: more expensive health insurance, more uninsured, and more opportunities for abuse. Until a mechanism is found to balance the need for mental health services and the potential for abuse, it may be best to let insurers themselves decide how much to cover.
For more information …
See the full text of Merrill Matthews’ Policy Brief for the National Center for Policy Analysis, “Do We Need Mental Health Parity,” at http://www.ncpa.org/ba/ba297.html.
Other resources on the Internet include the National Association for the Mentally Ill, http://www.nami.org; the American Association of Health Plans, http://www.aahp.org; the National Mental Health Association, http://www.nmha.org; and the Health Insurance Association of America, http://www.hiaa.org.
