It was easy to overlook in the midst of a historic financial crisis, but buried in the middle of the highly publicized bailout bill passed just before the November 2008 election was a mental health parity law.
The measure contains so many loopholes and exceptions it may not have any more impact than the previous mental health parity bill, which was enacted in 1996. That’s one good thing about it.
Ostensibly, employers of more than 50 people will have to apply the same co-payments, deductibles, etc., to mental health services as they have for medical services. But the employer doesn’t have to cover mental health at all. And if there is coverage, employers can pick and choose which disorders they will cover.
‘Very Bad Law’
So why does this interest us? Because it is an example of very bad law. It does the opposite of what good public policy should be all about.
With respect to insurance for any health condition, there are three public policy questions:
1. Is there a legitimate social interest in whether private insurance covers treatment costs at all?
2. Is there a legitimate social interest in how private insurance contracts allocate coverage between third-party insurance and individual self-insurance?
3. If the answer to 2 is “yes,” what should the allocation be?
The new law implicitly says “no” to question one, “yes” to question two, and “equal allocations for all covered services” to question three. These are the wrong answers to all three questions.
No Substitute for Market
There may be a legitimate social interest in whether people insure for catastrophic mental health care costs, just as there may be a legitimate interest in insurance for other catastrophic costs.
But given some level of catastrophic coverage, there is rarely any good reason to substitute the judgment of legislators for the judgment of the marketplace with respect to the division between self-insurance and third-party insurance.
And there is no conceivable reason to dictate the terms of question two while leaving the private sector completely free to answer “no” to question one.
In addition, even if there were a legitimate social interest in question two, the legislation gets it all wrong. There is no conceivable circumstance in which rational people would freely choose to be in plans in which deductibles and co-payments are the same for all services.
On the contrary, people should self-insure for those services where it is appropriate and desirable for patients to exercise discretion, and they should rely on third-party insurance for services where it is inappropriate and undesirable for patients to exercise discretion.
Mental health services frequently have the very characteristics that make patient discretion highly desirable. Thus, they constitute a case where it is far more efficient to put funds in health savings accounts (HSAs) and let patients make their own decisions. And even within the category of mental health, we would almost never want the same amount of self-insurance for every service.
John C. Goodman ([email protected]) is president of the National Center for Policy Analysis.