Some economics of mental health 'carve-outs'.

We discuss the rationale for benefit carve-out contracts in general and for mental health and substance abuse in particular. We focus on the control of adverse selection as a principal explanation and find that this is consistent with the wide-spread use of sole-source contracting with periodic rebidding. We also find that some degree of risk sharing is common; we interpret this as a method of balancing cost-containment incentives with incentives to maintain access and quality on unmeasured dimensions.

Is health spending slowing down?

We analyze trends in real per capita health care spending. Using a different and, we believe, more appropriate adjustment for trends in general inflation than the Health Care Financing Administration (HCFA) analysts use, we reach a different conclusion: The purported slowdown in health care spending in the 1990s is modest at best through 1993. Other measures of health care spending, such as the medical care Consumer Price Index, private health care premiums, and hospital cost growth, are unreliable measures of overall health care spending.

Managed care and market power: physician organizations in four markets.

Physicians and other providers have responded to the spread of managed care by adapting structures and strategies to accommodate or resist the pressures exerted on them to reduce costs. In this paper we examine how physician organizations have evolved in four markets and whether their features represent attempts to improve efficiency or resist change. The strategies adopted by physicians in terms of alignment with other providers and development of independent medical management capabilities appear to be sensitive to opportunities to reap cost savings and the competitiveness of physician, hospital, and health plan markets.

The Medicare prescription drug benefit: how will the game be played?

Most recent proposals to add a prescription drug benefit to the Medicare program suggest using pharmacy benefit managers (PBMs) to control costs and promote quality. However, the proposals give little detail on the institutional arrangements that would govern PBM operations and drug procurement. The recent Congressional Budget Office cost estimate of the Clinton administration's proposal reflects this lack of detail on how PBMs would function. We sketch an approach for structuring PBM operations that focuses on competition among PBMs, manufacturers, and distributors; incentive pricing; and risk sharing with PBMs.

Future directions for the national health accounts.

Over the past 15 years, the Health Care Financing Administration (HCFA) has engaged in ongoing efforts to improve the methodology and data collection processes used to develop the national health accounts (NHA) estimates of national health expenditures (NHE). In March 1998, HCFA initiated a third conference to explore possible improvements or useful extensions to the current NHA projects. This article summarizes the issues discussed at the conference, provides an overview of three commissioned papers on future directions for the NHA that were presented, and summarizes suggestions made by participants regarding future directions for the accounts.

How a managed behavioral health care carve-out plan affected spending for episodes of treatment.

OBJECTIVE: This study examined the impact on spending for episodes of mental health and substance abuse treatment of a managed behavioral health care carve-out program implemented by the Massachusetts Group Insurance Commission in July 1993. METHODS: Episodes of mental health and substance abuse treatment were defined using claims and enrollment data from before and after the carve-out implementation. Regression models were used to compare spending per episode for different types of episodes of mental health and substance abuse care: those involving care provided only in an inpatient facility (that is, inpatient care or partial hospitalization), those involving both inpatient-facility and outpatient care, and those involving only outpatient care. RESULTS: Adoption of the carve-out plan was associated with a large decrease in spending per episode across all three episode types, particularly for episodes involving inpatient-facility care. The decrease was 54 percent for inpatient-facility-only episodes, 46 percent for combined inpatient facility and outpatient episodes, and 21 percent for outpatient-only episodes. The decrease in spending per episode was larger for episodes involving a diagnosis of either unipolar depression or substance dependence. CONCLUSIONS: The findings suggest that spending per episode of mental health and substance abuse treatment may drop substantially after a carve-out is implemented. Individuals with a diagnosis of either unipolar depression or substance dependence seem to be disproportionately affected. It appears that even weak financial incentives placed on the managed behavioral health care vendor can result in dramatic changes in spending patterns for episodes of mental health and substance abuse treatment.

Episodes of mental health and substance abuse treatment under a managed behavioral health care carve-out.

Little is known about the effect of a managed behavioral health care (MBHC) carve-out on treatment episodes for a mental health/substance abuse (MHSA) condition. This study found adoption of a carve-out for Massachusetts state employees associated with a dramatic drop in total MHSA costs per episode (particularly for individuals with certain severe MHSA conditions). The carve-out also was associated with a shift away from the use of facility care toward the use of outpatient care for enrollees with a diagnosis of unipolar depression.