A New Look At Rising Mental Health Insurance Costs

Abstract

The news media have recently focused a great deal of attention on insurance coverage for treatment of mental disorders. Reports of unusually large increaces in expenditures for mental health care under private insurance plans have appeared in major newspapers and trade publications. These reports have pointed to mental disorders, defined to include psychiatric and substance abuse diagnoses, as disproportionate contributors to rising health insurance premiums. Reports from benefits consulting firms such as A. Foster Higgins have cited increases of between 18 and 27 percent Curing 1987–1989. These data form the basis of proposals to devote special attention to mental health care use via managed care arrangements and to place new limits on insurance coverage for treatment of mental disorders. These claims are based on surveys of insurance benefits managers for major employers, not on any direct observation of use and expenditures. The Foster Higgins survey has attracted the most attention. Only 18 percent of the benefits managers responding to the survey answered the question regarding mental health costs. Among those who did respond, approximately half indicated that they did not know the cost of mental health care. In this DataWatch, we examine recent changes in mental health care spending and usage, using information obtained directly from insurance and hospital records. We address these issues by relying on (1) a sample composed of the claims experience of employees of midto large-sized U.S. firms during 1986–1989, and (2) data from two state hospital discharge abstract data systems. Our review of these data produces a much more complicated view of recent trends in use of mental health care than has appeared in the popular press. The implication here is that solutions to rising expenditures for mental health care require targeted interventions aimed at