Managed care: public-sector managed behavioral health care: V. redefining "medical necessity"-the Iowa experience.

Abstract

Managed behavioral health care was born in the private sector in accord with Newton’s third law of motion: an entrepreneurial, cost-expanding hospital “industry” triggered an equal and opposite entrepreneurial, cost-containing managed behavioral health care “industry” (1). The new enterprises have developed considerable expertise at reducing hospital use. At its best, private-sector managed care eliminates unneeded hospitalization and puts the savings to better use elsewhere. At its worst, it is parodied as “1-800Just-Say-No.” The national movement to bring managed behavioral health care to the public sector involves a potential clash of cultures. Whereas the private sector might choose a hard-nosed cost-effectiveness analyst as its patron saint, the public sector would probably select Mother Teresa. “Medical necessity” is the vehicle for specifying how broad or narrow insurance coverage will be. The individuals, employers, and public agencies that pool funds to purchase health insurance specify the scope of the insurance through benefit design (the conditions and treatments that will be included) and medical necessity (the criteria for inclusion) (2). According to a Wisconsin study, typical private insurance definitions of medical necessity would cover only 60 percent of the treatment the public sector provides for serious and persisting illness (3), which makes for obvious conflict if a managed care company brings private-sector criteria and attitudes into the public