Mind, Money, and Morality: Ethical Dimensions of Economic Change in American Psychiatry

Abstract

Mind, Money, and Morality: Ethical Dimensions of Economic Change in American Psychiatry Certain general trends currently dominate health care delivery in America, trends shaped largely by economics and driven specifically by the need to contain rising costs. As throughout the health care system, there are pressures in psychiatry to restrain spiraling costs; mental health care costs of about $20 million currently represent some 14 percent of total expenditures for health care. [1] At present, three alternatives for economic reform in health care delivery dominate attention. First, costs can be contained by the imposition of third-party payer price controls by replacing retrospective cost-based reimbursement with set-price prospective reimbursement. This is the solution offered by Medicare's Diagnosis-Related-Groups (DRG) system and by various other prospective payment schemes imposed by insurance carriers. Second, costs might be contained through market discipline, that is, by setting for-profit providers in a competitive environment and making consumers of care bear more of the real costs of their choices. Third, the traditionally solo practice fee-for-service (FFS) medicine might be replaced by prepaid group practices in which group members pay a fixed fee to providers in advance of the need for care and providers bear the financial risk of providing care without charge as it is needed. This is the strategy of the health maintenance organization (HMO). While each of these alternatives offers some promise, each also carries with it substantive ethical problems, problems that are generally more pressing in the area of mental health care. DRGs: The Medicare Solution Medicare's solution to escalating costs of hospitalization was the introduction in 1983 of DRGs, a system of prospective reimbursement based on 468 diagnoses. Except for a few additional variables, hospitals are reimbursed for Medicare patients with a preset amount determined by the average cost of treating the diagnostic group to which the patient is assigned. If the hospital can treat that patient for less, it makes money on the DRG; if treatment costs more, it loses money. There are many problems raised by DRG reimbursement in general. [2] The complexity of individual patients' diseases and courses of treatment makes imposing uniform payment for hospital care overly simple at best. The financial pressures placed on hospitals under DRGs can lead them to create mechanisms to promote early discharge of all patients and to avoid admitting those likely to cost more to treat, namely, the very sick and, due to their generally less healthy conditions, the poor and the less educated. DRGs also provide incentives to seek out easy-to-treat patients and those in groups likely to make money for the hospital, to use the more profitable diagnosis in ambiguous cases, and to manage care on the basis of admission-discharge-readmission sequences rather than treating multiple problems during one admission. The Psychiatric Exemption For the immediate future much of psychiatric medicine has escaped the DRG price controls now widespread elsewhere in American health care. Because of the need to examine further the implications of prospective payment systems, psychiatric hospitals have been temporarily exempted from Medicare's DRG system. Distinct-part psychiatric units of general hospitals as well as alcohol and drug abuse hospitals and substance abuse units in general hospitals may also apply for exemption. [3] The best guess now is that Medicare's Health Care Finances Administration (HCFA) will not push for universal application of psychiatric DRGs before 1989 at the earliest. Applied to the care of mental illness, DRGs would be particularly problematic. The specifically psychiatric DRGs developed by Medicare are not valid as predictors of either length of stay or intensity of resource utilization, and thus are unfair in that reimbursement levels will not adequately reflect the costs of treatment. …