Getting It All Wrong on Mental Health Parity
It was easy to overlook in the midst of a historic financial crisis, but buried in the middle of the bailout bill was a mental health parity law. It contains so many loopholes and exceptions, it may not have any more impact than the previous mental health parity bill – enacted in 1996.
Ostensibly, employers of more than 50 people must apply the same copayments, 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. [link]
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:
- Is there a legitimate social interest in whether private insurance covers treatment costs at all?
- Is there a legitimate social interest in how private insurance contracts allocate coverage between third-party insurance and individual self-insurance?
- If the answer to 2 is “yes,” what should the allocation be?
The law just passed implicitly says “no” to question (1), “yes” to question (2) and “equal allocations for all covered services” to question (3). These are the wrong answers to all three questions.
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 (2), while leaving the private sector completely free to answer “no” to question (1).
Further, even if there was a legitimate social interest in question (2), 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 copayments are the same for all services. To the contrary, people should self insure for those services where it is appropriate and desirable for patients to exercise discretion. They should rely on third-party insurance for services where it is inappropriate and undesirable for patients to exercise discretion.
As explained previously here, here, here and here, mental health services frequently have the very characteristics which make patient discretion highly desirable. Therefore, it is far more efficient to put funds in Health Savings Accounts (HSAs) and let patients make more of their own decisions. But even within the category of “mental health,” we would almost never want the same amount of self insurance for every service.
Notice that the same mistake made by the mental health parity bill is also embedded in the HSA law. Congress has left people free to decide whether to insure, but has chosen to dictate the division between third-party insurance and self-insurance for those who choose to do so – even going so far as to regulate what the deductible can be for every service! (See our discussion of this issue here.
Superb post. First rational piece I have seen on mental health parity.
Has anyone considered that the mental health parity mandate could lead to less coverage for mental health than we have today?
There seems to be an unending conflict in health policy between those who think rationally (the economists) and people who can’t seem to master the syllogism. Sadly,the latter group always seens to win.
Yes, and pushed by a Republican!
The alternative John, would have been far worse. The agreement won’t overly burden the carriers. Far worse, I fear may yet be around the corner but we’ll see.
Dear John,
you’re right when you say, “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.”
But surely, it doesn’t follow that “it does the opposite of what good public policy should be all about.”
It’s not the opposite. The opposite would be mandating the copayments and deductibles and insisting that mental health be covered. At least this law gives an employer a way to keep health insurance for a whole lot of other things and not cover mental health.
Exellent positioln !this law is let people to be free to chooze where to insure themselves, but has restrict up their choice upper !
The law often been offered from some lobby.
The Social law Act in Bulgaria is full of descreapances -it said that ” person without incom has to unsurence itself alone by 6% health + 20% /social/pension insurent across the minimum national wage” ?!
Where money from ? They do not say .Else:People of the 3-rd party like me have to pay this 26 % insurence across 2 minimal wage a month , no matter if they get profit or not !
And that Act exist since recent 3 years.Before you could not make any individual insurence, nor in fund if do not work .
But the National Insurence Institut depted everione jobless ,tax it b up ,and lack these people of unsurence rights up to pay back all missing summ!
The number of such Bulgarian is 1050 000 .Now they simply do not go to doctor, or, if someone does he pay big summ no matter that has been paid 10-20 years before to cut it.
If someone on prove in hospital they black the relations to pay the dept while they cure him there.
Parity in MH coverage was needed to have all carriers and employers on the same page. The market is dysfunctinal and was not working for these conditions. The cost is minimal if not negative. I guess one has to experience the trauma of a mental illness in a family member to appreciate the need for coverage One wouldn’t expect asth,a not to be covered or follow up care for heart failure. The mind and body can not be separated. Try treating a dabetic without dealing with the underling depression.
The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (The “Wellstone-Domenici Parity Act”), enacted into law on October 3, 2008, will end health insurance benefits inequity between mental health/substance use disorders and medical/surgical benefits for group health plans with more than 50 employees.
Under this new law a group health plan of 50 or more employees that provides both physical and mental health/substance use benefits must ensure that all financial requirements and treatment limitations applicable to mental health/substance use disorder benefits are no more restrictive than those requirements and limitations placed on physical benefits.
This means that equity in coverage will apply to all financial requirements, including lifetime and annual dollar limits, deductibles, copayments, coinsurance, and out-of-pocket expenses, and to all treatment limitations, including frequency of treatment, number of visits, days of coverage and other similar limits.
Yes, Ron, but who, exactly, will determine what mental health is? Should I have to pay to treat whatever the APA votes to include in the DSM no matter how loopy it is?
I fail to see why people should be forced to pay for coverage for elective mutism, for example, or for selfishness disguised as narcissistic personality disorder.
As always, I agree with Dr. Goodman. I wrote about the issue myself after the bill was passed. See http://tinyurl.com/59pomm
Now that time has passed on the 1996, 40+ states passing MH parity, and even the broader 2008 legislation what do the nay sayers say?
There is broad recognition that the costs are minimal and studies continue to show untreated depression is the highest corporate cost (direct and indirect)of any expense outside of salaries.