Featured Health Business Daily Story, May 23, 2011

Severely Mentally Ill May Overrun Medicaid, Exchanges With Pent-up Services Demand

Reprinted from AIS's HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.

By ,
May 9, 2011Volume 2Issue 16

Individuals with severe mental disorders, who are now more likely to be uninsured than is the population as a whole, will represent a disproportionately large amount of the increased demand for services under health reform, especially in Medicaid, according to a recently published study. Overall, post-reform Medicaid will cover nearly one in four severely mentally ill Americans, nearly double what the public program now covers, the researchers report.

What are the implications? Will pregnant women with schizophrenia get quickly to the front of the line and receive proper care? How will financially struggling state Medicaid programs find resources to handle pent-up demand? In the private sector, how likely is it that plans participating in reform’s state-based health insurance exchanges starting in 2014 will use utilization management techniques that in effect “pay low and go slow” in approving such treatment? With the expected influx of more insured Americans in general under reform, will it be easier for providers and plans to avoid treating people with severe mental disorders altogether?

Some experts in the field worry that “skimming and dumping” of severely mentally ill people may occur in the reformed U.S. health care marketplace. Others assert the reform statute contains consumer protections that ought to minimize such possibilities — and cite opportunities to address such issues through regulation and the use of provider payment incentives.

In a study published in the May 2011 issue of The American Journal of Psychiatry, researchers at the University of Pittsburgh report that in the pre-reform marketplace, only about one-fifth of uninsured individuals with severe mental disorders use any mental health services, compared with about half of those with coverage. Among individuals with severe mental disorders, including self-reported severe depression, the researchers predict that nearly 3.7 million will gain insurance coverage under reform. They project that an additional 27.6 million individuals with less debilitating forms of mental illness will gain coverage — and assume that while not every newly insured individual in need of such services will seek it, many will.

According to the study, reform’s expansion of health insurance will result in a net increase of 1.15 million new actual users of mental health services nationwide: up 4.5% from current usage. They further estimate enrollment increases in Medicaid and private insurance of 2.3 million and nearly 2 million, respectively, of people using mental health services under reform. The researchers analyzed data from the national Medical Expenditure Panel Surveys (2004 through 2006), along with utilization patterns across different types of insurance coverage, to estimate changes likely to occur after reform is fully implemented in 2019.

“Our sense is that most people with more serious mental illnesses will probably get picked up in the Medicaid expansion” rather than seek coverage individually through insurance exchanges, says Chuck Ingoglia, vice president for public policy at the National Council for Community Behavioral Healthcare. Given the nature of mental illness and ensuing cognitive problems, people often lose their jobs, making it likelier they will qualify for the reform law’s expansion of Medicaid eligibility to persons with annual incomes up to 133% of the federal poverty level, he explains.

Indeed, the new study confirms that Medicaid will play an even greater role in caring for Americans with severe mental illness. Researchers estimate that Medicaid will cover 24.5% of this population upon full implementation of reform, nearly double the 12.8% coverage rate in 2006.

Potential Is Seen for ‘Skimming and Dumping’

An editorial in The American Journal of Psychiatry, reflecting on the study, asserts that providers trying to “avoid seeing the most needy, most challenging clients might be able to do so because of increased access to services by newly insured individuals in need of help although less ill.” Without appropriate management incentives, similar “skimming and dumping” also could be expected at the plan level, the editorial asserts. Without more thoughtful attention, utilization management strategies may amount to little more than “pay low and go slow,” it asserts.

“The [editorial] article is interesting and it notes that this ‘[pay] low and [go] slow’ approach could happen, without appropriate attention,” Ingoglia says. “The good news is that we have a lot of opportunities in future regulations to address these issues. Also, health reform includes protections regarding mandatory issue of insurance policies as well as nondiscrimination provisions. I think that these protections will help alleviate these concerns.”

Danna Mauch, Ph.D., principal associate and scientist at research firm Abt Associates, Inc., says the issue is that there is “going to be increased demand and a lot of pent-up demand,” all coming at a time of significant shortages in the ranks of primary-care practitioners and psychiatrists — particularly for the Medicaid population. And the more severely mentally ill likely will be in the public insurance pool, she adds.

Given the increasing demand for services, integration between behavioral health and physical health services is going to be important, Mauch says. She also cites the need to use a team-based approach that incorporates nonphysicians to create sufficient primary- and specialty-care capacity to meet rising needs. In Medicaid, the post-reform program will offer more flexibility through waivers and demonstration programs to meet the needs of this population, Mauch adds.

She notes that the reform law broadly mandates parity between behavioral and physical health services in Medicaid and for the benchmark benefit standards of plans participating in exchanges.

Mauch, the former founding CEO of Magellan Public Solutions, the Magellan Health Services unit that contracts for Medicaid managed care, also served as executive director of Rhode Island’s division of mental health and, prior to that, as Massachusetts’ assistant mental health commissioner. She explains that using a traditional utilization management approach that limits utilization to control costs isn’t useful for people with severe mental illness; instead, neglecting their treatment can result in higher costs.

Thus, Mauch says, it becomes crucial to promote strategies to help get timely treatment to this population. She suggests using risk-adjusted capitation — i.e., giving stratified payments to health plans based on members’ needs to get plans to provide a broader array of services. Adjusting the capitation payment for this is commonly done with Medicaid managed care plans, she notes.

Mauch also suggests performance incentive payments to plans and providers “to mitigate ‘skimming,’ which everyone is worried about.” In addition to paying a base reimbursement rate, this approach would give extra payment when standards are met, such as treating people with serious mental illness in a timely way. The incentive might be, for instance, for seeing the patient within a certain number of days following hospital discharge, or checking on the patient’s medication compliance every month.

View the report’s abstract at http://ajp.psychiatryonline.org/cgi/content/abstract/168/5/486.

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