Implications for Cost-Shifting from Private to Public Under Parity

Implications for Cost-shifting from
Private to Public under Parity Legislation

Principal Investigators Carole Siegel, Ph.D., Judy Samuels, Ph.D., and Joseph Wanderling, M.S.

PROJECT GOALS

Past analyses regarding the implications of parity on mental health costs have focused on the concerns of the private sector. Their concern has been that mental health costs would substantially increase since, under parity, persons who might have used other payers would now have more services reimbursed by private insurance. However, a complete cost analysis of the implications of parity needs to take into account the possibility that the private sector may try to shift costs to the public sector, a situation that could occur if employees or private insurers seek ways to exclude enrollees with severe mental illness. These questions are examined in this study.

RESEARCH ACTIVITIES AND RESULTS

The cost interface between the private and public sectors was examined for two time periods, both preceding the implementation of parity legislation: 1990 –1991 and 1995 – 1996. One year shifts in the payer of the services received by adult users of specialty mental health services (excluding private practitioners) and the yearly costs (Year 1, Year 2) under these payers were examined. The patterns that are observed provide a baseline against which changes that will occur under various versions of parity legislation can be meaningfully examined.

The subgroup of specialty mental health users that are privately insured is the focus of this analysis. They are comprised of a higher percentage of persons with severe mental illness than the privately insured population receiving mental health services. They are the ones who in the past have been most likely to shift to the public sector. These persons are covered by private insurance either because they are employed at some time, are dependents of employed or can pay for private insurance based on their income from other sources such as pension plans.

Data were obtained from an all payer data set and state data sets on costs and services for two counties in NYS, one urban and one rural. The service system available to residents is comprehensive and offers a wide array of services. Services were paid for either by traditional fee-for-service or by indemnity insurance, HMO, public, self- pay or other. Payers were grouped into Private, Public, Private/Public, Self and Other/Missing categories. Consumers in the Private group were enrolled during the year in one or more programs reimbursed for the services they received by private insurers and never by public insurers. Analogously, those in the Public group were in programs reimbursed for their service by public insurers and never by private insurers. The Private/Public group is comprised of clients who, at any time during the year, were enrolled in programs that were reimbursed by private insurers and in programs that were publicly reimbursed. The self group is comprised of those who self-paid only or self-paid and had services reimbursed by others who were not private nor public insurers. Payer information was updated in the data base once a year. Consumers were classified into the payer group of the programs in which they were enrolled for each of the two years.

The analysis on payer group shifts indicates that there is substantial cost sharing between the private and public sectors and that persons who have services reimbursed by both sectors have the highest costs among payer groups. The one year percent shift of persons from private to public payers has been minimal but appears to be increasing over time. The percent shift of persons from private to private/public payers is somewhat higher and has also increased. For both time periods, this subgroup had the highest Year 1 costs of any persons in the private group (more than 2 X the average total for private) and still higher Year 2 costs (more than 1.5x their Year 1 costs). 12%/13% of persons in the private/public group shift to the public group and 65%/54% remain in the group. These persons have high costs in both Year 1 and Year 2.

Two year shift data for 1991 - 1993 estimates that approximately 55% of persons in the private/public category remain in that group after two years and have consistently high costs over the three year period (> $11,000 in every year).

SIGNIFICANCE OF FINDINGS/POLICY IMPLICATIONS

Both private and public payers stand to benefit from information on the private/public interface of mental health costs. Private insurers covering services for persons that were reimbursed by other payers pre-parity will benefit from information on mental health utilization costs parsed out by funding source. Public payers will be able to make use of the same information to refine estimates of desirable capacities and expected mental health costs for publicly funded services. This information will be helpful in negotiating rates for contracted services with for-profit and not for-profit providers and behavioral health care entities.

PLANS

The project is ongoing.

PUBLICATIONS

Siegel, C., Samuels J., Wanderling J. Cost-shifting from private to public payers: The scene before parity legislation. Journal of Mental Health Policy and Economics, 4, 17-23, 2001.

Report Updated: 09/23/02

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Implications for Cost-shifting from Private to Public under Parity Legislation

Implications for Cost-shifting from
Private to Public under Parity Legislation