Understanding the impact of societal costs is essential to the process of
structuring mental health financing strategies, according to a mental health
advocate and lead author of a new study showing that while one managed care
plan saved money in some areas, the burden of cost may have been shifted
rather than avoided.
In a cost analysis of three Medicaid plans in Florida, managed care was
associated with a tendency toward reduced costs to Medicaid but increased
societal costs, which include those to family and friends of people with
mental illness. The results appeared in the February American Journal of
"It is critical to examine societal costs when forming sensible
social policy" that guides health care financing schemes, said David
Shern, Ph.D., lead author of the study and president of Mental Health America,
in an interview with Psychiatric News.
AJP Editor in Chief Robert Freedman, M.D., noted in a press
release announcing the study results that "the wider perspective is
especially important for patients with long-term disabling illnesses who have
multiple needs that cross different types of services and payers."
Shern and colleagues at the Louis de la Parte Florida Mental Health
Institute at the University of South Florida examined costs related to a
Medicaid waiver in the Tampa Bay area that established mandatory enrollment
for Medicaid recipients either in an HMO that charges beneficiaries a premium
or in a mental health carveout plan run by a national behavioral health care
They compared those costs with costs related to Medicaid mental health
services reimbursed on a fee-for-service basis in Jacksonville, an area that
resembles Tampa Bay in terms of its health care delivery system.
To recruit study subjects, Shern identified 688 Medicaid enrollees with
severe mental illness through a mail screening procedure, and colleagues
interviewed the enrollees on a face-to-face basis from October 1997 to
November 1999 about general health and mental health service use and
expenditures related to those services.
The researchers compiled service costs by using Medicaid fee-for-service
reimbursement rates from 1997 and collecting cost estimates of service use
from different health facilities. In addition, they estimated the costs
associated with time contributed by friends and family using minimum wage
rates from 1997.
Costs were categorized as Medicaid-financed costs, other publicly funded
costs, and privately financed costs, which included income and time and
financial support provided by friends and family of enrollees.
Societal costs were intended to reflect total resource consumption and were
calculated by adding together all service costs, housing subsidies, legal
costs, and support from family and friends.
Shern and colleagues found that HMO enrollees had significantly lower
Medicaid costs than those in the fee-for-service or carveout conditions
(p<.05). Those enrolled in either managed care plan, however, had
significantly greater private costs than those in the fee-for-service
conditions, with HMO enrollees registering the highest private costs.
The researchers found that although those enrolled in the HMO did save
money for the Medicaid program and showed the greatest overall reduction of
Medicaid service use compared with the other plans, "there were no net
savings when we considered overall societal costs," Shern said.
These societal costs were due to an increase in legal costs incurred by HMO
enrollees, which included time spent in jail, in prison, on probation, or on
community service work, as well as frequency of police contact, court
appearances, and attorney services.
Societal costs for HMO enrollees also included increased expenditures by
friends and family members compared with those in the carveout and
"People enrolled in managed care had much greater private costs,
consisting mostly of friends and family members' contributions" of time
and money, Shern said. Such contributions included family members staying home
from work to care for the relative with mental illness or giving the ill
family member money for food or medications.
Due to the study's design, Shern noted, he couldn't draw definite
conclusions about cost shifting from one payer to another, but was able to
pinpoint trends in cost shifting and emphasized that when exploring options
for health care financing strategies, societal costs must be considered.
"One problem we must take into account when talking about people with
severe mental illness is the fragmentation of the mental health system and the
multiple payers who are involved in financing care for those patients,"
said Shern. "This study shows that if you constrain payment in one of
those systems through a managed care arrangement, you may inadvertently
distribute cost to other payers."
"Medicaid Managed Care and the Distribution of Societal Costs
for Persons With Severe Mental Illness" is posted at<ajp.psychiatryonline.org/cgi/reprint/appi.ajp.2007.06122089v1>.▪