The effect of parity on expenditures for individuals with severe mental illness.

In 2008, advocates for behavioral health coverage celebrated the enactment of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA), which became effective beginning in 2010 (Centers for Medicare and Medicaid Services 2008). The MHPAEA represents a comprehensive law that institutes “parity,” referring to equality of insurance coverage between behavioral health treatment and physical health (medical and surgical) treatment. The rationale for parity has been based on reducing the stigma associated with behavioral health care and improving the financial protection of services for which there are high levels of unmet need. Many individuals with behavioral health disorders do not receive treatment (Regier et al. 1993; Kessler et al. 2005; Wang et al. 2005). Arguments for parity have been strengthened by two additional claims. First, parity laws can increase the efficiency of insurance markets by reducing the potential for adverse selection. By establishing a floor of coverage, there are fewer opportunities for health plans to focus on positive selection of low-risk enrollees (Frank, Goldman, and McGuire 2001). Second, concerns over higher costs have been dampened by the experiences of several states and employer groups that have adopted comprehensive parity, and have shown an ability to keep costs for behavioral health services in check (Pacula and Sturm 2000; Rosenbach et al. 2003; Bao and Sturm 2004; Goldman et al. 2006; Buchmueller et al. 2007; McConnell et al. 2012). While studies have consistently demonstrated that parity laws do not lead to increases in total behavioral health spending, these findings have also raised a separate concern: Does parity actually convey any benefits to patients? Less is known about whether removing treatment limitations actually means that patients use more care. The negative findings associated with overall spending for behavioral health care call into question the need for more information about the extent to which parity actually changes care, particularly for individuals with a high burden of mental illness. Knowing whether parity has any impacts on spending for subgroups of individuals is important, because it provides critical information about the extent to which the MHPAEA—which was signed only after extensive efforts and remains controversial—can be expected to change care for the individuals who are most likely to need it. Most studies of parity have examined the entire population of enrollees, regardless of whether they have mental health or substance use disorders. While this is the correct approach for understanding the effects of parity laws on the overall cost of health care or premiums, a focus on aggregate effects may hide changes in expenditures that occur for subgroups of individuals, particularly individuals with severe mental illness. Furthermore, recent studies of parity's effect on behavioral health expenditures have included spending on prescription drugs for behavioral health care (Goldman et al. 2006; Azrin et al. 2007; McConnell et al. 2012). However, as the primary focus of parity is on the removal of treatment limitations for behavioral health services, parity should have relatively little impact on prescription drug expenditures. Including prescription drug expenditures as part of the overall measure of behavioral health expenditures may introduce noise that obscures actual changes in spending on outpatient and inpatient services, the domains covered by parity. Finally, it is important to consider the ways in which the MHPAEA defines parity to understand how it may affect utilization and expenditures. Like most parity laws, the MHPAEA disallows health plans from employing “quantitative” treatment limitations (such as visit and spending limitations for behavioral health services) that are more restrictive than those offered for physical health services. Somewhat controversially, the MHPAEA also disallows the use of “nonquantitative” treatment limitations (NQTLs) that affect the scope or duration of benefits for treatment and that apply to behavioral health, but not physical health services. The restriction on NQTLs has been interpreted as an effort to insure that health plans do not “differentially manage” the behavioral health benefit. In other words, the MHPAEA has been interpreted as a restriction on the use of managed care tools (such as medical necessity, prior authorization, and utilization review) that apply to behavioral health benefits in ways that differ from their application to medical-surgical benefits. This study addresses each of these points. We focus our analyses on individuals with severe and persistent mental illness (SMI), defined as adults with schizophrenia or other psychotic disorders, major depression, bipolar disorder, post-traumatic stress disorder, obsessive-compulsive disorder, and selected personality disorders. We estimate the effect of parity on total behavioral health expenses as well as separate estimates for behavioral health services (excluding prescription drugs). These estimates may provide a more precise estimate of the change in expenditures for services that were directly covered by parity. Finally, we study the 2007 Oregon state parity law, which has important similarities to the MHPAEA. In particular, the Oregon statute has been interpreted to disallow managed care tools such as “selectively contracted panels of providers, health policy benefit differential designs, preadmission screening, prior authorization, case management, utilization review, or other mechanisms designed to limit … treatment that is medically necessary” unless there was an analog in the management of medical-surgical benefits (Oregon Insurance Division 2008). This approach mirrors the MHPAEA and its regulations on NQTLs. Thus, by using Oregon claims data, we examine a parity implementation in which the behavioral health benefit cannot be differentially managed, which parallels the MHPAEA. Taken as a whole, the data and focus of our study are designed to provide evidence about the extent to which parity actually changes expenditures for the population in greatest need of mental health treatment, focusing on the types of services most likely to be affected by a parity law.