In the 110 th Congress, there is a renewed push to expand existing federal mental health parity law. Legislation introduced in the House ( H.R. 1424 ) by Representatives Kennedy and Ramstad, and in the Senate ( S. 558 ) by Senators Domenici and Kennedy, have passed in the respective chambers. On March 5, 2008, the House passed H.R. 1424 by a roll call vote. On September 18, 2007, the Senate passed S. 558 with an amendment, by a voice vote. The Congressional Budget Office (CBO) scored S. 558 and H.R. 1424 and estimated that, if enacted, both bills would increase health insurance premiums by 0.4%. On April 29, 2002, in a speech on mental health care during which he announced the formation of the New Freedom Commission on Mental Health, President Bush urged Congress to enact legislation that would provide full parity in the health insurance coverage of mental and physical illnesses. The President identified unfair treatment limitations placed on mental health benefits as a major barrier to mental health care. Historically, private health insurers have provided less coverage of mental illnesses compared to other medical conditions. For example, health plans have imposed lower annual or lifetime dollar limits on mental health coverage, limited treatment of mental health illnesses by covering fewer hospital days and outpatient office visits, and increased cost sharing for mental health care services. Under full parity, a plan must use the same treatment limitations and financial requirements in its mental health coverage as it does in its medical and surgical coverage. The New Freedom Commission endorsed mental health parity in its final report, issued on July 22, 2003. "The commission strongly supports the President's call for federal legislation to provide full parity between insurance coverage for mental health care and physical health care," the report said, in reference to the President's April 2002 address. In 1996, Congress enacted the Mental Health Parity Act (MHPA), which established new federal standards for mental health coverage offered by group health plans. However, the MHPA is limited in scope and does not compel health plans to offer full-parity mental health coverage. It requires group health plans that choose to provide mental health benefits to adopt the same annual and lifetime dollar limits on their coverage of mental and physical illnesses. Plans may still impose more restrictive treatment limitations or cost sharing requirements on their mental health coverage. Lawmakers recently reauthorized the MHPA through December 31, 2008. Senators Domenici and Wellstone introduced full-parity legislation ( S. 543 ) in the 107 th Congress; the measure saw some action but failed to pass. The legislation ( S. 486 ) was reintroduced at the beginning of the 108 th Congress by Senators Domenici and Kennedy. An identical House bill ( H.R. 953 ) was introduced by Representatives Kennedy and Ramstad. No legislative action was taken on either bill. In the 109 th Congress, the MHPA was introduced in the House ( H.R. 1402 ) by Representatives Kennedy and Ramstad. No legislative action was taken on this bill, and no corresponding legislation was introduced in the Senate. For an analysis of the legislative history of federal parity legislation, see CRS Report RL33820, The Mental Health Parity Act: A Legislative History , by [author name scrubbed] and [author name scrubbed]. Patient advocacy groups and health care provider organizations that support mental health parity argue that there is no longer any scientific justification for discrimination in mental health coverage, which they believe only reinforces the stigma that many in society attach to mental illness. Their efforts to combat discrimination received a boost with the release of the 1999 Surgeon General's Report on Mental Health. The report reviewed the extensive scientific literature on mental health and concluded that mental illnesses were largely biologically based disorders like many other medical conditions. It also found that the efficacy of mental health treatments is well documented, and that effective treatments exist for most mental disorders. Proponents of mental health parity highlight the high costs to society of untreated and undertreated mental illness. The Substance Abuse and Mental Health Services Administration estimated that the direct treatment costs of mental illness in 2001 totaled $85 billion. This does not include the economic costs of lost productivity due to illness, lifetime lost productivity, and other indirect costs. Employer and health insurance associations oppose parity legislation because of concerns that it will drive up costs. Parity supporters refute those claims, pointing to recent studies that indicate that full parity can be implemented without substantial cost increases within the context of comprehensively managed behavioral health care. Twenty-eight states have passed laws mandating full-parity mental health coverage. Except Wyoming, all other states have enacted legislation that requires health plans to provide certain specified mental health benefits, but not necessarily full parity. However, employers who have self-insured plans (i.e., the employers pay physicians and hospitals directly) are not bound by state insurance regulations. This report briefly summarizes the economic forces that help explain the persistent limitations on mental health coverage in conventional, fee-for-service (indemnity) health plans. It also discusses issues relating to the feasibility of parity under managed care. In the past decade managed care has transformed the delivery of mental health care services. Employers and health plans now frequently contract out administration of their mental health benefits to specialty managed behavioral health care organizations. The report then reviews state mental health parity legislation and compares the Senate and House versions of the latest full-parity legislation ( S. 558 and H.R. 1424 ) in the 110 th Congress. It concludes with a discussion of some of the key issues in the ongoing congressional debate on mental health parity and discusses why parity may not be enough to provide equivalent financial protection and access to quality care for persons with mental disorders. Appendix A provides a side-by-side comparison of the key provisions in the engrossed versions of S. 558 and H.R. 1424 . Appendix B summarizes state mental health parity laws. Appendix C lists, by committee, the mental health parity hearings since the 106 th Congress. Finally, Appendix D provides websites and annotations of various patient advocacy groups and professional associations that have taken a position on mental health parity. Most mental health care used to be delivered and financed by state-run institutions that provided medical treatment, room and board, and vocational activities for individuals with severe psychiatric disorders. In the 1960s, the role of state governments in mental health began to diminish as alternative forms of outpatient and community-based care gradually replaced institutional care. The mental health system over time started to resemble the general health care system, financed by a combination of private and public insurance. However, private insurance coverage for mental health care no longer included some of the nonmedical services provided by state institutions, such as accommodation and employment. In addition, mental health coverage tended to be more restrictive than the coverage for physical illnesses and surgery and include a higher level of cost sharing. The lack of parity in insurance coverage in part reflected insurers' concerns that the costs of mental health care were high and unpredictable. Insurers argued that mental disorders were difficult to define, and that treatments involving long-term, intensive psychotherapy and extended hospital stays were expensive and often ineffective. Although stigma has played and continues to play an important role in the mental health care debate, differences in insurance coverage of mental illnesses and other medical conditions are also the result of important economic factors. Studies of indemnity insurance have found that the moral hazard problem is more pronounced for mental health care than it is for general medical care. Moral hazard refers to the tendency for patients to demand more services as the price they pay for those services declines. While health insurance, in general, creates incentives for overuse by insulating patients from the total costs of care, research shows that the demand response to reduced cost sharing in mental health care is approximately twice as large as that observed in general medical care. The result has been for insurers to impose higher cost sharing for mental health care. Insurers have also restricted their mental health coverage to protect themselves from adverse selection. Adverse selection refers to the tendency for health plans with generous coverage provisions to attract sick (i.e., high-cost) enrollees. The evidence suggests that adverse selection may be an especially powerful force in mental health care. Studies indicate that individuals with mental illness select health plans that offer more generous mental health coverage. Such behavior can create a strong economic incentive for health plans to reduce their attractiveness to users of mental health care. While competition among plans to avoid enrolling high-risk individuals may represent a good strategy for an individual plan, health economists argue that it is wasteful and inefficient for the health insurance system as a whole. Competition among indemnity insurance plans is seen as an important factor in reducing the level of coverage for mental health care. During the 1970s and 1980s, this argument was used to justify federal and state mandated benefit laws that required insurers to cover minimum levels of mental health care (see below). Some health economists claim that parity can improve the efficiency of insurance markets by reducing wasteful forms of competition that are the result of adverse selection. These commenters note that requiring parity for mental health benefits establishes a uniform "floor" of mental health coverage across all plans. Supporters of parity maintain that studies show that implementing parity through managed mental health care will not lead to a significant increase in costs to the insurers. The movement to establish parity for mental health care has been fueled by changes in the scientific understanding of mental illness and the rapid increase in managed behavioral health care (i.e., mental health and substance abuse treatment). Recently revised estimates suggest that about 15% of the adult U.S. population (approximately 30 million individuals) are affected by a clinically significant mental disorder in any given year. Clinicians are often able to diagnose mental illness with precision, and effective treatments now exist for many psychiatric conditions. Some studies show that the effectiveness of treatments for major mental disorders, which typically involve a combination of medication and psychotherapy, often match or exceed the effectiveness of common treatments for physical illness.