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8 Using Marketplace Incentives to Leverage Needed Change
Pages 325-349

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From page 325...
... , the tendency of the private insurance marketplace to avoid covering or to offer more-limited coverage to individuals with M/SU illnesses, and government purchasers' greater use of direct provision and purchase of care rather than insurance arrangements. Attending to these differences is essential if the marketplace is to promote quality improvement in M/SU health care.
From page 326...
... makes use of health insurance 100 Mental Health Substance Use 80 60 Percent 40 20 0 Public Insurance Private Insurance Direct Public (Medicaid/Medicare) Purchasing Source of Payment FIGURE 8-1 Financing methods for mental health/substance-use care in 2001.
From page 327...
... Some large employers focus special attention on M/SU coverage and spending. In these cases, employers separate the insurance risk for M/SU treatment from that for other health insurance, and create what have become known as managed behavioral health care organization (MBHO)
From page 328...
... Finally, some health plans offer M/SU coverage that is integrated with the rest of the health insurance risk; such plans represent a modest share of the private market. Medicaid, the federal≠state government program that focuses on the poor and disabled, includes managed care arrangements and insurance that follows the principles of fee-for-service≠indemnity health insurance.
From page 329...
... Thus, financing relies on state and local tax revenues instead of individual consumer premiums or federal government funding, although the federal government plays a larger role in funding the direct purchase of substance-use treatment services through the federal block grants to states. Further, nearly all states operate under balanced-budget statutes.
From page 330...
... Specifically, since people with M/SU illnesses are more costly to insure and payments to health plans do not recognize those differences, plans have an incentive to avoid enrolling persons with such illnesses. An example comes from recent analyses of the Medical Expenditure Panel Survey (Anderson and Knickman, 2001; Druss et al., 2001)
From page 331...
... Nothing in the modern market for health insurance has diminished the incentives to avoid enrolling high-cost individuals. Moreover, the evidence of market outcomes consistent with selection incentives for people with M/SU illnesses is strong (Cao, 2003; Cao and McGuire, 2003; Deb et al., 1996; Ellis, 1985; Frank et al., 2000; Normand et al., 2003)
From page 332...
... State Medicaid programs typically operate under state procurement regulations that place great emphasis on pursuing the lowest-cost bid if it is "technically acceptable" to reviewers of the proposal. It should be noted that many states include consumers of M/SU services as advisers to the state in the procurement of MBHO carve-out services.
From page 333...
... . Findings of two more recent studies, however, suggest that people with severe mental illnesses may be especially disadvantaged under MBHO carve-out arrangements in the context of state Medicaid programs.
From page 334...
... . This means that in general, an individual health plan has little ability to influence provider behavior if its approach differs from that commonly encountered in a practice (Glied and Zivin, 2002)
From page 335...
... The implication is that network design can be used to exert economic power not only to control spending, but also to improve quality. Purchase of Services in Traditional Medicaid Programs State Medicaid programs typically cover and pay for a wide range of services for the treatment of mental illnesses.
From page 336...
... This is often not the case for treatment of substance-use illnesses. Traditional Medicaid programs purchase ambulatory services on a fee-for-service basis.
From page 337...
... State and local governments have little leverage in such cases even if their goals differ because the agencies are in effect monopoly franchises. Thus, state and local governments concerned about quality levels cannot easily direct consumers to other providers.
From page 338...
... This role typically involves obtaining and processing information on the cost and quality of various health care services, including health insurance. Privately insured people frequently have a choice of health insurance plans.
From page 339...
... Quality Distortions in the Purchase of Health Plan Services Through Competition for Enrollees When a group purchaser offers its enrollees more than one health plan from which to choose, most private insurance and many state Medicaid programs create competitive markets in which health plans compete to enroll members. In these cases, incentives to avoid enrolling high-cost individuals may cause distortions in insurance coverage for and the quality of M/SU care.
From page 340...
... . It is important to note as well that most carve-out arrangements in private health insurance are not payer carve-outs but are implemented by an individual health plan; these arrangements do not affect selection-related incentives.
From page 341...
... . Thus existing risk adjustment approaches appear to be limited in their ability to stem selectiondriven distortions in quality affecting those at risk for using M/SU treatment services.
From page 342...
... Traditional Medicaid Programs Two core features of traditional Medicaid programs impede highquality M/SU health care. One is the reliance on setting prices for services below market rates to constrain supply; the result is low participation rates by providers and lower-quality service.
From page 343...
... Because people with M/SU illnesses are more costly to care for than other types of enrollees and because the costs of treating these illnesses persist over time, health plans have economic incentives to avoid enrolling these individuals -- a phenomenon known as adverse selection. These selection incentives result in distorted terms of insurance coverage for M/SU services, as well as distortions in the quality of care.
From page 344...
... Currently, about 16 states choose to purchase behavioral health care carve-out services directly from specialty managed behavioral health care vendors on behalf of their Medicaid programs. Among these states are some that delegate procurement to substate authorities (e.g., counties, regions)
From page 345...
... Such a reorientation can likely be accomplished with little risk of incurring "runaway costs" because there is now abundant experience with state procurement of managed behavioral health care services. The range of prices is well known, so that price bids can to some extent be bound in the procurement process.
From page 346...
... 2004. The effect of a managed behavioral health carve-out on quality of care for Medicaid patients diagnosed as having schizophrenia.
From page 347...
... In: Feldman S, ed. Managed Behavioral Health Services.
From page 348...
... 1999. Methadone maintenance and state Medicaid managed care programs.
From page 349...
... 1999. Tracking changes in behavioral health services: How have carve-outs changed care?


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