Mohammed T. Abou-Saleh

UNITED STATES SYSTEM OF CARE 691specialized mental health services that are provided from outsidethe facility through a consulting or other contractual arrangements.A variety of consulting models of mental health services tonursing homes have been described and optimally includecomponents of assessment and evaluation, with a strong emphasison collaborating with the treating medical physician and oneducating nursing staff 26 . However, surveys of nursing homedirectors indicate that there is considerable unmet need forpsychiatric consultation services, especially addressing nonpharmacologicmanagement and staff training. However, incentivesare lacking for adequate service provision by psychiatrists innursing homes and there are substantial challenges to identifyingthe most effective interventions and services 27 . Appropriateinstitutional and patient outcome measures need to be developedthat can identify the most cost-effective intrinsic and extrinsicmental health services for nursing homes.Acute Inpatient HospitalizationGeriatric patients with late-life mental disorders requiring acuteinpatient hospitalization are principally and appropriately caredfor in secondary and tertiary care hospitals 1 . Inpatient unitswithin general hospitals have access to subspecialist consultationand diagnostic technology required to provide accurate diagnosisand treatment recommendations. Over the last 15 years, there hasbeen a substantial increase in the rate of admissions of geriatricpatients to nine federal general hospitals. Specialized medicalpsychiatry units have increased the levels of sophisticatedtreatment for patients with severe mood disorders, mooddisorders complicated by psychotic features, and those elderpatients with mixed medical and psychiatric disorders 1 . Inpatientservices offer multidisciplinary interventions, including psychiatricservices, family evaluation and therapy, social service evaluationsand, in ideal situations, coordinated aftercare services.FINANCING MENTAL HEALTH CARE: THEUNDERPINNINGS OF THE CURRENT STRUCTUREOF THE US SYSTEM OF CAREIdeally, health systems follow the rule that ‘‘form followsfunction’’. In the US system of care, a more cautious approachmight be ‘‘form follows finance’’. In this respect, the character anddimensions of mental health services for older adults in the USAhas flowed directly from the structure, incentives and limitationsof the system of financing and reimbursement. In this section wewill describe these recent developments in fee-for-service financingof mental health services for older adults, followed by a discussionof current trends in managed care. For geriatric patients with latelifemental disorders, Medicare is the principal payment source foracute psychiatric services in the USA. Aside from out-of-pocketexpenses, state-managed Medicaid, a blended Federal and stateinsurance program for the poor, is the primary source of paymentfor institutional and long-term care services. Hence, we willconcentrate on an overview of Medicare and Medicaid as the twoprincipal sources of payment for mental healthcare servicesprovided to older persons in the USA.Traditional Fee-for-service MedicareMedicare, the federally funded health insurance program, is theprimary payer of acute general health and psychiatric care servicesfor the elderly, people with chronic disabilities and people withchronic renal failure. In 1997, approximately 39 million individualswere covered by Medicare, of whom about 33.6 million wereaged 65+. Total Medicare expenditures in 1997 were almost$207 billion and accounted for more than 11% of the US federalbudget 28 . Medicare’s nearly universal coverage for the elderly isimportant because of the impact of adverse risk selection oninsurance premium costs. Adverse risk selection refers to theattraction of high-cost consumers to insurance plans that offercoverage for high-cost conditions. In this respect, insurance plansthat cover high-risk populations (e.g. the elderly, with multiple comorbiditiesand chronic conditions) are likely to assume disproportionaterisk compared to insurers covering services ofyounger populations with low use of expensive services such asacute hospitalizations and long-term care. In other words, theactuarial risk for high medical service utilization among theelderly is high. Thus, if Medicare were privatized and premiumsreflected actual utilization, costs would be prohibitive for mostolder adults. This effect would be exaggerated for elders, as 11%of them live in poverty and another 6.4% are between poverty and125% of the poverty level 28,29 .Traditional Medicare is similar to typical indemnity insuranceproducts featuring retrospective fee-for-service (FFS) payment,deductibles and co-insurance, but it does not have limits onannual personal spending. It also does not fully cover medicalequipment costs, and fails to cover prescription medicines and thecosts of long-term care 28 . Cost sharing and uncovered benefitshave created the private ‘‘supplemental insurance’’ market, thepremiums for which constitute the largest source of personalspending for community-dwelling beneficiaries 28 . Supplementalpolicies may have inpatient and outpatient mental health benefits,designed to cover co-payments and deductibles. They do not alterbasic coverage limits.The proportion of Medicare expenditures devoted to mentalhealth is relatively small, however. For example, in 1996 Medicareexpended about $9.8 billion for mental health services, up fromjust under $5.1 billion in 1994 30,31 . Most Medicare expendituresfor mental health services are for Part A services, and less thanone-half of 1% are for older adults in non-institutionalsettings 32,33 .Medicare’s Benefit Design for Mental Health Services:Fee-for-service and Managed Care ArrangementsTraditional FFS Medicare has two components; part A, whichcovers inpatient psychiatric hospital care (up to 190 days life-timemaximum in free-standing psychiatric hospitals and unlimiteddays in general hospital psychiatric units) and outpatient care insome hospital-based clinics and other hospital technical fees 34 ;part B covers medically necessary physician, partial hospitalizationand related ancillary services. Psychotherapy servicesprovided by psychiatrists, non-psychiatric physicians, psychologistsand other mental health providers, as well as outpatientelectroconvulsive therapy are subject to a 50% co-payment, whilemedical management services are subject to a 20% co-payment 34 .Since the enactment of the Medicare legislation in 1965,reimbursement policies have been a financial barrier to accessingneeded mental health services for the elderly and disabled,especially for outpatient services. Until reforms were enacted inthe late 1980s, Medicare’s inpatient coverage was similar toprivate insurance, while outpatient service coverage was deminimus 35 . For example, Medicare reimburses inpatient servicescarefully, less a 1 day deductible for the first 60 days; it requires a25% co-payment for days 61–90 and a 50% co-payment for days90–150 34 . In contrast, in 1966–88 Medicare covered outpatientmental health services up to a maximum of $500, subject to a 50%co-payment, e.g. Medicare only paid $250. In 1984, limitations onmedically-based psychiatric services for Alzheimer’s disease werenot subject to the $500 and 50% cap. The Omnibus Budget