Mohammed T. Abou-Saleh

692 PRINCIPLES AND PRACTICE OF GERIATRIC PSYCHIATRYReconciliation Acts of 1987 and 1989 (OBRA-87 and OBRA-89,respectively) changed reimbursement for outpatient psychotherapyservices. OBRA-87 raised the $500 cap for psychotherapyreimbursement to $2200, but retained the 50% co-payment,effectively paying only $1100. OBRA-87 exempted medicalmanagement of psychotropic medications from the limit, inaddition to reducing the co-payment to 20%. Partial hospitalizationservices were authorized. OBRA-89 removed the cap onoutpatient mental health services, although the 50% co-paymentwas retained 35 .Changes in benefit design contributed to increasing expendituresfor mental health services by 136% between 1987–1992 36 .Correspondingly, service utilization increased, thus correcting thehistoric underutilization of mental health services by the elderly,e.g. mental health service users rose 76%, and the number ofservices per beneficiary over age 65 years rose 15% 36 . Difficult toestimate, however, are expenditures for mental health servicesdelivered by physicians in general medical settings, which reflectactual treatment services for psychiatric conditions not coded byproviders or treatment services for psychiatric conditions misdiagnosedas general medical disorders.Although increases in expenditures for mental health servicesprovided to older persons over the last decade suggest thatprogress has been made in better meeting the need, it is importantto note that most of the services remain biased towards costlyinpatient care. In 1994 about 12.7% of Medicare claimants had aMH/SA disorder based on primary diagnosis and/or procedurecodes 37 . Cano et al. 38 estimated that in 1995 Medicare beneficiariesaged 65+ with a primary psychiatric diagnosis accounted for325 000 hospital and skilled nursing facility stays and accountedfor approximately $1.8 billion or 53% of all acute psychiatricpayments made by Medicare. The majority of admissions were topsychiatric units in general hospitals (42%), followed by generalhospital admissions (29%), psychiatric hospitals (15%), andskilled nursing facilities (14%). Overall, the burden of mentaldisorders in the elderly is substantial; Smyer and Shea 39 estimatedthat the total direct costs for mental illness for individuals aged65+ were $17.3 billion.MedicaidMedicaid is the primary public insurer for acute care for medicallyindigent populations and for long-term care in the USA. Medicaidis a joint federal and state program, with an individual statecontributing up to 50% of costs. Variability in benefit designamong states makes it difficult to generalize about the effects ofMedicaid on care nationally 14 . For example, states differ oneligibility criteria (this applies to people eligible for both Medicareand Medicaid), on the scope of coverage for inpatient andoutpatient mental health services, pharmacy benefits, co-paymentarrangements for enrollees, pre-authorization rules for inpatientand outpatient services, and managed care arrangements.Common to Medicaid programs, however, is a 20–30% reductionin reimbursement schedules compared to regional market rates 14 .Figure 127.1 summarizes national Medicaid expenditures in1995. Excluding administrative expenses and disproportionateshare allocations to hospitals serving large numbers of poorpeople, Medicaid spent about $132 billion in 1995 on about 34.8million recipients, of whom only 11% were aged 65+. However,this latter group accounted for about 30% of all expenditures.About 19% of Medicaid expenditures were spent on nursingfacilities, 6% on home health services, and only 2% on mentalhealth services 40 . It is difficult to determine what proportion of the$7.1 billion in Medicaid expenditures for mental health services in1994 was for older adults 31 . Medicaid spent approximately100%0%49.323.116.511.1Percentage ofbeneficiaries19.912.837.629.7Percentage ofexpenditures$10 129 per elderly beneficiary, and 75% of this amount wasallocated to long-term care services 40 .Mental Health Managed Care for Older AdultsLow-incomechildrenLow-incomeadultsBlind/disabledElderlyFigure 127.1 Distribution of Medicaid beneficiaries and expenditures in1995: $132.3 billion for 34.8 million recipients. Adapted from MedPacOver the last decade, managed care has had stunning impact onprivate commercial and public financing and delivery of mentalservices in the USA. While universal definitions of managed carehave not been agreed upon, for the purposes of this chapter,managed care is defined as systems of care that integrate thefinancing and delivery of appropriate healthcare services to healthplan enrollees by means of provider network arrangements.Managed care organizations (MCOs) furnish comprehensivehealthcare services; set standards for the selection of providers;use formal and ongoing quality improvement and utilizationreview programs; and place emphasis on preventive services inorder to avoid more costly medical care services. MCOs useincentives to use health plan providers and services in order tolimit out-of-network providers 41 . Recall this definition of managedcare later in the chapter, when we discuss demonstrationprojects designed to integrate geriatric healthcare services for thefrail elderly.To a large extent, managed care has succeeded in reducinghealthcare expenditures in both the general health sector andspecialty mental health sector, especially for private commercialhealth plans. For example, under the Federal ProspectivePayment System (PPS) to hospitals, inflation in global operatingcosts per hospital case declined from a yearly average of 9.5%during 1985–1990, to a yearly average of 70.5% during 1993–1997 42 . The rate of growth of global physician expenditures hasalso declined. Using the Medicare Economic Index (MEI), whichmeasures various inputs used to produce physicians’ services, suchas earnings, staff salaries, supplies, etc., MEI increases in 1985–1992 averaged 3.1%/year, but have declined to 2.1%/year since1992 43 . In the non-Medicare specialty mental health sector, costreductions have also occurred. The Hay Group ManagementCorporation and the National Association of Psychiatric HospitalSystems (NAPHS) recently reported that the value of behavioralhealthcare expenditures for commercial insurance plans (nongovernmentalinsurance) decreased in 1988–1997 by 54.1%,compared to 7.4% for general healthcare costs 44 . As a proportionof total healthcare benefit costs, behavioral health benefits