Mohammed T. Abou-Saleh

UNITED STATES SYSTEM OF CARE 693decreased from 6.1% in 1988 to 3.1% in 1997. The disproportionatereduction in behavioral health benefit expenditures can beattributed to both impositions on utilization patterns (24.6%decline in outpatient utilization) and benefit design (57% of plansimposed day limits on inpatient care, and 48% placed outpatientvisit limits by 1997) 44 .Medicare Managed Care and the Balanced BudgetAct of 1997Encouraged by the private sector’s success in managed care,coupled with rising healthcare costs, federal initiatives havestimulated the growth of Medicare managed care, especially sincethe enactment of Public Law 105-33, the Balanced Budget Act of1997 (BBA-97). According to the Department of Health andHuman Services’ Health Care Financing Administration (HCFA),about 6.1 million Medicare beneficiaries were enrolled inMedicare risk-managed care plans by December, 1998 45 . Theenrollment growth has slowed in 1998–1999 and Health MaintenanceOrganizations (HMOs) holding nearly 100 risk contractshave indicated that they will withdraw from Medicare managedcare in 1999 (about 409 000 enrollees) because of payment ratesand regulatory burdens 45 . Medicare predicts that about44.5 million Medicare beneficiaries will be in managed careprograms by 2008 46 .Several managed care options existed for Medicare patientsprior to the BBA-97. These included Medicare risk contracting(MRC) plans, point of service options (POS), social HMOs ordemonstration projects called programs of all-inclusive care forthe elderly (PACE). Social HMOs or PACE programs aredemonstration projects that combine Medicare and Medicaidfunding into one funding base, providing a continuum ofhealthcare services, including inpatient, outpatient and longtermcare 5 . The BBA-97 created the Medicare+Choice program,a new Part C of Medicare. Medicare+Choice expanded theseoptions to include medical savings accounts, POS options thatallow patients to select from a broader panel of practitionersoutside of the HMO network, religious fraternal benefits plans,and other coordinated care plans meeting a set of establishedstandards 46 .MRC plans are the most frequent type of Medicare managedcare arrangement. A MRC plan receives a set payment per monthper patient, based on a county level adjusted average per capitacost (AAPCC), as determined by HCFA. The BBA-97 madesignificant changes in the payment methodology to MRC plansthat have had historically high AAPCC payment rates. Beginningin 2000, the risk adjustment methodology used to pay many HMOsalso changed, further reducing HMO payment rates 47 . To remainsolvent, MRC plans must ensure that their costs do not exceed theAAPCC payments. Concerns over the payment methodology haveforced some plans to leave the market, while others have reducedbenefits and increased co-payments and premiums.By law, MRCs must offer basic Medicare benefits, includingmental health benefits. In order to entice Medicare beneficiariesinto joining Medicare HMOs, many plans offer enhancedsupplemental benefits, such as prescription drug benefits, dentalcoverage, optical or hearing services 47 . Neither HCFA nor themanaged care industry has established policies or procedures forhow mental health services should be delivered to the elderly.Largely undefined, or using criteria from commercial managedcare plans, are medical necessity criteria, co-payment policies,credentialing standards for providers, hospital network standards,geographic access rules, referral mechanisms and quality improvementmechanisms 5 . Case management guidelines, coordinatedcare for patients with medical–psychiatric co-morbidity, dementiacare and long-term care policies (beyond the 90 day rule forskilled nursing home care) have not yet been clarified. These plansmay also fail to risk-adjust for chronicity and medical–psychiatricco-morbidity of late-life mental disorders, such as Alzheimer’sdisease or recurrent major depression 35 .Managed MedicaidOver the last several years, many states have created Medicaidmanaged care arrangements. As of 1996, about 38.6% of allMedicaid beneficiaries were under Medicaid managed carearrangement, and increased 12% during 1995–1996 40 . The moveto Medicaid managed care has been encouraged by programwaivers from the Federal Government under Section 1915(b) andSection 1115 of the Social Security Act 40 . Section 1915(b) allowedstates to mandate enrollment into managed care programs.Section 1115(a) allowed the US Secretary of Health and HumanServices to approve time-limited demonstration projects that testand evaluate innovative approaches to delivery and financing ofhealth care. Section 1115(a) also allowed some states to expandMedicaid eligibility for acute care services; however, it has beenused to enroll Medicaid beneficiaries into prepaid managed careprograms 40 . The impact of these new financial arrangements onaccess to mental health and long-term care services by olderpersons is yet to be determined. The degree to which state-runMedicaid programs will reallocate resources away from long-termcare programs used by elders towards children and low-incomefamilies is also unclear.Mental Health Managed Care Arrangements:The ‘‘Carved-out’’ vs. ‘‘Carved-in’’ DebateMost Medicare MRC plans ‘‘carve out’’ the mental health benefitpackage, similar to what they do for commercial patientpopulations. Mental health ‘‘carve-outs’’ refer to the practice ofsetting aside funds for mental health benefits and then contractingwith a vendor, who is responsible for managing all mental healthservices. Benefits of carve-out mechanisms include protection ofthe HMO from expenditures above the contracted percentage ofpremium paid to the carve-out vendor, reduction of HMO staffingand space needs, patient confidentiality and mental healthprofessional input for difficult cases. Proponents of carve-outspurport that these financial arrangements for mental healthservices are superior because vendors are able to manage costsand services through superior technical knowledge, skills andservice delivery networks 58 . ‘‘Carve-out’’ approaches to Medicaremanaged care may not be the best approach for older adultsbecause of medical–psychiatric co-morbidities. These arrangementsmay not provide coordinated psychiatric and primary careservices 48 ; may restrict physician involvement through profilingand paneling 49 ; may increase access barriers to care 50 ; and maylimit the quantity of needed services 51 . Carve-out arrangementsmay pose problems with demonstrating cost offset for mentalhealth services, especially for those patients with significantmedical–psychiatric co-morbidity 14 . A study of dominant carveoutsproviding service to MRC payers demonstrated little or norequirement for specialty-trained providers or evidence ofexperience in caring for the elderly 52 .Some argue that mental health benefits for older adults shouldbe ‘‘carved-in’’, e.g. where mental health services are included aspart of the general health benefit. Advocates argue that thisbenefit design better integrates mental and physical care, decreasesaccess barriers due to stigma, and produces cost offsets in generalhealthcare expenditures because of the high medical–psychiatricco-morbidity among older adults 14 . Other benefits include bettercollaboration among psychiatric and physical health providers, as