Commentary: Mental Health: Better Benefits Won't Break the Bank

By Paul Raeburn

More than 80% of American employees and their families face tougher limits on coverage for mental illness than they do for other health conditions. That's a serious problem for the one in five Americans who, according to the U.S. Surgeon General, will suffer from a mental disorder in the course of a year. Advocates for the mentally ill have pushed hard for parity in the coverage of mental illness and other ailments. But opponents have warned that parity could provoke a disastrous surge in health-care costs.

A 1996 federal law that went partway toward establishing parity has done little to improve coverage. But on Dec. 3, House and Senate conferees began meeting to decide the fate of a Senate amendment--passed by voice vote--that would establish full parity. (The House did not pass a similar amendment.)

Opponents are again warning about costs, but new data and several independent studies suggest that employers' costs for mental-health parity could be very small--amounting to less than a 1% increase in health care costs. In 1996, several studies by the government and lobbyists had estimated that the expansion of mental-health benefits could add as much as 10% to health-care costs. But those studies were done before it was shown that managed care was very effective in controlling mental-health expenses.

"NO DISASTER." One of the new studies was done by The RAND Corp. Based on an examination of 24 managed-care mental-health plans covering 140,000 people, the study concluded that the added cost of providing mental-health coverage equivalent to other medical coverage would come to less than 1%. The RAND researchers also looked at mental-health care costs in Ohio, which instituted equal coverage a decade ago. "Their costs are totally stable--there is no big increase, no disaster," says Roland Sturm, an economist and the study's author.

Another estimate came from the Congressional Budget Office, which reviewed the Senate bill. It concluded that complying with the bill would cost the private sector about $3 billion in 2002, rising to $5 billion or slightly more in 2006. Those numbers are only a tiny fraction of the $1.2 trillion the U.S. now spends on health care annually.

These estimates are backed up by real-world experience. Mental-health parity was extended to 2.2 million federal employees and their families on Jan. 1. The federal Office of Personnel Management (OPM) reports that premiums have increased 1.3%. "Our goal of expanding access to mental-health benefits in an affordable way was achieved," William E. Flynn III, OPM's associate director for retirement and insurance, told Congress last summer.

Even some opponents of mental-health parity legislation agree the costs are much lower than originally thought. Kristin Apgar of The Washington Business Group on Health, which represents large employers, says the group's members oppose mental-health parity legislation because "they don't think Congress should determine what their health-benefits package should look like." But many members offer generous mental-health benefits, and they have found that the costs are low.

One of the fiercest opponents of mental-health parity is the ERISA Industry Committee, a group of large employers, mostly in manufacturing. The organization argues that the Senate amendment would encourage excessive government interference. "This is microeconomic parity, parity down to a much more detailed level," says Anthony Knettel, vice-president of the group. Some firms, he says, might simply drop mental health coverage, which the Senate amendment allows.

Traditional insurers and HMOs also oppose mental-health parity--but patient organizations and the HMOs that administer mental-health benefits support it. "Finally people are understanding that mental illness is an illness like other illnesses," says Pamela Greenberg, executive director of the American Managed Behavioral Healthcare Assn.

The demand for better mental-health coverage is growing. Many companies have already chosen to offer their workers expanded mental-health benefits, without waiting for the government to order them to. Other employers--eager to avoid government mandates--may decide to do the same.

Raeburn writes about science and medicine in New York.

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