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Cost-shifting in manged care.

E C Norton¹, R C Lindrooth, B Dickey

¹Department of Health Policy and Administration, School of Public Health, University of North Carolina, Chapel Hill 27599-7400, USA.

Mental Health Services Research

|March 22, 2001

Summary

The transition to managed care for mental health services in Massachusetts Medicaid initially lowered per person spending by 24%. Long-term savings were modest at 5%, with evidence of cost-shifting and potential quality improvements.

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Area of Science:

Health Services Research
Public Health Policy
Healthcare Economics

Background:

The Massachusetts Medicaid program transitioned from fee-for-service to managed care for mental health services in fiscal year 1993.
Understanding the financial impact of such transitions is crucial for public healthcare systems.

Purpose of the Study:

To estimate the short-term and long-term effects of managed care implementation on total public expenditures for mental health services.
To investigate potential cost-shifting between public agencies following the managed care transition.

Main Methods:

Analysis of per-person expenditures before and after the managed care implementation.
Estimation of expenditures across five specific services paid by three public agencies (Medicaid, Department of Mental Health, managed care vendor).
Utilized two-part expenditure models to assess cost-shifting and its relation to quality improvements.

Main Results:

Per-person expenditures decreased by 24% in the first year of managed care, but savings diminished to 5% in the subsequent two years.
Expenditures decreased for services paid by the managed care vendor, increased for Medicaid, and decreased for the Department of Mental Health, indicating cost-shifting.
Cost-shifting effects were more pronounced for beneficiaries with the highest expenditure levels.

Conclusions:

The shift to managed care demonstrated initial cost savings, with diminishing returns over time.
Evidence suggests cost-shifting occurred between public agencies, potentially linked to quality of care improvements.
The findings have implications for healthcare policy regarding managed care implementation and inter-agency financial dynamics.

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