The effects of expanded mental health benefits on treatment costs

Mental health disorders represent one of the most common problems facing adults in the labor force. It is estimated that within a 12-month period nearly 30% of the US population experiences some diagnosable mental health or addictive disorder. This study examines the impact that corporate benefit policies can have on mental health treatment costs.

To measure the effects of a change in mental health benefit design on treatment expenditures for employees of a large US-based company.

Data came from mental health treatment administrative claims and eligibility information provided by the company and a comparable set of claims for a randomly selected control group for the years 1995-1998. We measure the effect of a change in mental health benefits consisting of three major elements: a company-wide effort to destigmatize mental illness; reduced cost-sharing for mental health treatment; and the implementation of a provider network that emphasized access to non-physician mental health specialists. We use a two-part regression model within a difference in differences framework to examine outpatient, pharmaceutical, and combined outpatient and pharmaceutical expenditures between the treatment company and the control group.

We find that the program led to a statistically significant dollar 17 increase in outpatient costs (excluding pharmaceutical costs) per employee. Similar to outpatient care we find that the benefit change was associated with a statistically significant increase in pharmaceutical costs of about dollar 15.

The results reveal that the mental health benefit expansion at the company led to a significant increase in aggregate mental health expenditures among employees. However, the aggregate increase in cost masks a number of interesting underlying trends in mental health utilization. First, conditional upon any mental health treatment, mental health costs were virtually unchanged before and after the benefit change. Conditional on any use, outpatient and pharmaceutical expenditures went in opposite directions, with outpatient expenditures falling and pharmaceutical expenditures increasing.

Private sector initiatives can increase use of mental health care treatment through decreased cost-sharing, improved access to specialty providers, and destigmatization of mental disorders. IMPLICATIONS FOR HEALTH CARE POLICY FORMULATION: Given that the vast majority of people in the US get their health insurance through employer-sponsored health insurance, efforts on the part of the private sector to recognize and treat serious chronic illnesses such as mental disorder in a proactive manner should be encouraged.

While the aggregate cost of corporate initiatives to improve access to quality mental health care is frequently examined, it is also important to decompose the aggregate cost changes into effects from a change in the rate of initiation and changes in utilization conditional upon initiation.