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Managed care: Key to a transformed system

May 1, 2009
by Ed Jones, PhD
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It has an important role in parity's implementation and upcoming reforms

Our industry has not yet absorbed the tremendous changes signed into law last year in the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act and the phased-in reforms to Medicare reimbursement, both of which essentially increase behavioral health benefits to the level of general medical benefits. The next profound changes soon could be upon us as the Obama administration pursues healthcare reform. Yet behavioral healthcare is not high on the list of issues being considered in this reform, and this could be a real problem for our industry.

Recent years have witnessed important changes in how behavioral healthcare is conceptualized in both the public and private sectors. Public-sector behavioral healthcare now is focused on recovery and resiliency as achievable goals, and peer-support programs are viewed as critical to recovery as medication and psychotherapy. The private sector is focused not simply on mental health and substance abuse services but is more broadly engaged in behavior change, including diet and exercise as well as adherence with medical treatment. These changes are evolving and still hardly universal, but the healthcare landscape is likely to change shortly in ways that will impact everything we are doing.

An important issue facing us is how we can secure a seat at the table to shape healthcare's future. In the words of an unknown yet wise policy analyst, you are either at the table or you are on the menu! What could it mean to be “on the menu”? Quite simply, money that might be directed to behavioral healthcare instead would be directed to some other worthy area. Although many of us believe people cannot achieve health without first achieving mental health, this is not the majority's view.

I believe successful healthcare reform will build on our existing system of care rather than invent something new. Atul Gawande, MD, a highly respected healthcare provider and observer, recently articulated this perspective in The New Yorker:

[W]e'll inevitably want to build on the institutions we already have. That precept sounds as if it would severely limit our choices. But our health-care system has been a hodgepodge for so long that we actually have experience with all kinds of systems. The truth is that American health care has been more flotilla than ship…. We're not going to get perfection. But we can have transformation-which is to say, a health-care system that works. And there are ways to get there that start from where we are.1

Dr. Gawande makes his argument with the support of historical precedents, specifically changes in European healthcare systems following World War II. It also should be noted that powerful interest groups are likely to drive compromise rather than fundamental change. With this in mind, I now return to the concluded debate on mental health parity and resurrect a critical issue that undoubtedly will be raised again in healthcare reform discussions-managed care's role in a transformed system.

Sen. Pete Domenici (R-N.M.) fought for mental health parity longer than any other legislator associated with the law. He always was clear that mental health parity was inconceivable without the existence of managed care organizations. He no doubt remembers the unbridled, escalating behavioral healthcare costs that brought managed care into existence in the 1980s. This was not the view of everyone who fought for the parity law. Rep. Patrick Kennedy (D-R.I.), for example, wants to see insurance bureaucrats out of the picture so that providers and patients can make the decisions about services. This is an understandable view given managed care's abuses (e.g., unnecessary micromanagement of care), and yet it likely would return us to the abuses of insurance benefits witnessed in the 1980s (e.g., inpatient lengths of stay driven by insurance coverage rather than clinical need).

In fact, the parity law brings new attention to managed care, enabling health plans that provide mental health and substance abuse coverage to make “medical necessity determinations” for both in-network and out-of-network care. Conducting utilization reviews for out-of-network services is quite challenging, as a service provider has no contract with the company conducting the review. However, employers are concerned that the parity law requires behavioral health out-of-network benefits to be on par with out-of-network medical and surgical benefits. Out-of-network coverage for behavioral health disorders historically has been much more limited than for medical and surgical care, so employers support efforts to ensure that out-of-network services are medically necessary. To be sure, healthcare payers would have vigorously opposed parity legislation without a strong role for managed care organizations.

Managed behavioral healthcare organizations (MBHOs) are attempting to evolve into behavioral health and wellness organizations (BHWOs). If BHWOs are successful, behavior change will be understood as the cornerstone of health and wellness, and behavioral health will come to mean living without the burdens of mental health disorders, substance use disorders, and unhealthy lifestyles that put physical and mental health at risk. And BHWOs are determined to see that behavioral healthcare has a place at the health reform table.

Ed Jones, PhD, is Executive Vice-President of the Commercial Division for ValueOptions, a behavioral health and wellness company with 22 million members nationally. He also is a member of

Behavioral Healthcare's Editorial Board.