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VII. Public-Private Sector Interface

A. Background

Concern about parity's potential for shifting mental health care costs to the general medical sector is paralleled by concern about parity's potential to shift some expenditures for mental health/substance abuse care from the public sector to the private sector. The latter shift may lower overall mental health/substance abuse expenditures as a result of efficiency gains in the private sector, but higher private insurance premiums may also result. (Another potential shift of particular concern to people with severe mental illness is that from the private to the public sector due to exhaustion of private insurance benefits--especially for inpatient care.) Studies delineating differences in utilization and cost between the public and private sectors, as well as the effects of parity and managed care in encouraging cost shifting between the sectors are at an early stage of development. A few recent findings are reported here.

B. Single-State Case Studies

Case Study 1: Public-Private Sector Comparisons: Utilization and Expenditures
A 1-year study was recently conducted of utilization patterns and expenditures for a single managed care company providing mental health and addictive services to a State population of almost 2 million enrollees; of these, approximately 650,000 were in the public sector (Goldman H. et al. 2000). The study provides a more complete picture of a single State mental health system--in both private and public sectors--than previously available. Preliminary data from the study indicate that all service use (except rarely used and usually noncovered substance abuse services) is higher in the public sector than in the private sector. This difference does not seem to change dramatically when managed care is implemented in both the public and private sectors by the same managed behavioral health care company.

Case Study 2: Public-Private Sector Cost Shifting
A recent study using a longitudinal data source (pre-parity) from the mid-1990s (containing individuals with private insurance who also use public-sector services, as well as privately insured individuals who do not use publicly financed services) is contributing to understanding interactions and cost shifting between the public and private mental health care systems (Siegel et al.1997, 2000). Major findings of this case study indicate that during a year, only a small proportion (< 1 percent) of those with private insurance directly shifted to the public sector; a larger proportion (< 2.2 percent) of those with private insurance shifted to a mixture of private and public-sector services.

During the first year of the study, the latter group had the highest costs within the private group. There is a high likelihood of remaining in the mixed private/public pay category; approximately 55 percent of people in that group remain in it over 2 years, and have consistently high costs. People who shift from private to public sector or to a mixture of public and private sectors tend to be dependents (with subsidized income) of employed individuals. This study demonstrates empirically that the public and private insurance sectors are not mutually exclusive, and individuals are not purely in one sector or the other. There is a small group of high-use, high-cost patients who are being financed by both sectors, and about 13 percent of them moved to the public sector after being in the mixed sector for 2 years.

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This page was last updated: November 1, 2000.

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