A. Background

Comprehensive analyses of the impact in the workplace (including employer concerns) of broadened mental health coverage under parity need to take into account parity's effect on the costs of general health care, and costs of disability and work productivity. Potential shifts of employees with mental illness into primary care to obtain mental health treatment, changes in workplace performance and attendance, and movement of workers between the employment and disability rolls are of particular interest to employers. No data are available on the impact of parity in these areas. However, previous research discussed below provides some insight into the potential effect of providing expanded mental health services under parity.

B. Indirect Effects of Mental Health Care on General Medical Care Costs

The interactions of somatic and psychological factors in health and illness--and their impact on health care use and costs--are gaining increasing recognition in a climate of greater management and cost control. There is widespread agreement that people with mental illness are high users of general medical services. For example, people diagnosed with depression have nearly twice the annual health care costs of those without depression, while those with somatization disorder have nine times greater annual health care costs than those without the disorder (Simon et al.1995). There has been considerable interest in the effect of providing mental health and substance abuse treatment on the use and cost of general medical care.

In the classic research review and meta-analysis of how mental health care affects medical care costs (Mumford et al. 1984), most of the 58 studies under review demonstrated a medical cost offset, that is, a compensatory reduction in the cost of general health services, usually resulting from provision of short-term psychotherapy or supportive counseling. But many of the studies were difficult to interpret because of methodological flaws, such as lack of randomization or of a well-matched comparison group.

Two studies that used random assignment examined the effect of providing psychiatric consultation to primary care physicians for people with somatization disorder or somatization syndrome (Smith et al. 1986; Simon et al. 1995) Both studies demonstrated reductions in health care expenditures (53 percent and 33 percent respectively) for the two illness groups.

Zhang and colleagues (1999) followed 435 people with depression over a 1-year period. Among those receiving depression treatment, individuals treated in the mental health sector had significantly higher depression treatment costs and significantly lower lost earnings than those treated in the primary care sector. The investigators concluded that the annual net economic costs are lower for people treated within the mental health sector than for those treated by primary care providers.

Concern has been expressed in the field that restricting access to specialty mental health services might shift the cost of caring for the mentally ill into the general health system. This concern is based in part on findings of cost shifting to the general health system, such as that identified by Rosenheck and colleagues (1999) described in Section C below. However, a recent study of the transition of a large employer from an unmanaged indemnity plan to a managed behavioral health carve-out did not show any evidence of cost shifting (Cuffel et al.1999b). This study compared the use and cost of behavioral health care and medical care services during a 2-year period before the carve-out and 3 years afterward. Medical care costs decreased for those using behavioral health care services during a period when such costs were generally increasing.

England (1999) has proposed that medical cost offset data could be very valuable for identifying people who are underserved and for developing better coordination of medical and mental health care. She underscores the importance of linking employer databases of aggregate data on health, mental health, disability, workers' compensation and employee absenteeism to comprehend fully how changes in mental health coverage and policy affect the system as a whole, rather than the mental health specialty sector alone. It is important to remember, however, that the idea of a medical cost offset presents enormous conceptual and methodological challenges that make it difficult to study.

C. Indirect Effects of Mental Health Care on Disability

The World Health Organization (WHO) Report on the Global Burden of Disease (Murray and Lopez 1996) highlights the substantial impact of disability resulting from several major mental and addictive disorders--especially major depressive disorder-- compared to physical disorders. Among the 10 leading causes of disability worldwide, four are mental disorders, and unipolar major depression leads the entire list. It is well known from the clinical and disability literatures that severe mental disorders tend to have earlier ages of onset and are more persistent than many other disabling conditions; thus they tend to result in longer periods of disability. Even among those able to work, the severity of illness affects both productivity at work and the ability to tolerate the stress of the workplace. However, current treatments for depression and other mental illnesses offer appreciable benefits for workers and their employers. For example, the effectiveness of treatments for depression in improving work performance, satisfaction, and work relations has been convincingly demonstrated in meta-analyses of several randomized clinical trials (Mintz 1992).

The economic impact of effective treatment can be considerable, given the high toll of disability exacted by certain mental disorders. Kessler and colleagues (1999) recently estimated the short-term work disability associated with a diagnosis of major depression over a 1-month period, based on an analysis of two national surveys (the National Comorbidity Survey and the Midlife Development in the United States Survey). Such short-term work disability is much more prevalent among workers with major depression (affecting 37 to 48 percent) than among those without depression (affecting 17 to 21 percent). Within a 30-day period, workers with depression experienced between 1.5 and 3.2 more short-term work-disability days than workers without depression. This differential represented "a salary-equivalent productivity loss averaging between $182 and $395 [during the 30-day period]." The researchers showed that this amount was nearly comparable to the direct costs of treatment of depression for that period of time, thus providing support for the cost-effectiveness to employers of providing mental health treatment.¹⁰

How does managed care affect the workplace and the work-related benefits of treatment? In a recent Yale study, Rosenheck and colleagues (1999) examined the impact of managed care (not under parity) on employees of a large national corporation. During the 3-year study period mental health expenditures decreased, due to a large decrease in the use of specialty mental health services. At the same time, however, there was greater employee absenteeism and poorer work performance; in addition, increased general health costs offset any savings in mental health specialty costs among users of mental health services.

Researchers at Johns Hopkins University (Salkever et al. 2000) have found that in general, having greater access to outpatient specialty care and increased mental health coverage reduces the number of mental health disability claims. Plans with the highest financial barriers (first dollar costs and coinsurance) experienced more psychiatric disability claims. By contrast, front-line disability management (e.g., providing alternative employment and offering Employee Assistance Program services) was associated with reduced numbers of claims, as was having greater organizational access to specialty care through carve-outs.

¹⁰  This study only examined the cost of short-term work disability for employed persons; it did not include the costs to employers of long-term depression-related disability for those no longer in the work force. Thus, it underestimates the total disability impact associated with this illness

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