Mental Health Parity: A Policy Analysis

Although psychological and addictive disorders have come to be recognized as common and treatable conditions within the medical profession and even among the general population, the United States health care system is still lagging behind. Insurance companies do not provide equal coverage for mental health services, and most Americans lack access to even basic mental health care. The goal of interest groups campaigning for better mental health coverage has been to achieve “mental health parity,” meaning that that mental health services would be covered at the same level as general medical services and surgical procedures.

The first major victory is this campaign came in 1996, when Congress passed a law mandating equal annual and lifetime dollar limits for mental health benefits. A more recent piece of legislation has extended this parity in benefits to co-payments, deductibles, out-of-pocket limits, and caps on the number of inpatient or outpatient visits. The passage of this law is being hailed as a tremendous success by advocacy groups. However, the law has problematic limitations that may actually serve to increase systemic barriers to mental health treatment, particularly among the working poor and the lower middle class.

In this analysis we will examine the consequences of the present mental health parity law, and the structural barriers that continue to limit access to mental health services. We will examine the consequences of these limitations, both for the affected individuals and for the society as a whole. Finally, we will propose changes to the current policies which could remedy the problems we outline.

Why Mental Health Parity Is Needed

The Substance Abuse and Mental Health Services Administration (SAMHSA) conducted a comprehensive National Survey on Drug Use and Health in 2002, and found that more than five million individuals meeting criteria for serious mental illness “perceived themselves as having an unmet need for treatment in the year prior to the survey” (Bender, 2003). Of these, nearly 2.5 million severely mentally ill individuals cited insufficient financial resources as the primary reason that they were unable to receive appropriate treatments.

This means that, as of 2002, nearly 1% of the entire population of the United States is comprised of severely mentally ill individuals who want treatment but are unable to afford it (U.S. Census Bureau, 2003). This figure does not include individuals whose mental illnesses are distressing but not debilitating, who likely number in the tens of millions, nor does it include individuals suffering from substance abuse disorders, of whom there may be more still. The magnitude of the problems we face in ensuring treatment of psychological and addictive disorders constitutes a public health crisis.

This crisis reaches beyond the mental health system by putting an undue strain on the nation’s medical infrastructure. According to O’Donohue & Cucciare (2005), “research consistently shows that patients with psychological problems use more [medical] services than those without diagnosable psychological problems.” For example, one recent study tracked a sample of individuals admitted for inpatient treatment of various medical conditions. At four years, patients who demonstrated psychological factors such as depressive or aggressive tendencies had been readmitted for further medical treatment at a rate twice that of their counterparts with no psychological comorbidity. The total number of days of inpatient care utilized for the treatment of physiological conditions also doubled for these patients (Saravay, Pollack, Steinberg, Weinschel, & Habert, 1996).

The good news is that psychotherapeutic treatment reliably reduces medical service utilization. Mumford, Schlesinger, Glass, Patrick, & Cuerdon (1998) describe a history of research demonstrating that the delivery of mental health services is strongly predictive of decreased utilization of medical services across the board. They conclude that the evidence for a general cost-offset effect following outpatient psychotherapy is “widespread and persistent” (p. 85), with the most substantial savings coming from a decrease in inpatient service utilization.

Steps Toward Mental Health Parity Implementation

As we have mentioned, the first step toward mental health parity in the United States came with the passage of the Mental Health Parity Act of 1996 (MHPA). The act required that insurance policies which included mental health coverage do so at the same annual and lifetime dollar value as their coverage for general medical and surgical services (NASW, 2002). However, disparities between co-payments, deductibles, and out-of-pocket expenses were not affected by the bill, nor were any of the millions of insurance policies which provided no mental health coverage at all.

The U.S. Congress expanded on this effort to improve mental health coverage for Americans in 2008, by passing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The MHPAEA addressed a number our concerns regarding the MHPA. It required that employers whose insurance plans include mental health and/or substance abuse coverage eliminate any remaining disparity with medical coverage, including co-payment amounts, total out-of-pocket expense limits, deductibles, and annual limits on inpatient and outpatient visits (Bernstein, 2008).

However, the MHPAEA still placed no requirements on payees to provide mental health coverage to their beneficiaries. This means that, as before, only patients whose medical coverage includes optional mental health benefits will be able to benefit from the new law. Individuals’ whose insurance coverage does not include optional mental health coverage will remain without access, as will the millions of uninsured Americans (Jenkins, 2008).

Problematic Impacts of Mental Health Parity Legislation

Like the 1996 Act, The MHPAEA places a substantial financial burden on employers and other insurance payers without placing any additional regulation on insurance providers and managed care organizations. Opponents of comprehensive parity legislation have argued that any new regulations on the insurance industry would precipitate the loss of other, unprotected health care benefits in order to offset the cost (Carroll, 2004). However, placing the burden on employers will likely result in severe consequences for lower and middle class workers.

We can predict this because it is essentially what took place after the passage of the MHPA, which represented much less of an imposition on employers. According to the National Association of Social Workers, the “U.S. General Accounting Office reported in May 2001 that 86 percent of employers surveyed reported that they had complied with the requirements of the 1996 Act. Nevertheless, the vast majority of those employers substituted new restrictions on mental health benefits, thereby evading the spirit of the law” (NASW, 2002, Background and legislative history section, ¶ 10). With the new requirements being much more demanding, it is likely that many employers will simply see no benefit in continuing to provide mental health coverage, particularly for employees who are not considered valuable enough to warrant competitive benefits packages.

This means that by placing the burden of providing additional coverage on employers, the MHPAEA has essentially given employers an incentive to drop existing mental health coverage for low-wage employees. Workers who previously had inadequate access to mental health services are likely to see even their inadequate mental health benefits disappear. Such a change will disproportionately affect the working poor, a group whose high levels of external stress create a greater need for the very services they will be losing access to.

Meanwhile, advocacy groups such as the American Psychological Association are lauding this new law as a huge victory in the fight to end discrimination against sufferers of psychological illness (APA, 2008). What has actually taken place is the passage of federal legislation which effectively institutionalizes the medical discrimination which was already taking place within the insurance industry. Furthermore, the Act has freed the insurance industry from any responsibility for ending that discrimination, instead placing the burden on a group which has far less interest in the provision of those benefits to the individuals who need them most.

Solving The Problem Of Mental Health Parity

The laws that have been passed so far are out of line with the basic ideology underlying mental health parity, which is that mental illness is a medical condition. Based on this premise, it is reasonable that sufferers of mental illness be able to expect treatment comparable to that which they would receive for any other illness. Any medical service plan that excludes coverage for psychological conditions is therefore unfairly discriminating against sufferers of a particular set of conditions in a way that has been outlawed when it has occurred in the past.

There are two main counter-arguments that can be made against this premise. The first is that mental illnesses are not medical conditions (Kershaw, 2008). However, as executive director of the Suicide Prevention Action Network USA in Washington Jerry Reed (2007) points out, a growing body of research has solidly established distinct physiological correlates of individual mental illnesses. Furthermore, mental illness results in a far greater number of fatalities each year than HIV/AIDS. There are nearly 30,000 mental illness-related suicides in the United States each year (Reed, 2007).

The second major counter-argument against our premise of mental health parity is that insurers should have the right to exclude certain classes of conditions as they see fit. As we have already discussed, legislative precedent contradicts this idea. Congress has already specifically outlawed this type of exclusion both for the elderly and for patients diagnosed with HIV/AIDS (Wellstone, 2002). This precedent takes on added weight when we consider that the level of fatality resulting from mental illness is much higher than that of the very disease for which Congress previously intervened.

Given, then, that the premise of mental health parity is sound, it becomes the duty of insurance providers to include mental health coverage as a part of basic medical benefit packages. Placing the burden of improving mental health coverage onto the individuals and organizations purchasing the coverage is not in keeping with the philosophy that mental illness and its treatments are equivalent and of equal importance to all other medical conditions and services. The way to implement that philosophy would be to require that insurance providers simply include mental health services under the existing terms of their coverage for general medical services.

Aside from being philosophically sound, this method of implementing mental health parity is also highly pragmatic. Insurers stand to benefit financially from offering better coverage for mental health services. Full mental health parity would represent a total cost increase of about 1.5% for most managed care organizations (Carroll, 2002). That increase would be more than offset within just a few years by the resulting reduction in general medical service utilization (Mumford et al, 1998). Employers, on the other hand, may stand to realize some increases in worker productivity as a result of better access to mental health services (see, for example, Wang, et al, 2007; Hartmann & Zepf, 2004; Hafner, Haug, & Kachele, 2004; Jordan, Grissom, Alonzo, Dietzen, & Sangsland, 2008), but ultimately have far less demonstrable interest in the provision of these services.

We therefore conclude that the most logical, feasible, and enforceable method of implementing mental health parity is to require insurance providers to include mental health treatments in their definitions of general medical treatments. By prohibiting the segregation of mental illness from physiological illness, equitable coverage is ensured without the substantial loopholes seen in the 1996 Parity Act and again in the 2008 Act. Furthermore, this method of enactment provides an ultimate financial benefit to the very organizations it holds responsible for implementation.

The problem in implementing this strategy is, of course, a political one. The insurance lobby is both exceptionally powerful and highly resistant to legislation which would increase its obligations. They have, unsurprisingly, supported legislation which offloads responsibility for mental health coverage onto businesses. For this reason, the business lobby seems like a natural ally in our attempts to redefine medical coverage to include mental health services. However, it is arguable that they have enough to gain to make substantial involvement worth their while.

The primary stakeholders in this redesignation seem to be healthcare providers and patient groups. Providers stand to gain from the opportunity to expand their mental health services, while patient groups have an interest in ensuring that comprehensive services are available. It may be possible to enhance the support of both groups by forming grass-roots organizations for individuals and families whose medical status has been affected by inadequate mental health care. These groups could act as emissaries between other stakeholder groups.


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