Mental-health parity: simple fairness, or recipe for disaster?

Columbia College Chicago

Psychiatrists and advocates for the mentally ill call it a blow against unfair discrimination. Insurers and economists call it a sure-fire way to raise costs, erode other benefits, and throw millions off the insurance rolls. It’s mental-health parity.

For years, employers have cut insurance costs by scaling back mental-health benefits. While 95 percent of all employers do offer mental-health coverage, the amount they spend on physical coverage has routinely outpaced that spent on mental-health coverage by 20 to one. Whether this is the result of stigma or consumer demand is one of the questions at issue.

In the last decade, 19 states have passed some sort of mental- health parity legislation, and in 1996 Congress joined the fray by requiring that employers provide equal lifetime and annual benefits (in dollars) for mental illnesses as for any other medical or surgical benefits.

In an effort to keep down costs while obeying the letter of the law, employers have imposed limits on the number of inpatient and outpatient visits covered rather than the dollar amounts. Now two bills in Congress seek to close this so-called loophole.

Senate bill 796 (also known as “The Mental Health Equitable Treatment Act of 1999”), co-sponsored by Sens. Pete Domenici (R-N.M.) and Paul Wellstone (D-Minn.), would require employers to cover mental health exactly as they cover physical health, prohibiting limits on the number of visits. Both Domenici and Wellstone have relatives struggling with mental illnesses.

“Medical science is in an era where we can accurately diagnose mental illnesses and treat those afflicted so they can be productive,” Domenici said when he introduced the bill on April 14. “I would ask then, why with this evidence would we not cover these individuals and treat their illnesses like any other disease?”

Rep. Marge Roukema (R-N.J.) introduced her own mental-health parity bill in the House a week later. House Resolution 1515 (also known as “The Mental Health and Substance Abuse Parity Amendments of 1999”), treads the same ground as the Domenici-Wellstone bill, but also covers substance abuse and chemical dependency.

While both bills are stuck in committee, the issue has not faded from the spotlight. On June 7, Tipper Gore, mental-health advisor to the president (and the vice president’s wife) chaired the White House Conference on Mental Health, which addressed strategies to reduce stigma and featured President Clinton’s announcement of full mental-health parity for federal workers.

Gore, who suffered a serious bout of depression after her six-year-old son was seriously hurt in a car accident, was joined at the conference by “60 Minutes” co-editor, Mike Wallace. Wallace was diagnosed for depression several years ago and openly and jubilantly speaks about his success with the anti-depressant drug Zoloft.

While people like Wallace and Gore have the resources and the public acceptance to live comfortably with their illnesses, supporters of parity legislation say, that may not be true for the approximately 55.5 million Americans — nearly 25 percent of the adult U.S. population — who, according to National Institute for Mental Health statistics, suffer from some form of mental illness during their lifetimes.

“The reason why I think we need legislation is because the stigma exists, and because people are being discriminated against,” says Jennifer Heffron, director of public policy for the National Mental Health Association, the nation’s oldest advocacy group for the mentally ill, founded in 1908.

“The important thing,” says Heffron, “is that you don’t want to leave open a way for companies to discriminate.”

“It’s an issue of fairness,” says Jeremy Lazarus, chair for the American Psychiatric Association‘s joint commission on governmental relations. “There’s no reason that people who have mental illnesses should be stigmatized and not allowed to get treatment.

“It would be as if someone had diabetes or hypertension and they were told it was too expensive and they couldn’t get the treatment. Our view is that mental illness and substance abuse should be in the same fair pool of allocated money.”

But is the disparity between mental and physical coverage discrimination or consumer demand? Gail A. Jensen, joint professor of economics and gerontology at Wayne State University, says that mental-health coverage “is available, if workers and their employers wanted that kind of coverage, but they don’t because it’s not worth the premium.”

The legislation, Jensen says, “would amount to forcing on to insured people something that they don’t want to pay for. Mental-health care costs five to 10 percent of the premiums. An expansion of coverage could end up being quite costly.”

The question of how much parity legislation would raise costs is a matter of intense statistical debate. Michael Tanner, director of health and welfare studies at the Cato Institute, a libertarian think-tank in Washington, D.C. wrote in 1996 that mental-health parity “could raise insurance premiums by an additional 8 to 15 percent.”

Meanwhile, the National Mental Health Association reports a study showing an average of a mere one to four percent growth in premiums in states that have some form of parity legislation.

Tanner also argues that mental-health parity will actually encourage more people who otherwise would not need mental-health treatment to seek it out. Called induced demand, “it’s a fairly well-recognized phenomenon,” Tanner says, that once a benefit is mandated, people take much more advantage of it.

He cites the “famous” case of Hawaii, where chiropractors persuaded the legislature to mandate coverage. “The result,” Tanner says, “was a four-fold increase in chiropractors and skyrocketing costs.”

Tanner cited one observer who said, “If your employer is willing to pay for 30 visits to a psychiatrist, your psychiatrist will treat you in 30 visits; if your employer will pay for 60, it will take 60 to cure you.”

Heffron, for one, doesn’t see that happening. “Parity is delivered in the context of managed care,” she explains. “With the managed care system you have a gatekeeper. So just because there are available benefits does not mean you’re automatically going to get to them.

“There will be different mechanisms in place to determine whether you need the benefits. Managed care is one of the things that makes mental-health parity possible.”

Regardless, health insurance providers still oppose mental-health parity legislation. “We oppose all mandated benefit requirements,” says Richard Coorsh flatly. He is the assistant vice president for communications with the Health Insurance Association of America, which represents 269 health insurance companies.

“No matter how well-intended the benefit requirement may be,” Coorsh says, “mandates drive up the cost of health insurance and, as a result, make it more difficult for people to buy health insurance. Which, in turn, raises the number of uninsured Americans.”

But shouldn’t the mentally ill, stigmatized as they are, get the same treatment as those with physical illnesses? This contention “overlooks one key issue,” says Coorsh, “which is that because of the cost of coverage there are 43 million Americans who currently don’t even have the luxury of clamoring for an additional benefit because they have no insurance whatsoever.

“This, and other mandated benefit proposals, would only raise the cost of coverage and make insurance more out of reach.”

Michael Tanner puts it this way: “If you have to offer the Cadillac and were thinking of offering the Pinto, then you won’t offer anything.”

Gail A. Jensen confirms that 20 to 25 percent of those who are uninsured, about 10 million people, owe their situation to state and federal mandates on private health care.

“No mandate does any good,” Coorsh adds, “if people don’t have any insurance at all.”

Jeremy Lazarus, who has his own private practice, says that this argument misses the point. “It depends on what part of the elephant you’re looking at,” he says. “There is a substantial societal and health-care cost in terms of those who don’t get treatment. It shows up on some ledger book somewhere else. The prison system, the state hospital, emergency rooms, lost work time.

“No employer wants to see their costs go up if they cannot be assured that cost savings are going to accrue to their bottom line in a short period of time,” Lazarus says, explaining why he believes legislation is necessary.

“It might accrue to the bottom line of society, it might accrue to the benefit of some insurance plan, it might accrue to the bottom line of the state prison and jail system, but they’re not sure it’s going to accrue to their bottom line.

“No one’s going to step up to the plate first and raise their costs and their premiums if no one else is doing it,” Lazarus says. “You have to level the playing field by federal legislation.”

The National Institute of Mental Health agrees, estimating the annual cost of “untreated mental illnesses” at more than $300 billion due to “productivity losses, health care costs” and “increased use of the criminal justice system and social welfare benefits.”

Tanner says he’s heard it before. “That’s an unprovable argument that’s always made,” he says. “We’re told that we’ll save money, but costs always rise. We’re saving money right into the poorhouse.

“There are some cases where you might save money due to an early intervention, but with mandates, you’ll no longer have price competition and induced demand is only something that will show up in the long run.”

Lastly, some say that mental illness really is different from physical illness. Diagnosing “post-traumatic stress disorder” is not the same as fixing a broken arm, they say.

“Going beyond chemical brain diseases,” Tanner says, “which are rather easily diagnosed and cured, there are a lot of broad concepts like ‘anxiety.’ How do you determine something like that?”

Heffron disagrees, pointing out that “the success rate for treating clinical depression is over 80 percent, versus the 40 percent success rate for balloon angioplasty, a treatment for heart disease.”

The National Institute of Mental Health’s statistics show a 60 percent success rate in treating schizophrenia, a 70-80 percent rate for depression, and a 70-90 percent rate for panic disorder.

A parity bill is also winding its way through the Illinois legislature. Heffron reports that H.B. 111 “passed the House with flying colors, but was stalled in Senate Rules Committee.”

The bill would prohibit insurance providers from imposing durational limits, amount limits, deductibles and co-insurance for a number of severe mental illnesses.