JAMA Paper Shows That Mental Health Parity is Affordable

Posted on November 11, 1997

Arlington, VA - A paper published today (Nov. 12) in the prestigious Journal of the American Medical Association (JAMA) provides further evidence that equitable health insurance is affordable, according to the National Alliance for the Mentally Ill (NAMI).

Nine out of ten insurance policies treat the brain differently from the heart. The federal Mental Health Parity Act of 1996, which goes into effect January 1st, will ensure that annual and lifetime expenditure limits are the same for brain disorders as they are for other serious illnesses. In addition, 15 states have enacted their own equitable health insurance laws, many of which are broader than the federal legislation.

The cost of implementing these laws is a concern for business – yet the JAMA paper finds that this issue is a red herring. As reported in JAMA, a researcher at the Rand Corporation concludes that equalizing a typical annual limit -- a key provision of the Mental Health Parity Act of 1996 -- will increase costs by only about $1 per employee per year under managed care. And even a more comprehensive change required by some state laws (removing limits on inpatient days and outpatient visits) will increase costs by less than $7 per enrollee per year.

"This paper shows that the ‘sky is falling’ rhetoric by special interest lobbyists does not have any economic basis," said NAMI Executive Director Laurie Flynn. "It also shows that many previous cost projections are based on outdated information that is no longer relevant." Roland Sturm, the Rand researcher who wrote the JAMA paper, found that previous studies were often based on fee-for-service data and models, resulting in dramatic overestimates of costs (by as much as 4 to 8 times what he is projecting). Fee-for-service data are no longer relevant at a time when 3 out of 4 insured individuals are enrolled in managed care plans.

As reported in JAMA, Sturm instead used actual mental health claims data from 24 managed care plans and then estimated what the Mental Health Parity Act and other mental health parity provisions would cost. In the managed care plans studied, access to mental health specialty care increased (as compared to fee-for-service plans), while costs were lower due to reduced hospitalization rates, a relative shift to outpatient care, and reduced payments per service.

This paper is only the latest evidence NAMI has cited in its arguments on behalf of providing equitable health insurance to people with brain disorders such as depression, manic depression, schizophrenia, panic disorder and obsessive-compulsive disorder. In late October, NAMI released a survey of businesses conducted by William M. Mercer, Inc., one of the nation’s leading human resources consulting organizations. The survey showed that 85 percent of businesses familiar with the Mental Health Parity Act were either already in compliance or intended to make changes to comply with the law by the end of the year.

The survey followed a casebook written by William M. Mercer, Inc. for NAMI, documenting the efforts of three companies to implement parity. The experiences of these companies -- which actually experienced a decrease in costs subsequent to parity -- offers further evidence that compliance with the new law can be achieved.

With more than 168,000 individual members, NAMI is the nation’s largest grassroots organization solely dedicated to improving the lives of persons with severe mental illnesses, including schizophrenia, bipolar disorder (manic-depressive illness), major depression, and anxiety disorders. NAMI has 1,140 state and local affiliates in all 50 states, the District of Columbia, Puerto Rico, and Canada.