Costs and Use of Mental Health Services Before and After Managed Care

This paper tracks access, utilization, and costs of mental health care for a private employer over nine years during which mental health benefits were carved out of the medical plan and managed care was introduced. Prior to the carve-out, mental health costs increased by around 30 percent annually; in the first year after the change, costs dropped by more than 40 percent; in the six follow-up years, costs continued to decline slowly. This cost reduction was not attributable to decreased initial access, as the number of persons using any mental health care increased following the change. Instead, the cost reduction was the result of (1) fewer outpatient sessions per user, (2) reduced probability of an inpatient admission, (3) reduced length-of-stay for an inpatient episode, and (4) substantially lower costs per unit of service.