October 6, 2001

CARE FOR MENTALLY ILL SUFFERS AT STATE'S HANDS

With government, Linda Gorman observes, ``you almost always get less than you pay for.''

Gorman, an economist, is a senior fellow with the Independence Institute, a free-market think-tank based in Golden. Her case study of care for the mentally ill in Colorado, Kentucky, Tennessee and other states, Treatment Denied, examines how mental health treatment deteriorates when states take it over.

Marching under the banner of health care reform, Gov. Roy Romer's administration conscripted Colorado's Medicaid patients into managed care, in the arrogant but unfounded belief that private medicine was extravagantly wasteful and that state bureaucrats could make better medical decisions than doctors or patients.

``Left unmentioned,'' Gorman writes, ``were the possibility that the private system was in fact fairly efficient, the fact that government had historically been unable to manage such complex enterprises, the certainty that removing price constraints would require rationing in other forms, and the potential for capitated managed care . . . to pose a significant danger for patients.''

Now we know that managed care, at least when the managing is done by distant insurance companies who do not themselves provide care, is unlikely either to save money or to improve care in the long run. The considerable cost of the managing reduces the amount available for care.

Moreover, a lot of people don't care for being managed, yet they have little to say about it because they aren't the customers who buy insurance; their employers are.

The mentally ill who get their treatment from the state have even less choice. Though federal rules normally require states to offer options to people enrolled in Medicaid, Colorado obtained a waiver exempting it from that rule in cases of mental illness.

Then in 1995, under the Medicaid Mental Health Capitation and Managed Care Program, Colorado began requiring virtually all Medicaid patients to get mental health care from the Mental Health Assessment and Service Agency that covers the area where they live.

The Romer administration was so certain that this scheme would save money that it allocated to the agencies only 95 percent of what it would have paid under the previous fee-for-service model. At the same time, it mandated a raft of new services primarily for those with less severe illnesses.

Of course, it cost more, not less. A state audit in 1998 estimated that the new program cost $27 million more than the old one would have while providing fewer services. And the most severely ill, such as schizophrenics, lost the most.

``Under political rationing,'' Gorman says, ``government officials must choose between spending large sums on the small number of people who are severely ill, or relatively small amounts to alleviate the relatively minor conditions affecting large numbers of `worried well' voters.''

No prizes for guessing what happens.

Schizophrenics are particularly affected because the disease is so debilitating that most of those who have it, up to 90 percent of them, rely on public assistance, including Medicaid.

During the '90s, treatment for schizophrenia was radically improved by a new class of drugs, called ``atypical antipsychotics,'' that were more effective and had fewer side effects than their predecessors. But they were also more expensive.

One has to stop and ask, ``Compared to what?'' If the new drugs reduce the time patients spend in hospitals because of acute episodes of psychosis; or improve patients' conditions sufficiently that they can go back to work; or increase the likelihood of a permanent cure -- then in the long term they cost less, not more. But the agency paying for the drugs receives none of those benefits, and concern for the patient's well-being takes second place behind the need to stay within budget.

As Gorman shows, states such as Tennessee and Kentucky have traveled further down the road toward state-provided medicine than Colorado has, and the landscape just gets more bleak every step of the way. Turn back, or at least go no further.

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