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Health Tracking

TRENDS

What Drove Private Health Insurance Spending On Mental Health And Substance Abuse Care, 1992–1999?

Abstract

 
Trends in MH/SA treatment spending from 1992 to 1999 were examined using employer claims data from approximately 1.7 million covered lives in each year. The analysis finds that employer-based private insurance spending on MH/SA treatment did not keep pace with total employer-based private insurance spending or general price inflation. MH/SA spending dropped from 7.2 percent of total private insurance spending in 1992 to 5.1 percent in 1999. The decline was attributable to a dramatic decrease in inpatient MH/SA treatment—specifically, the probability of admissions and average length-of-stay.

The SAMHSA studies have not analyzed these types of questions because the data did not consistently provide the detail necessary to decompose spending into these underlying factors. A number of reports and papers funded by SAMHSA and others have analyzed various aspects of MH/SA services use and spending; space precludes a full description of these studies here.² This paper adds to the emerging literature by focusing on trends in employer-based private insurance spending, which might differ in important ways from total mental health care spending. We examine the underlying factors influencing the trends in MH/SA spending in the private sector, by decomposing changes in covered private health insurance spending during 1992–1999 into changes in the probability of use, intensity of use, and cost per service used.

Study Methods

Top Study Methods Study Findings Conclusions NOTES

 
Data for this study came from the Medstat MarketScan database, which compiles claims information from the private health insurance plans of large employers. The database covers employees, their dependents, and early retirees of participating companies. Medstat collects and standardizes claims from more than 100 different insurance companies, including Blue Cross and Blue Shield plans and third-party administrators. In 1992 about seventy-five employers contributed to MarketScan. In 1999 about forty employers did so. There were 5.0 million covered lives in 1992 and 3.5 million in 1999. All of the employers were self-insured or had Employee Retirement Income Security Act (ERISA) plans.

Some employers in MarketScan change from year to year. To account for changing population characteristics attributable to changing employers, we present results only for the sample of twenty-two employers that were in MarketScan in 1992 and 1999, representing 1,802,382 people in 1992 and 1,664,676 people in 1999. Information about the firms is confidential; however, the distribution of covered lives by industry in the twenty-two employers was as follows: oil and gas extraction mining (5 percent); manufacturing–durable goods (10 percent); manufacturing–nondurable goods (33 percent); manufacturing–durable and non-durable goods (5 percent); transportation–communication–utilities (19 percent); services (19 percent); retail (5 percent); and combination of manufacturing, transportation–communication–utilities, services, and finance–insurance–real estate (5 percent). The distribution of employees by plan type for these twenty-two employers in 1992 was 90 percent fee-for-service (FFS), 8 percent preferred provider organization (PPO), 2 percent point- of-service (POS) plan, and 1 percent exclusive provider organization. The distribution in 1999 was 25 percent FFS, 41 percent PPO, 31 percent POS, 3 percent health maintenance organization (HMO), and 1 percent exclusive provider organization.

Claims data include both the covered charge and the portion of the charge paid by the enrollee. The focus of this analysis was only on the covered charges, since out-of-pocket trends are only imperfectly captured by claims.

Encounter records from HMOs in Market-Scan do not contain charges for inpatient and outpatient services. Charges for these plans were imputed using a regression model. The dependent variables were inpatient and outpatient charges for MH/SA treatment and other treatment. The independent variables for estimating inpatient charges for non-MH/SA treatment were major diagnostic categories of the diagnosis-related groups (DRGs), region, whether or not the patient was in a metropolitan statistical area (MSA), and age of claimant. The independent variables for estimating inpatient charges for MH/SA treatment were MH/SA diagnosis, region, MSA, and age. The independent variables for estimating outpatient charges for non-MH/SA treatment were Berenson-Eggers Type of Service (BETOS) Codes (a system for classifying outpatient claims into service types), major diagnostic categories, region, MSA, and age. The independent variables for estimating outpatient charges for MH/SA treatment were BETOS group, MH/SA diagnosis, region, MSA, and age. A negative exponential model was used to estimate the parameters, because the spending data were log-normally distributed.

Claims for MH/SA services were identified based on a primary diagnosis or use of a specialty MH/SA provider.³ The diagnosis codes selected match those used in the SAMHSA spending estimates study that tracks MH/SA spending. They include diagnoses such as depression and schizophrenia but exclude dementia and mental retardation. Medication claims also were identified as MH/SA if their therapeutic class indicated a psychotropic medication. The therapeutic classes were assigned by the Red Book classification system and include the following: opiate antagonists, anticonvulsants, antidepressants, tranquilizers/antipsychotics, stimulants, barbiturates, benzodiazepines, anxiolytics/sedatives/hypnotics, antimanic agents, and miscellaneous central nervous system (CNS) agents. The medications selected included those prescribed by internists as well as those that may have had a primary indication for psychiatric conditions but were prescribed for other non-psychiatric conditions. A total of 105,527 people in 1992 and 113,188 in 1999 were identified with an MH/SA claim.

Study Findings

Top Study Methods Study Findings Conclusions NOTES

 
Exhibit 1 shows the overall seven-year per enrollee growth rate of total health care and MH/SA treatment spending. Total health care spending per enrollee grew by 16 percent from 1992 to 1999, or 2.1 percent annually. In contrast, MH/SA spending fell by 18 percent or 2.8 percent annually. Whereas MH/SA accounted for 7.2 percent of total health care spending in 1992, it accounted for only 5.1 percent in 1999. Exhibit 1 also shows the distribution of MH/SA spending by inpatient, outpatient, and pharmaceutical expenses. The proportion of spending going to inpatient care declined dramatically between 1992 and 1999 from 48 percent to 18 percent, falling 15.6 percent annually. In contrast, psychotropic drugs made up 22 percent of total MH/SA expenditures in 1992 and 48 percent in 1999, growing 8.9 percent annually.

The distribution of expenditures by service also differed by age group (Exhibit 1). In 1999 spending for psychotropic medications accounted for 24 percent of spending for people age 17 and younger, 49 percent for people ages 18–54, and 68 percent for people age 55 and older. The dramatic shift away from inpatient spending and toward pharmaceutical spending occurred for all three age groups.

Exhibit 2 shows the decomposition of trends in MH/SA spending by the probability of use, the intensity of use, and the charge per service. These components are shown by type of service (outpatient, drugs, and inpatient). The probability of outpatient use rose 17.5 percent; the number of outpatient visits per user, only 4.5 percent. Mean spending per visit declined by 3.6 percent.

Inpatient use showed a dramatic decline in both the probability of use and the length-of-stay. The probability of use dropped 39.6 percent. The average number of admissions per user was unchanged, which indicates that readmissions did not increase. Average length-of-stay dropped dramatically as well: 55.1 percent. Mean spending per day increased by 11.8 percent.

Exhibits 3–5 decompose these trends by age group. Children (under age eighteen) had a lower probability of use of MH/SA services than the population as a whole. In 1999, 6 percent had an outpatient MH/SA visit, 6.5 percent used an MH/SA medication, and 0.2 percent had an inpatient MH/SA stay. Intensity of outpatient and psychotropic drug use was also higher in 1999 than in 1992, although the number of admissions per user was the same.

People ages 18–54 had a slightly higher probability of outpatient care or psychotropic medication use than did the overall population; their inpatient usage and trends were comparable to those of the overall population. People age fifty-five and older had a lower probability of outpatient and inpatient care than the population as a whole, but they had a much higher probability of using a psychotropic medication. In 1992, 23.6 percent in this age group used a psychotropic medication; in 1999, 23 percent did so. People in this age group, on average, spent $150 on psychotropic medications in 1992 and $307 in 1999.

Conclusions

Top Study Methods Study Findings Conclusions NOTES

 
This analysis finds that private insurance spending on MH/SA treatment did not keep pace with total health care spending or with general price inflation. MH/SA as a proportion of total health care claims dropped from 7.2 percent in 1992 to 5.1 percent in 1999. The decline in MH/SA spending is a change from trends apparent in the 1980s, when the news media reported that MH/SA cost growth had been of considerable concern to employers.⁴ A prior analysis of the MarketScan data for 1986–1988 by Richard Frank and colleagues found that charges for psychiatric and substance abuse care rose at rates well above the rate for all health care: 20.1 percent and 32.4 percent, respectively, compared with an overall rate of increase of 13.0 percent.⁵ Thus, while MH/SA expenditures were viewed as "runaway" in the late 1980s, data from the 1990s suggest that this was no longer the case.

The decline in private insurance spending on MH/SA treatment was attributable to a dramatic decline in inpatient utilization—a decline that has been consistently found in other studies as well. One analysis indicated that inpatient dollars fell from 41.8 percent to 36.8 percent of total MH/SA spending.⁶ The SAMHSA analysis did not decompose trends into inpatient and outpatient treatment but did examine trends by provider type and found a dramatic shift away from hospital-based care, particularly care in specialty hospitals.⁷ Our analysis indicates that the decline in inpatient expenditures was attributable to declines in length-of-stay and in the percentage having any admission.

Consistent with an analysis of other data, our analysis shows an increase in the probability of receiving outpatient treatment.⁸ Although the probability of such treatment increased, the intensity of outpatient care use remained relatively constant. This suggests that the decline in inpatient use is not being replaced by more intensive outpatient usage, as one might expect.

Our analysis also shows that inpatient MH/SA spending declines were only partially offset by growth in prescription drug spending. Drug spending growth is a major cost containment concern among third-party payers. Psychotropic drugs are among the fastest-growing in terms of drug spending. Nevertheless, while drug spending grew 8.9 percent a year, inpatient spending fell 15.6 percent a year, more than offsetting drug cost growth, so that overall MH/SA spending fell from 1992 to 1999.

The percentage of the population using a prescription medication for MH/SA treatment was found to be very high (14.5 percent in 1999). This percentage is higher than that found in the Zuvekas study (5.6 percent in 1996). The difference is probably the result of different definitions of "psychotropic medication." Zuvekas used self-reported prescription data and only counted prescriptions where the household also reported on an associated MH/SA condition.⁹ In our study many more people had a psychotropic drug prescription than an MH/SA diagnosis. For example, in 1999, 6.8 percent of the population had an MH/SA diagnosis on an outpatient claim, whereas 14.5 percent of the population used a psychotropic medication. In 1999, 85 percent of the prescriptions in this study were classified as antidepressants, benzodiazepines, or anxiolytics. Some of these medications may be prescribed for conditions that the general population would not recognize as MH/SA conditions. For example, a commonly prescribed medication in this study’s population is Ambien, which has a primary indication for insomnia. It was chosen for the study as a psychotropic medication because it fell into the therapeutic class labeled anxiolytic/sedative/hypnotic.

Nominal price increases for outpatient and inpatient services in the time period were generally modest. For outpatient services, the price per visit actually fell. It should be noted that prices are not quality-adjusted. For example, a day in the hospital may not include the same mix of services in 1992 as in 1999.

The decline in MH/SA spending as a percentage of total spending was greatest for children (falling from 13.4 percent to 6.6 percent) and was also sizable for adults ages 18–54 (falling from 8.2 percent to 6.1 percent). MH/SA spending as a percentage of total spending actually grew slightly for older adults (age fifty-five and older), from 2.5 percent to 2.8 percent. Trends in the mix of services were consistent across age groups, with notable declines in inpatient use and growth in pharmaceutical usage.

The main limitation of this study is that it is based on a convenience sample of twenty-two large, self-insured employers with primarily FFS or PPO coverage, so it might not be representative of national trends. Nevertheless, the sample size is quite large, and the findings from the decomposition are similar to the findings of other studies using data representative of the noninstitutionalized civilian population for all payers, not just private health insurance.

Overall, this analysis shows a profound change in the nature of MH/SA treatment being received by employees of large corporations. Part of this change may be the result of financing changes. Employer surveys indicate that the number of health insurance plans with no specific limitations on inpatient care for mental illness fell from 37 percent in 1990 to 13 percent in 1996.¹⁰ At the same time, prescription drug benefits became more common.

Managed care grew rapidly over the 1990s and has been shown to shift care away from inpatient treatment. Behavioral health care carve-outs, as well as "carved-in" prior authorization and utilization review programs, were increasingly used during the late 1980s and 1990s to control MH/SA spending. Although these programs are held responsible for inpatient and outpatient MH/SA costs, they typically do not manage drug costs. Thus, the incentive may be to shift away from managed or "budgeted" items— inpatient and outpatient care—to "off-budget" items—prescription drugs.

Technologies also changed over the 1990s and may be driving the shift in service types. For example, new medications such as selective serotonin reuptake inhibitors (SSRIs) and atypical antipsychotic medications have reduced the side effects associated with psychotropic treatment of depression and schizophrenia, allowing for improved compliance and perhaps a reduced need for inpatient care.

One question that this analysis cannot answer is whether the mix of services being supplied is optimal to meet the needs of patients. Are people being admitted to hospitals appropriately and for an optimal length of time? Is pharmaceutical use too high, too low, or about right? How many outpatient visits are adequate? For example, research suggests that optimal treatment for depression comprises medication and psychotherapy.¹¹ It would be useful to discern whether patients are now more or less likely to get medication treatment alone. Further, one might examine whether early hospital discharges are now more likely to be associated with adverse events such as suicides or accidents. Clearly, future work needs to focus on these questions.

Editor's Notes

 
Tami Mark is an associate director, Research and Pharmaceutical Division, of Medstat in Washington, D.C. Rosanna Coffey is a vice-president of that division of Medstat.

The authors acknowledge the programming support of Jack Li. This project was funded through a contract with the Center for Substance Abuse Treatment and Center for Mental Health Services, Substance Abuse and Mental Health Services Administration (SAMHSA). The content is solely the responsibility of the authors and does not necessarily reflect the official views of SAMHSA or the U.S. Department of Health and Human Services.

NOTES

Top Study Methods Study Findings Conclusions NOTES

 

1. R.M. Coffey et al., National Expenditures for Mental Health and Substance Abuse Treatment, 1997, Pub. no. SMA-00-3499 (Rockville, Md.: Center for Substance Abuse Treatment and Center for Mental Health Services, Substance Abuse and Mental Health Services Administration, July 2000); T.L. Mark et al., "Spending on Mental Health and Substance Abuse Treatment, 1987–1997," Health Affairs (July/Aug 2000): 108–120; T.L. Mark et al., National Expenditures for Mental Health, Alcohol, and Other Drug Abuse Treatment, 1996, SMA-98-3255 (Rockville, Md.: SAMHSA, 1998); and D. McKusick et al., "Spending for Mental Health and Substance Abuse Treatment, 1996," Health Affairs (Sep/Oct 1998): 147–157.
2. S.H. Zuvekas, "Trends in Mental Health Services Use and Spending, 1987–1996," Health Affairs (Mar/Apr 2001): 214–224; D.L. Leslie and R. Rosenheck, "Changes in Inpatient Mental Health Utilization Costs in a Privately Insured Population, 1993 to 1995," Medical Care 37, no. 5 (1999): 457–468; [Medline]Hay Group Management, Inc., "Health Care Plan Design and Cost Trends—1988 through 1997," Report prepared for the National Association of Psychiatric Health Systems, Association of Behavioral Group Practices, and National Alliance for the Mentally Ill (Arlington, Va.: Hay Group, April 1999); and Coffey et al., National Expenditures for Mental Health and Substance Abuse Treatment, 1997.
3. Claims with an International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) code greater or equal to 290.0 and less than or equal to 315.0, or ICD-9-CM codes equal to 648.4, 797.xx, 648.3, V40.2, V40.3, V40.9, V61.0, V61.1, V66.3, V67.3, V70.1, V70.2, V71.0, V71.02, or V71.09.
4. See, for example, A. Bruzzese, "Double Digit Increase Per Worker Hits Health Costs," Employee Benefit News (March 1989); T.W. Ferguson, "Any Wonder Medical Premiums Are Anything but Shrinking," Wall Street Journal, 22 May 1990; and L.D. Williams, "Businesses Facing Rising Mental Health Care Costs Are Turning to Managed Care," Baltimore Sun, 5 August 1990.
5. R.G. Frank, D.S. Salkever, and S.S. Sharfstein, "A New Look at Rising Mental Health Insurance Costs," Health Affairs (Summer 1991): 116–123.
6. Zuvekas, "Trends in Mental Health Services Use and Spending."
7. Coffey et al., National Expenditures for Mental Health and Substance Abuse Treatment, 1997.
8. Zuvekas, "Trends in Mental Health Services Use and Spending."
9. Ibid.
10. Hay Group, "Health Care Plan Design and Cost Trends."
11. Y. Burnand et al., "Psychodynamic Psychotherapy and Clomipramine in the Treatment of Major Depression," Psychiatric Services 53, no. 5 (2002): 585–590; and [Abstract/Free Full Text]C.F. Reynolds et al., "Nortriptyline and Interpersonal Psychotherapy as Maintenance Therapies for Recurrent Major Depression: A Randomized Controlled Trial in Patients Older than Fifty-nine Years," Journal of the American Medical Association 281, no. 1 (1999): 39–45.[Abstract/Free Full Text]

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