Community Support

Regulating Managed Mental Health Care
A Policy Analysis and Discussion
of the Role of Evaluation

Managed Care as an Emerging Public Issue

Three recently deceased nurses stood before God at the gates of heaven. God asked the first nurse: "And what did you do in your time on earth to merit entrance into heaven?" The nurse replied: "I worked in a hospice program. Although we didn't save any lives, I helped provide comfort and care to those who were terminally ill." God said: "That was wonderful work. Welcome into heaven."

God then asked the second nurse: "And what did you do to merit entrance into heaven?" The nurse replied: "I worked in an emergency room where we gave treatment to many patients who were very seriously injured or ill and needed immediate assistance." God said: "That was wonderful work. Welcome into heaven."

Finally, God asked the third nurse: "And what did you do to merit entrance into heaven?" The nurse replied: "I worked as a reviewer for a managed care company and helped to control unnecessary utilization of health care and rising costs." At this, God grew thoughtful, and pulled out a calculator and a paper and pencil. After some intense figuring, God looked up at the nurse and said: "I can give you five days in heaven."

(Based on a joke told on the Garrison Keillor radio program.)

The above joke, related one recent Saturday evening on a popular public radio variety program, is one sign of a deepening public disenchantment in the United States with the phenomenon of managed care. Managed care has met with a degree of skepticism, wariness, and, even, hostility from organized medicine from the time that "prepaid health plans" first gained a foothold in the health care system during the 1930s and 1940s (Starr, 1982). Yet the health maintenance organization (HMO) movement also once had "a populist flavor to it" (DeLeon, VandenBos, and Bulatao, 1991, p. 16), and many analysts have praised such organizations for their ability to outperform traditional fee-for-service medicine in areas ranging from efficiency, to quality, to patient satisfaction. Thus, when national health care reform was debated in the early 1990s, many plans put forward, including President Clinton's, centered on expanding HMOs and other contemporary forms of managed care (The White House, 1994). Public and professional fears about redirecting the medical mainstream via this strategy, however, helped to thwart the drive for reform, if not the continuing spread of managed care itself. Today that growth is attended by a barrage of angry criticism about managed care abuses that is fueling new legislative activity around the country.

The basic concept of managed care refers to controlling the use of medical services by confining patients to a specified group of providers and/or reviewing providers' treatment decisions. By this broad definition, managed care is being carried out not only by "capitated" health plans, like HMOs, that accept a set enrollment fee per person per year, but also by a wide variety of insurance industry spin-offs and more conventional fee-for-service plans. To underscore the recent dramatic growth of managed care, between 1987 and 1990 the percentage of insured U.S. employees who were covered in unmanaged fee-for-service health plans fell from 41 percent to just 5 percent (Starr, 1994, p. 38). According to the New York Times, by 1996 there were 53 million Americans enrolled in HMOs and at least 70 million in other types of managed health plans (Freudenheim, May 19, 1996, p. 1). (See also Exhibit 1.)

Coincident with this upsurge, by the start of the 1990s a heated managed care controversy was in full swing within the medical community. In the area of mental health, for example, the journal Hospital and Community Psychiatry sponsored a debate on the topic in its pages in October, 1990. Stating the affirmative position, an industry executive argued that managed care could lead toward more "rational psychiatric treatment" by improving the mental health service delivery model, screening for the most appropriate providers, establishing "judicious" financial incentives, and controlling quality of care (Patterson, 1990). A practitioner in private practice, however, complained about an inherent financial bias for undertreatment in managed care, as well as the use of unqualified reviewers, inadequate appeal mechanisms, violation of patient confidentiality, and disruptive review practices, all of which hindered effective treatment (Borenstein, 1990). Elsewhere in this same issue, it was reported that 60 percent of surveyed psychiatrists said they had been subject to "pressure from outside influences to shorten the length of stay or to discourage treatment for some patients" (Dorwart, 1990, p. 1090).

Today, managed care antagonisms remain exceptionally strong within organized psychology and psychiatry. It is not uncommon for opponents to employ such extreme rhetoric as "a growing crisis" and "national nightmare" in describing the provision of psychotherapy under managed care, as did one recent contributor to the journal Professional Psychology (Karon, 1995). Significantly, when that same journal later published an article on the "Hidden Benefits of Managed Care," the author chose to be anonymous, since he was "fearful of reprisals from his colleagues for speaking positively about managed care" (Anonymous, 1995, p. 235). And the recent victor in a divisive campaign for the presidency of the American Psychiatric Association declared that his colleagues "must never accept [these managed care systems]...we must fight them with all our resources" (quoted in Sabin, 1995, p. 32).

It would be one thing if the detractors of managed care were limited to medical providers whose autonomy and earnings are directly threatened by managed care practices. Yet another major source of discontent today is found among the massive number of insured individuals whose treatment options are being shaped by these same pressures. Past research on the public's evaluation of managed care has tended to focus on enrollees in federal programs or particular employee groups. Data are now beginning to be collected for broader cross-sections of the population. Two recent studies are specially of note.

The first survey was sponsored by the Commonwealth Foundation in 1994 and carried out among adults with employer health coverage in Boston, Los Angeles, and Miami (Davis et al., 1995). Compared to those in fee-for-service plans, managed care enrollees rated their plans as more unsatisfactory in the areas of physician choice, access to specialty care, availability of emergency care, and waiting time for appointments. On the other hand, they were more satisfied with out-of-pocket costs, paperwork, and coverage of preventive care. Overall, however, respondents covered by managed care plans were significantly less satisfied with their health insurance (29 percent describing it as "excellent" versus 38 percent of fee-for-service enrollees who termed their coverage "excellent"). A key factor influencing whether managed care enrollees were dissatisfied or not was whether they had been given the choice to enter a fee-for-service plan instead of managed care. Authors of this study concluded that "The finding that managed care enrollees without a fee-for-service option are more likely to rate their plan and its quality negatively suggests that offering a fee-for-service or point-of-service option may improve overall satisfaction with medical services. Insurance structures that preserve a viable fee-for-service option or partial coverage for services by out-of-network physicians enable families to exercise their health care preferences and thus are likely to meet with greater popular support" (Davis et al., 1995, p. 110).

Sponsored by the Robert Wood Johnson Foundation (1995) and designed by researchers at Harvard University, the second study was a national survey in late 1994-early 1995. It compared nonelderly persons in HMOs, PPOs, and other managed care plans to those enrolled in more open-ended insurance arrangements. Sick or disabled patients in the former type of plan reported lower out-of-pocket health spending, but also greater unhappiness with access to general and specialist physician care and diagnostic testing. Those in managed care who had visited a doctor for general or routine care in the past year tended to cite more problems with getting medical appointments; amount of time spent waiting to see the doctor; and receiving clear medical instructions from their doctor. Both managed care enrollees who had received treatment from a general physician or a specialist were more than twice as likely to report that the medical care provided was not correct or appropriate than similar persons in fee-for-service plans. "In health care, we don't get something for nothing," commented the director of evaluation at RWJ. "Managed care holds promise of providing cost effective medicine, but it appears that the tradeoff may be patient dissatisfaction with services and treatment."

Another valuable way of gauging current perceptions of managed care is by looking at the kinds of media coverage given to the subject. Based on a methodology developed by Baumgartner and Jones (1993), all items discussing the topics of HMOs and managed health care in the Reader's Guide to Periodical Literature computerized data base were extracted for the period 1987 to 1996 (first quarter). Each story was then coded as "positive," "neutral," or "negative" in its tone of coverage, as illustrated in Exhibit 2. Finally, the percentage of total managed care articles that were positive, neutral, and negative in each year was calculated.

Results are displayed in Exhibit 3; several trends are noteworthy:

First, the level of print-media attention given to managed care rose substantially over the period examined, from only twenty articles in 1987 to 83 in 1995, the last full year of coded data; this growth was steady from 1989 to 1993, when it reached a peak of 92 articles, after which it fell slightly but then rose again.
Negative articles rose sharply from 1990 to 1994, reaching a level of 51 percent of all managed care stories. They dropped slightly below neutral stories in 1995, but then climbed to 68 percent of all items in the first quarter of 1996.
The percentage of positive managed care articles was at its highest in 1991. In this year, a number of news items portrayed the predominantly fee-for-service system as being in crisis. The drop in positive articles since 1991 has been dramatic, however, even with a slight trend reversal in 1994-95, so that in the most recent quarter only 5 percent of managed care stories had a positive tone.

Exhibit 2
Illustrative Types of Managed Care Media Stories

Postive Tone
Kinsley, M. 1991. "For Better Care Try Snob Appeal." Time, vol. 137, p. 72, June 3.

…Health Maintenance Organizations (HMOs) represent a style of health care that combines the best of capitalism and socialism. Those enrolled in an HMO pay an annual fee, and the group then supplies all necessary health care services. Since the provider is also the insurer, there is no incentive to run up the tab with unnecessary services, yet HMOs must compete for customers by offering high quality care.

Neutral Tone
"The Ins and Outs of Managed Care." 1990. Nation's Business, vol. 78, p. 28, October.

…The purpose of managed care in health insurance is to weed out unnecessary medical treatment and thereby cut costs. Small businesses in particular are starting to look to the managed care provided by health maintenance organizations (HMOs), which offer employees minimal freedom of choice in choosing doctors but provide companies with maximum cost control. Many employees prefer more expensive, traditional plans that allow them to choose their own doctors. Businesses can either provide their employees with a cost-controlling HMO or give them a more flexible plan but require them to make up the cost differential.

Negative Tone
Hamilton, J. O. 1994. "A Furor Over Mental Health (Managed Care)." Business Week, pp. 66-69, August 8.

More and more companies are turning to managed care to rein in mental-health care costs that doubled in the 1980s. Employers are using the same rigid cost and treatment guidelines that now govern conventional medicine. The trend is cutting mental-health spending, but critics say that employers are going too far. Moves made in the name of efficiency are causing turmoil in the lives of emotionally troubled employees and their families…

Source: H. H. Wilson, The Reader's Guide to Periodical Literature (Bronx, NY, 1990-92).

During the period since April, negative news coverage of managed care has persisted. The New York Times, for example, featured stories on bill-paying irregularities by The Health Insurance Plan of Greater New York (Fein and Rosenthal, April 1, 1996); privacy questions in psychotherapy under managed care (Lewin, May 22, 1996); New York City's faltering Medicaid managed care initiative (Fein, May 25, 1996); and the financial risks faced by vacationing members of managed care plans who become ill when traveling (Pear, May 26, 1996). The paper also included two major stories on the legislative movement to protect managed care patients (Freudenheim, May 19, 1996; Dao, May 9, 1996).

Exhibit 3
Trends in Media Coverage of Managed Care

Note: For 1996, the graph includes only the first quarter of the year's data.

No attempt will be made to assess the validity of media-reported problems in managed care, nor for that matter the complaints of consumers and professionals. What is most central here is the worsening public image of managed care, which has decided importance for public policymaking. As Baumgartner and Jones (1993) explain, every public policy issue is associated with a certain "tone" which conveys its simplified meaning. Is the subject of attention perceived positively and optimistically as a means of solving a defined problem, of achieving progress and social benefits? Or, is the subject defined negatively, as a danger to well-being that needs to be controlled? A predominantly positive tone tends to support decisions favoring a private industry's expansion, minimal regulatory hindrance, and a relatively constricted decisionmaking process. To a great extent, these attributes describe earlier phases of public policymaking for managed care, notably the period of the 1970s when the federal government passed several measures promoting HMO growth (Brown, 1983). A predominantly negative tone, by contrast, signals heightened political conflict, proposals for new industry controls, and broadened involvement in the policymaking process, including the emergence of new decisionmaking "venues." All of these elements are present in the current managed care policy environment, including the increasing involvement of state legislative bodies, consumer affairs divisions, health departments, courts, and consumer action groups.

The rapid development of legislative restrictions upon early discharge of mothers and infants well illustrates this new political groundswell for controlling managed care practices (Declercq and Simmes, 1996). As of early 1996, fifteeen states had passed such laws, and by very large bipartisan majorities. Meanwhile, several other states had pending bills of this kind. The U.S. Congress has also taken action on the issue, to which President Clinton gave his strong backing, choosing the day before Mother's Day as the occasion to announce his endorsement (Pear, May 12, 1996). It is important to note that this legislative movement does not arise from clear scientific evidence on the safety issues of early discharge, for which existing studies are inconclusive and support both sides of the debate. Rather, a different kind of public policy diffusion has taken place, in which the issue's public appeal, seeming simplicity, and intensive media coverage have combined to advance it quickly onto the legislative agenda and to give groups of activist medical professionals a victory over industry forces (Declercq and Simmes, 1996).

Still, even as managed care has come under siege, the hope remains that it can be a vehicle for improving quality, continuity, and efficiency in a health care system marked by fragmentation and waste. With respect to mental health care, the widespread application of managed care techniques has also surfaced as an argument on behalf of parity insurance coverage for general medical and mental illnesses. According to one estimate, parity need only raise insurance premiums about $40 a year per family in a managed care context (Beck, 1996). Thus, the challenge facing public policymakers is not merely how to check possible abuses of managed care, but how to do so without at the same time undermining managed care's beneficial potential. The next two sections outline the principal regulatory strategies that have been devised to this stage, first in the area of managed care generally, and then in regard specifically to mental health care.

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