Community Support

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

Regulatory Policy Analysis

What will be the impact of new regulatory initiatives for managed mental health care? Are there hidden pitfalls capable of undoing the purpose of legislative reforms? What is the potential for regulation to produce unintended consequences that impact negatively on consumers of care, providers, the managed care industry, or all three? What issues will merit attention in future waves of managed mental health policymaking? These questions pose a set of analytical questions involving past regulatory outcomes, the intricacies of a fast-changing health care sector, and long-term public policy challenges of mental health care.

Post-Legislative Politics
Those celebrating victory over managed care interests with the passage of new patient protection statutes are well-advised to understand that the political process of regulatory policymaking is not ended, it has merely entered a new phase. Unlike the ad hoc coalitions that frequently provide impetus for new legislative regulations, well-organized and well-financed industry groups do not dissipate after legislation has been enacted. Rather, they have a panoply of means at their disposal to continue to seek success on issues decided against them in the legislative arena. They may simply drag their feet on tasks requiring industry cooperation. Or, benefiting from good access to bureaucratic officials, such groups may alternate between pressure tactics and cultivation of relationships to delay program implementation, weaken the stringency of operational standards, and influence those aspects of regulation selected for attention or neglect. They may challenge legislative requirements in the courts, attacking in whole or in part the legal premise of a new regulatory framework.

Far from idle speculation, these dynamics already are being seen in the post-legislative stage of managed care regulation. For example, under the 1990 federal law requiring disclosure of provider incentives by HMOs enrolling Medicare and Medicaid patients, not until March, 1996, were detailed rules issued by the U.S. Department of Health and Human Services. Then, in July, the department quietly suspended these rules to an unspecified future date due to "a torrent of criticism" from regulated organizations (Pear, July 8, 1996, p. A1). In Massachusetts, which passed a law constraining insurers from requiring extensive personal information before supplying $500 of state-mandated mental health benefits, regulators now report that many MCOs are evading or simply ignoring the law (Bass, May 7, 1996). Events in Vermont seem to make a pattern. In this state, the managed care industry continued to "complain bitterly" after the passage of recent regulatory legislation, shifting its lobbying effort to the governor's office (Libertoff, 1996). In part owing to such political resistance, it has taken state regulators two years to instate the licensing and appeals procedures mandated by law.

The role permitted to regulated interests within the administrative process of regulation will vary from state to state, depending on the stance of public officials as well as the ability of consumer advocates to adapt from legislative to bureaucratic politicking. Given their resource advantages, however, it is not uncommon for industry groups to dominate at this juncture, a phenomenon known in the public policy literature as "capture." "Agencies that regulate a single industry have tended to become advocates of their industries, rather than impartial protectors of the public interest," writes Peters (1996). "Capture results from the agencies' needs to maintain political support...when the only logical support is the regulated industry itself. The public is usually too amorphous a body to offer the specific support an agency may need in defending its budget, or its very existence..." (p. 90).

Bureaucratic Capacity
One way that regulatory practices are sure to fall short of objectives is if regulatory responsibilities exceed the capacity of public bureaucracies to carry them out (Scallet, 1996a; Koyanagi, 1996). The new regulatory burdens being created by managed care legislation are unprecedented in some ways, and undoubtedly enough to strain existing agency manpower and expertise. Within some states, regulatory agencies already are very overburdened by other commitments. Yet it is unclear whether the capacity issue is being taken seriously enough by legislators.

In Vermont, for example, legislators did not increase funding at all for the Banking, Insurance, and Securities Department when charging it with licensing all utilization review agents in the state and setting up an independent managed care board of appeals. Feeling themselves in a "David and Goliath" battle with the managed care industry, advocates concluded that to ask for such appropriations would have doomed their regulatory proposal (Libertoff, 1996). Along with the political factors already mentioned, insufficient agency capacity and lack of technical knowledge account for the department taking so long to issue necessary rules and procedures under the bill.

In Rhode Island, recently-passed legislation does specify that managed care organizations will pay a processing fee for certification of qualified health plans. Whether this will supply adquate administrative resources for the Health Department, hard-pressed on other fronts, is open to question. In June, a Providence-Journal Bulletin story cast a spotlight on 175 uninvestigated nursing home complaints lodged with the department concerning possible neglect and verbal or physical abuse of patients (Tooher, June 2,1996). Acknowledging the backlog as a chronic problem, the department cited its lack of staff, and it has proposed stepping down the intensity of inspection procedures as a coping measure.

Real versus Symbolic Regulation
The realities of presure-group politics combined with administrative overload accentuate the possibility of managed care regulation that proves more symbolic than real. Political scientists have long noted the mismatch between stated goals and actual results under many regulatory systems. Legislative language that gives strong pledges of protecting the public interest and promoting values like fairness and quality is capable of attracting much positive publicity (Edelman, 1964). Preambles to regulatory bills are ritually devoted to such themes, as in the following opening passage from Rhode Island's "Health Care Accessibility and Quality Assurance Act":

The legislature hereby declares that: (a) It is in the best interest of the public that those individuals and care entities involved with the delivery of plan coverage in our state meet the standards of this chapter to insure accessibility and quality for the state's patients...

Another proposed bill before this last session of the Rhode Island General Assembly, entitled the "Citizen's Access to Mental Health Treatment Act," began this way:

Changes are occurring in the health insurance industry with the overt intent of enhancing the efficacy and cost effectiveness of mental health services. Actions taken by health insurance companies unnecessarily interfere with an insured person's ability to obtain the treatment they need and to exercise their responsibility to choose the health care services and the health providers they desire. These actions have also interfered with the responsibilities health care providers have to treat their patients. The intent of this legislation is to provide regulation over the interactions between insurers and professionals so as to protect the interest of consumers and professionals.

Much more important than abstract assurances, of course, are the operational powers established by a bill and the faithfulness of their execution. Experience from a variety of regulatory policies shows that these often do not live up to high-flown legislative rhetoric. Further, not only is there frequently a lapse in the delivery of promised benefits to the public in regulatory policymaking, but "the deprived groups often display little tendency to protest or to assert their awareness of the deprivation" (Edelman, pp. 24-25). With these overarching political tendencies as backdrop, we turn our attention to specific regulatory strategies for managed mental health care.

Limits of Information Disclosure
Information disclosure is one of the main regulatory methods being applied to managed care, reflecting both its appeal as a relatively mild coercive intervention and the belief that better information will improve the operation of health insurance as an economic market. However, for consumer choice genuinely to be strengthened in regard to mental health care, transforming it into an estimable force for quality improvement, regulators will have to amplify current legislative provisions substantially. According to the Center for Health Care Rights (Dallek, Jimenez, and Schwartz, 1995), "States' HMO statutes and regulations generally provide little guidance on how much detail HMOs should provide enrollees on their benefit structure, benefit limits or how to obtain benefits" (p. 127). More concrete requirements are now coming to the fore in some legislation, but the clarity of information provided, as well as the means by which MCOs disseminate information to consumers, remain problematic. Consumers are prone to focus on immediate, tangible concerns like waiting times and freedom to choose a provider, even though a health plan's quality assurance mechanisms have more to do with the overall health care experience provided (Conniff, 1996). For this reason, consumers will have to be made more familiar with the broad array of plan performance indicators that reflect on their interests, and both regulators and MCOs need to shoulder responsibilites for developing consumer-empowering strategies in this area.

Mental health care is a specialty not likely to receive extensive coverage in a general information package prepared for all plan subscribers. Consequently, probable users of these services will need much more detailed facts and figures available on request (Dallek, Jimenez, and Schwatrz, 1995). Moreover, to make data user-friendly, regulators will have to play a role in ensuring a helpful degree of consistency and comparability in the way various MCOs prepare consumer information. MCOs should be required to supply data on patients' perceptions of the appropriateness, quality, and outcomes of mental health care they have received (Ware, 1995). Especially on the design of such informational materials, consumers of mental health services have a real contribution to make and should be given an opportunity for supplying that input (Bazelon Center, 1995).

Consumer Participation
In mental health care, consumer voice is widely seen as complementary to consumer choice, for reasons of empowerment and destigmatization that have a special place in the "culture" of this service environment. In the development of public managed-care plans, consumer groups have every justification to demand inclusion (Bazelon Center, 1996). Public involvement in private health plan management is a more tricky issue, yet here, too, there are possibilities. For example, in the early 1990s IBM Corporation hired an independent advisory board of mental health professionals to help monitor quality of care and establish treatment protocols for its managed mental health care program (Astrachan et al., 1995). Private insurers have sometimes convened similar groups, generally dominated by professionals.

The next step for these nascent efforts at broadening upper-level MCO governance is to build in significant consumer participation. An important internal monitoring tool, consumer involvement naturally supplements the external regulatory efforts of public officials and private accrediting and rating groups. To be effective, however, it requires genuine organizational commitment that goes beyond token representation. The most comprehensive study on this topic concluded that "Although over half of the states provide for some enrollee participation in HMO policy, the laws in this area are so vague they may not result in a meaningful participatory role for enrollees" (Dallek, Jimenez, and Schwartz, 1995, p. 146). Neither has consumer involvement so far received a great deal of attention from private groups like NCQA. It remains the case that government is the most reliable ally consumers have, and only government can institutionalize consumer participation as a public policy goal. Regulatory support is just the kind of leverage consumers currently need to strengthen their position vis à vis the management of HMOs and other MCOs to achieve inclusion in plan decisionmaking.

Mental Health Exceptionalism
Regulation of managed care revisits the familiar dilemma in mental health policymaking of mental health exceptionalism (Rochefort, 1993). Exceptionalism refers to approaching mental health problems and solutions as categorically different from issues of general medical care. Adopting this standpoint, mental health providers and advocates have sometimes won major attention for the plight of persons with mental illness in American society, including the passage of mental health legislation. But exceptionalism also has been turned against the mentally ill as justification for exclusionary practices, such as discriminatory insurance coverage.

Proponents of managed mental health regulation have been faced with a hard tactical choice over whether to seek their own specialized regulatory mechanisms or to subsume the mentally ill under one broad framework of health care protections. Both methods are seen in the legislative enactments reviewed here (e.g., Vermont versus Rhode Island) and in pending proposals. It is impossible to state a priori what will work best as long-term policy. There may well be more than a single answer, depending on the precise regulatory issue or population group concerned. One area deserving careful monitoring by regulators will be the appeals process and how boards dominated by generalists as opposed to mental health specialists make their decisions. Contracting issues, discussed next, are also much more salient in mental health care, so much so as to warrant distinctive attention for this service sector. In any case, a main challenge for public officials in either broad-based or narrow regulatory systems is guiding policy development over time, so that integrated and categorical responses to managed mental health issues each come to have their place working in harmony.

Contracting Issues
The preeminent role of specialty MCOs in managed mental health care is likely to continue for the forseeable future, especially as Medicaid waivers and state mental health policymaking lead more seriously mentally ill into managed care. It has been predicted that carve-out competition will increase, as mental health and substance abuse providers organize specialty networks to vie for public and private contracts (Manderscheid and Henderson, 1995). Thus, for mental health more than other types of health care, the regulatory function must pay heed to both the process and the content of contract development. To date, this topic has been overshadowed by other managed care policy concerns in state legislatures. Even federal authorities are only gradually making the linkage between contracting and quality of care for the state waiver programs they oversee. However, one need look no further than the well-publicized troubles of ValuJet airline, which purchased its maintenance services from outside vendors, for insight into the quality control issues sometimes raised by contracting (Wald, June 18, 1996).

The many organizational forms that specialty mental health contracting can take are just now coming to light and will proliferate further. Too, purchase-of-service often takes on a layered character, as a primary organization contracts to a secondary organization, which in turn contracts to a series of tertiary organizations, each specialists for particular users or forms of care. At each organizational intersection, it is contract terms that create incentives for performance and set the rules for reporting. Reflecting this reality, NCQA's proposed accreditation standards for behavioral health care include a series of items delving into contracting and delegated activities. Further, the lesson of Massachusetts' managed mental health program for Medicaid recipients has applicability beyond a single state or insurance provider: It takes detailed specifications and close monitoring by the contractor to make the contracting process work while upholding quality control aims (Callahan et al., 1995).

Legal experts are now offering to health care providers detailed checklists for reviewing proposed managed care contracting agreements (e.g., Stewart, 1996; Sargent, 1992). Similar advice is also being given to MCOs on how to maximize their advantage in the contracting process (e.g., Miller, 1993; Aspen Health Law Center, 1995). No less than the same close attention and systematic method ultimately will be needed from public officials who seek to monitor specialty mental health carve-outs. Prohibiting financial arrangements that flagrantly induce or reward providers to limit services merely scratches the surface of important risk-sharing issues and the operation of contracted networks.

To be sure, the contracting process generates more questions than answers at this point. This hampers the ability of bureaucratic officials to formulate programmatic requirements, as opposed to accounting and insurance safeguards. However, other quasi-regulatory tools suggest themselves under the circumstances, such as ensuring that different contracting approaches are well-documented and their relationship tracked to service development, benefit flexibility, treatment outcomes, and other indicators (Frank, McGuire, and Newhouse, 1995). State departments will have to build specialized contracting expertise among their staff (to reinforce an earlier point about capacity-building). This will enable them to perform better assessment of the varying procedures used by MCOs for selecting specialized mental health providers and for supervising their activities. Finally, regulators can use their unique strategic position to raise important policy questions about the way vendor contracts reimburse for services traditionally associated with high quality mental health care (for example, case management) (Manderscheid and Henderson, 1995), and how they address long-term problems of the mental health sector (for example, "dumping" into public facilities) (Bazelon Center, 1995).

Prescribed Treatment via Regulation
Dictating treatment protocol for identified categories of patients is among the latest managed care regulations. The most prominent example of this is required 48-hour stays for mothers and newborns. Variations are beginning to appear in mental health, too, as with attempts to establish utilization corridors that are free from benefit management, or formulating a certain care standard for children with mental health problems. It is not hard to envision more ambitious proposals being made along these lines that state explicit mandates for the length, settings, or forms of care for given diagnoses.

Arguably, this phenomenon is one sign of the low levels to which consumer and provider confidence has fallen in regard to current patient management practices by MCOs. If this is so, MCOs should recognize more general regulatory reforms as a vehicle to help calm a skittish market and a way to keep the political process from "spinning out of control" with further treatment-level regulatory remedies (Conniff, 1996). Meanwhile, regulatory proponents have to reconsider how well it serves their aims to handcuff the utilization review process in this manner. Patients with the same diagnosis may differ in many other ways-age, complicating medical conditions, family support, and more. Factoring these variables into treatment plan decisions is a proper dimension of good quality care. Treatment entitlements that operate without regard to cost-efficiency or clinical variations make a poor substitute for upgrading plan-wide quality assurance and a questionable adjunct.

Regulatory Coordination
The movement for managed care legislation has struck pell-mell across the states, a reflection of national currents, indigenous political pressures, and state policy style, all at once. Little effort has been made in the process to rationalize the overall regulatory environment in which MCOs operate—not between public and private rule-makers, or even among government bureaucracies on their own.

At the same time, much legal ambiguity exists about the applicable scope of new regulatory authority. A chief issue, for example, concerns the Employee Retirement Income Security Act (ERISA), which pre-empts state laws regulating employee benefit plans when it comes to so-called self-insuring businesses. ERISA plans are exempt from state benefit mandates. Courts have been more divided as to whether any-willing-provider statutes apply under ERISA. Also unclear at present is the relevance of state third-party-administrator laws for self-insuring plans. And several courts have decided that ERISA plans have no liability under state utilization review laws (Brennan and Berwick, 1996). When MCOs include self-insured enrollees as one part of their membership, as many of them do, it creates a morass for plan managers to assess when they must, and when they need not, abide by different regulatory standards (Bass, May 7, 1996).

Parallel uncertainty surrounds the application of legislative regulations to public managed care enrollees being served by private organizations. From another perspective, there are federal regulations appplying to Medicare and Medicaid populations that may or may not be in force for privately-insured enrollees of the same health plan. Significantly, in several states examined, the state mental health department was virtually uninvolved in the legislative process regulating private managed care organizations, this despite widespread negotiation of carve-out arrangements between the two.

These observations point to a critical need for greater coordination of evolving regulatory actions in managed mental health care. Brennan and Berwick (1996) recommend a number of useful steps to make the regulatory process more efficient and friendly to industry innovation. Sensibly, they call for regulation that is simultaneously more responsive to the organizational needs of the regulated and more collaborative in its orientation, without sacrificing basic social aims. Some items that seem directly pertinent to a coordinated regulatory approach in mental health are:

developing a common set of measurable objectives to which all regulatory authorities agree to give priority
reconceiving the regulatory strategy to make it more population-based, community-oriented, and focused on the relationships among different organizations, rather than the independent operation of organizational fragments
eliminating unnecessary excess in the overlap, duplication, and contradictions among rules in place or under development by all public and private regulating parties
helping to promote positive innovations in care and quality improvement systems, with regulators fashioning a new role as "quality consultants"
increasing attention to service and quality levels for the Medicaid population as it is moved into managed care, with the federal the Centers for Medicare and Medicaid Services and state administrators cooperating on measurement issues and a plan for continuing oversight

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