Mental Health: A Report by the Surgeon General

The private sector uses a health insurance model that reimburses for acute medical problems. Under this traditional model, mental health coverage usually entails outpatient counseling, medication treatments, and short-term inpatient hospitalization. Under more generous insurance plans, including some managed care plans, intermediate services, such as crisis respite and day hospitalization (also called partial hospitalization or day treatment), are becoming more popular although more traditional insurance plans continue to restrict their use. The drive to reduce the cost of inpatient care is sparking an expansion in the range of services supported by the private sector.

When children and adolescents have complex and long-term mental health problems, required services are not usually covered by private sector insurance plans. Families must either pay for the services themselves or obtain the services through the public sector. In many states, parents are forced to give up custody of their children to the state child welfare system in order to obtain needed residential services (Cohen et al., 1991). This unfortunate choice results from a limited supply of public sector services and special requirements for gaining access to them.

Over the past decade, managed care has become a major payer for private health care. Managed care provision of mental health services emerged partially in response to the overutilization of costly inpatient hospitalization by adolescents in the 1980s (Lourie et al., 1996). The purpose of managed care has been to control spiraling mental health service costs, mostly by limiting hospital stays and rigorously managing outpatient service usage (Stroul et al., 1998). Managed care can offer advantages in terms of cost-effective services to meet the needs of children with flexible benefits. It may also lead to denial of needed treatment. While its potential negative effect on the efficacy of mental health care delivered under its aegis is a hotly debated issue, for the most part managed care furnishes the same traditional services available under fee-for-service insurance. The drive for efficiency, however, has led to the introduction of intermediate services designed to divert children from hospitalization. Managed care has shortened hospital stays and increased the use of short-term therapy models (Eisen et al., 1995; Merrick, 1998). Managed care also has lowered reimbursements for services provided by both individual professionals and institutions. This has been accompanied by the construction of provider networks, under which professionals and institutions agree to accept lower than customary fees as a tradeoff for access to patients in the network.

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