Estimating cost-offsets of new medications: use of new antipsychotics and mental health costs for schizophrenia.

Estimation of the effect of one treatment compared to another in the absence of randomization is a common problem in biostatistics. An increasingly popular approach involves instrumental variables-variables that are predictive of who received a treatment yet not directly predictive of the outcome. When treatment is binary, many estimators have been proposed: method-of-moments estimators using a two-stage least-squares procedure, generalized-method-of-moments estimators using two-stage predictor substitution or two-stage residual inclusion procedures, and likelihood-based latent variable approaches. The critical assumptions to the consistency of two-stage procedures and of the likelihood-based procedures differ. Because neither set of assumptions can be completely tested from the observed data alone, comparing the results from the different approaches is an important sensitivity analysis. We provide a general statistical framework for estimation of the casual effect of a binary treatment on a continuous outcome using simultaneous equations to specify models. A comparison of health care costs for adults with schizophrenia treated with newer atypical antipsychotics and those treated with conventional antipsychotic medications illustrates our methods. Surprisingly large differences in the results among the methods are investigated using a simulation study. Several new findings concerning the performance in terms of precision and robustness of each approach in different situations are obtained. We illustrate that in general supplemental information is needed to determine which analysis, if any, is trustworthy and reaffirm that comparing results from different approaches is a valuable sensitivity analysis.

Risk adjustment alternatives in paying for behavioral health care under Medicaid.

OBJECTIVE: To compare the performance of various risk adjustment models in behavioral health applications such as setting mental health and substance abuse (MH/SA) capitation payments or overall capitation payments for populations including MH/SA users. DATA SOURCES/STUDY DESIGN: The 1991-93 administrative data from the Michigan Medicaid program were used. We compared mean absolute prediction error for several risk adjustment models and simulated the profits and losses that behavioral health care carve outs and integrated health plans would experience under risk adjustment if they enrolled beneficiaries with a history of MH/SA problems. Models included basic demographic adjustment, Adjusted Diagnostic Groups, Hierarchical Condition Categories, and specifications designed for behavioral health. PRINCIPAL FINDINGS: Differences in predictive ability among risk adjustment models were small and generally insignificant. Specifications based on relatively few MH/SA diagnostic categories did as well as or better than models controlling for additional variables such as medical diagnoses at predicting MH/SA expenditures among adults. Simulation analyses revealed that among both adults and minors considerable scope remained for behavioral health care carve outs to make profits or losses after risk adjustment based on differential enrollment of severely ill patients. Similarly, integrated health plans have strong financial incentives to avoid MH/SA users even after adjustment. CONCLUSIONS: Current risk adjustment methodologies do not eliminate the financial incentives for integrated health plans and behavioral health care carve-out plans to avoid high-utilizing patients with psychiatric disorders.

Scale and structure of capitated physician organizations in California.

Physician organizations in California broke new ground in the 1980s by accepting capitated contracts and taking on utilization management functions. In this paper we present new data that document the scale, structure, and vertical affiliations of physician organizations that accept capitation in California. We provide information on capitated enrollment, the share of revenue derived by physician organizations from capitation contracts, and the scope of risk sharing with health maintenance organizations (HMOs). Capitation contracts and risk sharing dominate payment arrangements with HMOs. Physician organizations appear to have responded to capitation by affiliating with hospitals and management companies, adopting hybrid organizational structures, and consolidating into larger entities.

Partial versus full hospitalization for adults in psychiatric distress: a systematic review of the published literature (1957-1997).

OBJECTIVE: The authors reviewed published research that compared partial and full hospitalization as alternative programs for the care of mentally ill adults, with the goal of both systematizing the knowledge base and providing directions for future research. METHOD: Studies published since 1950 were obtained through manual and electronic searches. Results were stratified by outcome domain, type of measure used to report between-group differences (global, partial, or rate-based), and time of assessment. Effect sizes were computed and combined within a random-effects framework. RESULTS: Eighteen investigations published between 1957 and 1997 were systematically reviewed. Over half of eligible patients were excluded a priori; diagnostic severity of enrollees varied widely. On measures of psychopathology, social functioning, family burden, and service utilization, the authors found no evidence of differential outcome in the selected patient population admitted to the studies reviewed. Rates of satisfaction with services suggested an advantage for partial hospitalization within 1 year of discharge, with the gap being largest at 7-12 months. CONCLUSIONS: Although partial hospitalization is not an option for all patients requiring intensive services, outcomes of partial hospitalization patients in these studies were no different from those of inpatients. Further, patients and families were more satisfied with partial hospitalization in the short term. Weaknesses of the studies limited the scope of our inquiry and the generalizability of findings. Positive findings require replication under the present circumstances of mental health care, and more research is needed to identify predictors of differential outcome and successful partial hospitalization. A clearer definition of partial hospitalization will help consolidate its role in the continuum of mental health services.

Prescription drug prices: why do some pay more than others do?

The fact that sick elderly people without prescription drug coverage pay far more for drugs than do people with private health insurance has created a call for state and federal governments to take action. Antitrust cases have been launched, state price control legislation has been enacted, and proposals for expansion of Medicare have been offered in response to price and spending levels for prescription drugs. This paper offers an analysis aimed at understanding pricing patterns of brand-name prescription drugs. I focus on the basic economic forces that enable differential pricing of products to exist and show how features of the prescription drug market promote such phenomena. The analysis directs policy attention toward how purchasing practices can be changed to better represent groups that pay the most and are most disadvantaged.

Depression and work productivity: the comparative costs of treatment versus nontreatment.

This article discusses the impact of depression on work productivity and the potential for improved work performance associated with effective treatment. We undertook a review of the literature by means of a computer search using the following key terms: cost of illness, work loss, sickness absence, productivity, performance, and disability. Published works were considered in four categories: (1) naturalistic cross-sectional studies that found greater self-reported work impairment among depressed workers; (2) naturalistic longitudinal studies that found a synchrony of change between depression and work impairment; (3) uncontrolled treatment studies that found reduced work impairment with successful treatment; and (4) controlled trials that usually, but not always, found greater reduction in work impairment among treated patients. Observational data suggest that productivity gains following effective depression treatment could far exceed direct treatment costs. Randomized effectiveness trials are needed before we can conclude definitively that depression treatment results in productivity improvements sufficient to offset direct treatment costs.

Health plans and selection: formal risk adjustment vs. market design and contracts.

In this paper, we explore the demand for risk adjustment by health plans that contract with private employers by considering the conditions under which plans might value risk adjustment. Three factors reduce the value of risk adjustment from the plans' point of view. First, only a relatively small segment of privately insured Americans face a choice of competing health plans. Second, health plans share much of their insurance risk with payers, providers, and reinsurers. Third, de facto experience rating that occurs during the premium negotiation process and management of coverage appear to substitute for risk adjustment. While the current environment has not generated much demand for risk adjustment, we reflect on its future potential.

Medicaid behavioral health carve-outs: a new generation of privatization decisions.

This article addresses issues related to the privatization of various functions within the mental health system. It acknowledges the contributions of Robert Dorwart, who explored trends with regard to the privatization of inpatient psychiatric services. The authors then highlight changes in the division of labor between the public and private sectors regarding the financing and delivery of mental health services and the management of the system. Responsibility for funding the mental health system has remained largely a public responsibility while responsibility for production or delivery of services in the mental health system is typically held by private, for-profit, and not-for-profit organizations. The roles of managing the mental health system and setting policy are now shared between the private and public sectors in a number of states that have implemented Medicaid behavioral health carve-out programs. This article explores the impact of such privatization on cost, access, and quality of services by examining the experiences of three states with carve-outs. The authors suggest that while organizational form is an important issue, concerns about privatization should be tempered by attention to the contracting decisions made by purchasers, the level of resources devoted to services, and the adequacy of administration of the system.

One-year costs of second-line therapies for depression.

BACKGROUND: We compared patterns of medical resource utilization and costs among patients receiving a serotonin-norepinephrine reuptake inhibitor (venlafaxine), one of the selective serotonin reuptake inhibitors (SSRIs), one of the tricyclic agents (TCAs), or 1 of 3 other second-line therapies for depression. METHOD: Using claims data from a national managed care organization, we identified patients diagnosed with depression (ICD-9-CM criteria) who received second-line antidepressant therapy between 1993 and 1997. Second-line therapy was defined as a switch from the first class of antidepressant therapy observed in the data set within 1 year of a diagnosis of depression to a different class of antidepressant therapy. Patients with psychiatric comorbidities were excluded. RESULTS: Of 981 patients included in the study, 21% (N = 208) received venlafaxine, 34% (N = 332) received an SSRI, 19% (N = 191) received a TCA, and 25% (N = 250) received other second-line antidepressant therapy. Mean age was 43 years, and 72% of patients were women. Age, prescriber of second-line therapy, and prior 6-month expenditures all differed significantly among the 4 therapy groups. Total, depression-coded, and non-depression-coded 1-year expenditures were, respectively, $6945, $2064, and $4881 for venlafaxine; $7237, $1682, and $5555 for SSRIs; $7925, $1335, and $6590 for TCAs; and $7371, $2222, and $5149 for other antidepressants. In bivariate analyses, compared with TCA-treated patients, venlafaxine- and SSRI-treated patients had significantly higher depression-coded but significantly lower non-depression-coded expenditures. Venlafaxine was associated with significantly higher depression-coded expenditures than SSRIs. However, after adjustment for potential confounding covariables in multivariate analyses, only the difference in depression-coded expenditures between SSRI and TCA therapy remained significant. CONCLUSION: After adjustment for confounding patient characteristics, 1-year medical expenditures were generally similar among patients receiving venlafaxine, SSRIs, TCAs, and other second-line therapies for depression. Observed differences in patient characteristics and unadjusted expenditures raise questions as to how different types of patients are selected to receive alternative second-line therapies for depression.

Risk adjustment of capitation payments to behavioral health care carve-outs: how well do existing methodologies account for psychiatric disability?

This study used 1994-1995 administrative data from a large public employer to examine the viability of commercial risk adjustment systems for setting capitation payments to competing behavioral health care "carve-outs". The ability of Hierarchical Condition Categories and Adjusted Diagnostic Groups to predict psychiatric expenditures was improved by controlling separately for psychiatric disability. However, even the best models underpredicted expenditures of patients with psychiatric disability by 15%. Relative to full capitation, "mixed" payment systems and soft capitation reduce the ability of carve-outs to earn disproportionate profits by enrolling healthy patients and avoiding sick ones, yet also diminish incentives for cost containment.

The creation of Medicare and Medicaid: the emergence of insurance and markets for mental health services.

Editor's Note: As a follow-up to the preceding article first published in the October 1965 issue (see page 461), Richard G. Frank, Ph.D., offers an analysis of the evolving Medicare and Medicaid programs and their impact on public mental health care. He shows that many of the themes raised at the 1965 APA conference on Medicare legislation for psychiatric disorders continue to dominate public debate.

The Medicare prescription drug benefit: how will the game be played?

Most recent proposals to add a prescription drug benefit to the Medicare program suggest using pharmacy benefit managers (PBMs) to control costs and promote quality. However, the proposals give little detail on the institutional arrangements that would govern PBM operations and drug procurement. The recent Congressional Budget Office cost estimate of the Clinton administration's proposal reflects this lack of detail on how PBMs would function. We sketch an approach for structuring PBM operations that focuses on competition among PBMs, manufacturers, and distributors; incentive pricing; and risk sharing with PBMs.

Measuring adverse selection in managed health care.

Health plans paid by capitation have an incentive to distort the quality of services they offer to attract profitable and to deter unprofitable enrollees. We characterize plans' rationing as a "shadow price" on access to various areas of care and show how the profit maximizing shadow price depends on the dispersion in health costs, individuals' forecasts of their health costs, the correlation between use in different illness categories, and the risk adjustment system used for payment. These factors are combined in an empirically implementable index that can be used to identify the services that will be most distorted by selection incentives.

Methadone maintenance and state Medicaid managed care programs.

Coverage for methadone services in state Medicaid plans may facilitate access to the most effective therapy for heroin dependence. State Medicaid plans were reviewed to assess coverage for methadone services, methadone benefits in managed care, and limitations on methadone treatment. Medicaid does not cover methadone maintenance medication in 25 states (59 percent). Only 12 states (24 percent) include methadone services in Medicaid managed care plans. Moreover, two of the 12 states limit coverage for counseling or medication and others permit health plans to set limits. State authorities for Medicaid and substance abuse can collaborate to ensure that appropriate medication and treatment services are available for Medicaid recipients who are dependent on opioids and to construct payment mechanisms that minimize incentives that discourage enrollment among heroin-dependent individuals.

Medical resource use and cost of venlafaxine or tricyclic antidepressant therapy. Following selective serotonin reuptake inhibitor therapy for depression.

OBJECTIVE: An analysis of administrative and claims data was performed to compare the resource use and costs to a managed-care organisation of venlafaxine, a serotonin and norepinephrine reuptake inhibitor (SNRI), versus tricyclic antidepressant (TCA) therapy, after switching from a selective serotonin reuptake inhibitor (SSRI). DESIGN: One-year costs and frequencies of all medical services, and of services coded for depression, were compared between patients who received venlafaxine and TCA therapy as second-line therapy using bivariate and multivariate statistical analyses. SETTING: Data were obtained from 9 individual health plans with more than 1.1 million covered lives affiliated with a national managed-care organisation. PATIENTS AND PARTICIPANTS: Health plan members were included if they had a diagnosis of depression between July 1993 and February 1997. They also had to have at least 2 months of prescriptions for SSRI therapy followed by at least 2 months of venlafaxine or TCA therapy, and continuous enrollment in the plan from at least 6 months prior to 12 months following initiation of venlafaxine or TCA therapy. 188 patients who received venlafaxine and 172 patients who received TCAs met the inclusion criteria. MAIN OUTCOME MEASURES AND RESULTS: Patients who received TCAs were slightly but significantly older (43 vs 40 years) than venlafaxine recipients and, during 6 months prior to initiating therapy, had significantly higher mean costs coded for depression ($US451 vs $US311) and costs not coded for depression ($US4500 vs $US2090). Psychiatrists prescribed a significantly higher proportion of venlafaxine than TCA prescriptions (46.3 vs 25.0%). Prior to adjusting for confounding characteristics, during 12 months following initiation of therapy, mean depression-coded costs were significantly higher for venlafaxine than TCA recipients ($US1948 vs $US1396) and mean costs not coded for depression were significantly lower ($US4595 vs $US6677). Overall costs were not significantly different ($US6543 for venlafaxine vs $US8073 for TCA). Significant cost differences were observed with primary care physicians as initial prescribers of second-line therapy but not with psychiatrists. However, costs between the 2 groups were similar after adjusting for confounding variables, including prior 6-month costs and initial prescriber of second-line therapy. CONCLUSIONS: Payer costs are similar among patients receiving venlafaxine and TCA therapy following SSRI therapy. Higher costs of venlafaxine pharmacotherapy relative to TCA therapy may be offset by lower costs of other medical services. Differences in prescribing patterns and costs between primary care physicians and psychiatrists warrant further investigation.

The value of mental health care at the system level: the case of treating depression.

The value of mental health services is regularly questioned in health policy debates. Although all health services are being asked to demonstrate their value, there are special concerns about this set of services because spending on mental health care has grown markedly over the past twenty years. We propose a method for using administrative data to develop a comprehensive assessment of value for mental health care, which we call systems cost-effectiveness (SCE). We apply the method to acute-phase treatment of depression in a large insured population. Our results show that SCE of treatment for depression has improved during the 1990s.

Depression in the workplace: effects on short-term disability.

We analyzed data from two national surveys to estimate the short-term work disability associated with thirty-day major depression. Depressed workers were found to have between 1.5 and 3.2 more short-term work-disability days in a thirty-day period than other workers had, with a salary-equivalent productivity loss averaging between $182 and $395. These workplace costs are nearly as large as the direct costs of successful depression treatment, which suggests that encouraging depressed workers to obtain treatment might be cost-effective for some employers.