The economics literature suggests that plans will manipulate the quantity of specific health services that they provide to avoid adverse selection. Services that consumers know they have a high likelihood of using and that are positively correlated with total spending, such as mental health services, are more likely to be underprovided (
+4,
+5,
+6). Incentives to underprovide psychiatric medications may be even stronger than those for mental health services for several reasons. Psychiatric medications are among the most expensive classes of drugs. Antidepressants and antipsychotics ranked third and fourth in total dollar sales in 2003 (
+7). Serious mental illnesses are chronic and persistent, and individuals are likely to take psychiatric medications for several years. In addition, individuals with serious mental illnesses are very likely to have comorbid medical conditions, making their total drug costs very high.
In the Missouri Medicaid program, 84 percent of enrollees who used psychiatric medications were in the top quartile of total drug spending in 2004 (personal communication, Comprehensive NeuroScience Drugs, 2005). Incentives for drug plans to select on the basis of mental health status are likely to be strong, because psychiatric medications are less able to be therapeutically substituted than drugs in other classes (
+8). Once an individual with mental illness finds a good treatment match, his or her provider may be reluctant to switch medications and the individual will likely seek out a plan that covers the drug. The response of health plans may be to limit access to psychiatric medications to avoid adverse selection.