How a Managed Behavioral Health Care Carve-Out Plan Affected Spending for Episodes of Treatment

OBJECTIVE: This study examined the impact on spending for episodes of mental health and substance abuse treatment of a managed behavioral health care carve-out program implemented by the Massachusetts Group Insurance Commission in July 1993. METHODS: Episodes of mental health and substance abuse treatment were defined using claims and enrollment data from before and after the carve-out implementation. Regression models were used to compare spending per episode for different types of episodes of mental health and substance abuse care: those involving care provided only in an inpatient facility (that is, inpatient care or partial hospitalization), those involving both inpatient-facility and outpatient care, and those involving only outpatient care. RESULTS: Adoption of the carve-out plan was associated with a large decrease in spending per episode across all three episode types, particularly for episodes involving inpatient-facility care. The decrease was 54 percent for inpatient-facility-only episodes, 46 percent for combined inpatient facility and outpatient episodes, and 21 percent for outpatient-only episodes. The decrease in spending per episode was larger for episodes involving a diagnosis of either unipolar depression or substance dependence. CONCLUSIONS: The findings suggest that spending per episode of mental health and substance abuse treatment may drop substantially after a carve-out is implemented. Individuals with a diagnosis of either unipolar depression or substance dependence seem to be disproportionately affected. It appears that even weak financial incentives placed on the managed behavioral health care vendor can result in dramatic changes in spending patterns for episodes of mental health and substance abuse treatment.