Let’s get down to one of the most contentious aspects of mental health care in the U.S., today. Managed care was invented in the early 1970’s, as a way to hold down spiraling health-insurance costs. It has since become an institution all its own, a true driving force behind how mental illnesses are treated — in addition to driving all other areas of medicine. (Disclosure: I worked for 9 years for a managed-care company, so I know a good deal of this “from the inside” as it were.)

Before the advent of managed care, most people had “health insurance” through their employer. The employee got health care as needed, paid for it, then filed a claim and got reimbursed — between 50 and 80%, usually — for the cost. The need for the care was never questioned, the only question was what the insurance plan’s coverage allowed, usually up to a total amount per year.

As families grew, and lifestyles improved, people naturally became more demanding in their health care. They sought help for things which, previously, they might not have. Costs to employers, for health insurance, went up, as claim amounts rose. Stories such as people going to emergency rooms for hangnails, were swapped among executives concerned that their companies’ insurance premiums were being wasted.

At the very same time, another trend was developing. Medicaid and Medicare covered the indigent, disabled, and the retired, for their medical care. In some cases the reimbursements were quite generous. But budget deficits in the ’70s forced Congress to cut back on how much was paid out, and certain procedures were disallowed completely.

Hospitals, however, were required by law to care for all, without regard to their ability to pay. They lost money on Medicaid and Medicare patients. This deficit had to be made up elsewhere, and inevitably, that was from paying patients, especially patients who were paid by insurance.

Not only were insured patients going to the doctor more often, but their bills for each visit were going up, through no fault of their own. Insurance premiums escalated, sometimes as much as 25% or more a year.

Eventually, insurance companies and large employers developed what became the HMO (health management organization). These were originally closed groups of doctors and hospitals, who were either on payroll for the HMO, or who were paid for healthcare services according to specific, contracted payment amounts. Furthermore, some procedures were subject to review by the HMO for “medical necessity.” Thus was born what know as “managed care.”

The first HMOs were content to limit things such as emergency room visits (which were particularly expensive) and unneeded tests, reduce hospital stays, and deny payment for “experimental” procedures. Over time, however, this was not enough to stem the tide. Cost-passing from Medicaid/Medicare patients continued at an escalating pace, through the ’80s, so more and more, the HMO’s clamped down on what they paid for.

Regular, old-fashioned “health insurance” had by this time became brutally expensive, so more and more employers opted for managed care plans. This trend continues even today. Traditional health insurance takes up only about 2–3% of the total market, while HMOs account for well over 50%.

One arena of healthcare which was incredibly expensive, but which most managed care plans knew little about, was “behavioral health” or psychiatry. Psychiatry is rather unlike conventional medicine, in that diagnoses, condition evaluations, and treatment decisions are far more “iffy” and subject to judgement calls. Many managed care companies set up separate divisions, or even spun off separate companies, devoted solely to behavioral health. This allowed their caseworkers to specialize. Note, this was not done to help patient care, even though most HMOs claim this was the case; it was done so that more ways could be found to control costs.

The upshot, of course, is that managed-care patients often have to traverse a maze of bureaucracy in order to get what they need. Psychiatric hospitalizations and treatment plans are reviewed by a behavioral health company; but prescriptions are obtained through the HMO itself. In many instances the patient is given two or more phone numbers to call, if they have a question, but they don’t always know which one to call, and they still might get referred to someone else, who refers them to someone else, etc.

It’s really a very pathetic picture, especially given that folks with mood disorders often don’t have the wherewithal to handle such bureaucratic gymnastics. Also, it’s counter-productive for these companies to maintain separate bureaucracies, while trying to reduce operating costs.

Government programs don’t work the same way as commercial managed care does. Either patients are contracted out to commercial health insurers or HMOs, or their care is reimbursed according to delineated standards, such as their diagnosis, severity level, etc. In other words, government agencies pay for hospital stays only for certain diagnoses, and so long as the person is in poor enough condition to remain there; and it’s all decided by rote, not by careful analysis.

Either way, managed care companies and government agencies all too often save money in the short term, but lose money, long term. A patient who is discharged from the hospital too early, may wind up back in it all over again. An extra couple of days in the first stay, could have saved many, from the second, or eliminated that second stay entirely. Yet the companies and agencies are not learning this lesson. If anything, they’ve become increasingly parsimonious and even more short-sighted. In the end, they’re doing the patient no favors, and they aren’t really saving premium-payers or taxpayers anything.

One particular problem for those with mood disorders, is that insurance doesn’t always cover mental illness in the same way that other diseases are covered. Some plans have very low annual caps on total behavioral health payouts, which can be particular harmful if the patient needs, say, frequent therapy sessions.

Fortunately, though, over the last decade, an effort has been made to correct this situation. Many states, such as my own state of Connecticut, have passed “parity” laws, which require insurers to grant mental illnesses “parity” with others.

That it comes down to passing laws of this kind, though, is a travesty. What makes anyone think that mental illnesses are worth less than others? By what standard does one make such a determination? It’s all right for a depressive to go broke paying for Prozac, while a diabetic need not pay anything for insulin? Does this make any sense?

Of course it doesn’t! Nothing about mental illness makes any sense … not the illnesses themselves, not the way in which they’re treated, and not the way in which they’re paid for.

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