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full parity. So it is hard to have a natural experiment where you really don't have that situation.
I believe this is an aspect of what the OPM study is going to look at. Am I right about this? Is Mr. Flynn still here?
There is quite an extensive and comprehensive evaluation. We are one of the subcontractors to the health plans managing a fair number of the Federal employees, and it was implemented very well and carefully and it is a very comprehensive evaluation process.
I don't know if Mr. Flynn is still here, but maybe
Dr. REGIER. Well, there are some difficulties in trying to get to the human resources departments, where they have both productivity measures and cost of insurance measures in the same place. It is also helpful if they have disability insurance coverage data at the same time as productivity data and other health insurance data. It is in those types of industries where these kinds of research studies can be done.
The research study that I mentioned from Dr. Rosenheck at Yale University was one of those unique laboratories where a large, national-level company actually had that information and was able to demonstrate that the focus just on the insurance benefits did not tell the whole story because of the offsetting increases both in the physical health benefit area and also in the productivity, and very importantly in the absenteeism rates, that they noted some 20-percent increase in absenteeism rates.
In some other studies that Dr. Salkever at Johns Hopkins University has conducted, they have looked at disability insurance payments and have seen this hydraulic type of dynamic in which, if you push down too hard on the health insurance costs, you will see a poke-up in disability insurance costs.
So this is the type of research investigation that many of the National Institute of Mental Health grantees have been doing and certainly we are beginning to do now at the new research institute where I am.
The CHAIRMAN. I thank all of you for this very, very helpful testimony. We are going to call on you a good deal in the future because there are a lot of cliches and a lot of old tales, like in so many other areas of public policy. I must say this has been enormously clarifying and very reassuring, at least for me. To have policy based upon very sound data is very, very important, so I thank all of you.
We have two prepared statements and a letter that have been submitted for the record, and they will be included in the record at this point.
[The information referred to may be found in additional material.]
The CHAIRMAN. I would ask if Senator Wellstone would be good enough to conclude the hearing.
Thank you very much.
Senator WELLSTONE (presiding). Senator Kennedy, the chairman, has been here a long time. It has been an exhaustive hearing. I like kind of finishing up together. I have plenty of questions, but I think instead I will just tell each and every one of you, starting with you, Ms. Cohen, that the testimony has been extremely helpful.
Thank you, Senator Kennedy, and thank you, everyone, for being here. There are a lot of National Alliance of Mentally Ill people here, and thank you very much for being here. It has been an extremely important hearing, and we are going to pass this legislation.
[Additional material follows.]
PREPARED STATEMENT OF SENATOR DOMENICI Good morning and it is a pleasure to be here before the HELP Committee. I would like to thank Chairman Kennedy and Senator Gregg for holding this very important Mental Health Parity Hearing today.
The human brain is the organ of the mind and like the other organs of our body, it is subject to illness. And just as we must treat illnesses to our other organs, we must also treat illnesses of the brain.
Building upon that, I would ask the following question: what if thirty years ago our nation had decided to exclude heart disease from health insurance coverage? Think about some of the wonderful things we would not be doing today like angioplasty, bypasses, and valve replacements and the millions of people helped because insurance covers these procedures.
I would submit these medical advances have occurred because insurance dollars have followed the patient through the health care system. The presence of insurance dollars has provided an enticing incentive to treat those individuals suffering from heart disease. But sadly, those suffering from a mental illness do not enjoy those same benefits of treatment and medical advances because all too often insurance discriminates against illnesses of the brain. More often than not, opponents of mental health
parity argue the costs are too great. Today, Senator Wellstone and I would like to let everyone know just how affordable parity is. The Congressional Budget Office (CBO) has estimated mental health parity would cause insurance premiums to rise by a mere one percent. Thus, I would submit the cost of the "Mental Health Equitable Treatment Act of 2001” (S.543) is negligible, especially, when contrasted with the cost impact upon society, The devastating consequences inflicted upon not only those suffering from a mental illness, but their families, their friends, and their loved ones.
Furthermore, the following are several additional costs that result from mental illness: sixteen percent of all individuals incarcerated in State and Local jails suffer from a mental illness and suicide is currently a national public health crisis with approximately 30,000 Americans committing suicide every year. Additionally, of the 850,000 homeless individuals in the United States, about one third or 300,000 of those individuals suffer from a serious mental illness and finally the direct cost to the United States per year for mental illness is $148 billion.
Now let us look at the number of individuals suffering from some of the more severe mental illnesses: 9.9 million American adults age 18 and older suffer from Major Depressive Disorder in a given year; 2.3 million American adults age 18 and older suffer from Bipolar Disorder in a given year; 2.2 million American adults age 18 and older suffer from Schizophrenia in a given year; and 3.3 million American adults age 18-54 suffer from Obsessive-Compulsive Disorder (OCD) in a given year.
However, medical science is in an era where we can accurately diagnosis mental illnesses and treat those afflicted so they can be productive. Let us also look at the efficacy of treatment for individuals suffering from certain mental illnesses: treatment for bipolar disorders has an 80 percent success rate; Schizophrenia, the most dreaded of mental illnesses, has a 60 percent success rate in the United States today if treated properly; and Major depression has a 65 percent success rate.
Lets compare those success rates to several important surgical procedures that everybody thinks we ought to be doing: Angioplasty has a 41 percent success rate and Atherectomy has a 52 percent success rate. I would ask then, why with this evidence would we not cover these individuals and treat their illnesses like any other disease? We should not.
Working together, we took a historic first step with the passage of the Mental Health Parity Act of 1996, but that law is also not working as intended. While there may be adherence to the letter of the law, there are violations of the spirit of the law. For instance, ways are being found around the law by placing limits on the number of covered hospital days and outpatient visits. Consequently, Senator Wellstone and I have again joined forces and introduced the “Mental Health Equitable Treatment Act of 2001" (S. 543).
The Bill seeks a very simple goal: provide the same mental health benefits already enjoyed by Federal employees. The Bill is modeled after the mental health benefits provided through the Federal Employees Health Benefits Program (FEHBP) and expands the Mental Health Parity Act of 1996 by: prohibiting a group health plan from imposing treatment limitations or financial requirements on the coverage of mental health benefits unless comparable limitations are imposed on medical and surgical benefits.
Our Bill provides full parity for all categories of mental health conditions listed in the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition (DSM IV) with coverage contingent on: the mental health condition being included in an authorized treatment plan, the treatment plan is in accordance with standard protocols, and the treatment plan meets medical necessity determination criteria.
Like the Mental Health Parity Act of 1996, the Bill does not require a health plan to provide coverage for alcohol and substance abuse benefits. Moreover, the Bill does not mandate the coverage of mental health benefits, rather the Bill only applies if the plan already covers mental health benefits.
In conclusion, the Bill provides mental heath benefits on par with those already enjoyed by Federal employees and I would urge my colleagues to support this important piece of legislation. Thank you and I look forward to working with my colleagues on this important issue.
PREPARED STATEMENT OF WILLIAM E. FLYNN, III Mr. Chairman and members of the committee: Thank you for asking me to be here today. In your invitation letter, you asked me to discuss the Office of Personnel Management's implementation of mental health parity in the Federal Employees Health Benefits Program for 2001.
INTRODUCTION In broad terms, I would like to cover four areas in my statement. First, I will provide some brief information about the Federal Employees Health Benefits Program. Then, I well describe incremental steps we took beginning in 1994 to strengthen mental health benefits. Third, as a prelude to our implementation in 2001, I would like to touch upon the research forming the basis for our action. Finally, I plan to discuss our implementation of mental health parity at the start of 2001, and an evaluation plan to ensure we are meeting our objectives and providing useful information for others.
BACKGROUND The Federal Employees Health Benefits Program was established by law in 1959 as the Health Insurance Program for Federal employees. As an employer-sponsored program, it covered employees of the executive, legislative, and judicial branches, as well as the U.S. Postal Service and certain independent Federal agencies. Today, through our annual contracts with about 240 health maintenance organizations (HMOs) and 13 fee-for-service (FFS) plans, the program provides comprehensive, affordable health insurance coverage to over 8.5 million people, including 2.2 million Federal employees, 1.9 million retirees, and 4.6 million family members.
The program is part of the Government's overall compensation package. As a component of the benefit package, it enables the Federal Government to compete with other employers for its share of the talent needed to carry out the work of government.
EVOLUTION OF MENTAL HEALTH COVERAGE
In the late 1980's, we began discussions with participating health plans about mental health benefits in the program. During that period, we asked insurance carriers to reassess their mental health coverage. In large measure because of increases in health care costs during the 1980's, we had witnessed an erosion in the value of the benefits offered and we wanted to ensure health plans were reasonably meeting the needs of enrollees. While we left design enhancements to the plans themselves, we did establish a floor for the benefits and informed health plans that we would not accept any reductions in their existing mental health benefits.
In 1994, we took further steps by setting minimum mental health coverage requirements that all health plans needed to meet. For example, health plans had to pay at least half of the cost for a certain number of hospital days and doctor's office visits each year. However, these benefits were still significantly limited compared to other medical benefits. Plans typically had day and visit limitations that did not exist for other medical benefits. Consequently, some enrollees could not get coverage for all of their mental health needs, and when they did get coverage, they paid more for these services than for other medical benefits. For some, mental health coverage was unaffordable.
Since 1994, OPM and the health plans have collaborated each year on ways to improve mental health coverage in the program. In 1995, we abolished lifetime benefit limits on mental health benefits. In later negotiations, we were able to eliminate annual benefit limits as well. We also encouraged health plans to remove day and visit limitations and lower patient out-of-pocket costs. In 1999, all Federal employee plans began providing the same coverage for office visits and diagnostic testing for managing drug treatment for mental conditions as for any other medical condition.
Our efforts to improve coverage for mental health continued. At our 1998 and 1999 health plan conferences, we sponsored presentations on mental health by panels of experts, including representatives from the National Institute of Mental Health and other Government agencies. These panels discussed the desirability and feasibility of offering expanded and affordable mental health benefits. Among the matters discussed were findings that most mental health illnesses have well-established biological bases, that diagnoses are reliable, and that treatments are effective and available.
Further, contemporary research had demonstrated that effective mental health and substance abuse benefits improve patient health outcomes, provide patients with greater financial protection, and reduce workplace absences and disabilities. Following the 1999 conference, we met with our larger health plans, health network managers, and health industry associations to consider the parity initiative.
Also during this period, a growing body of research and actual industry experience indicated that parity could be implemented without substantial increases in premiums, as long as it was coupled with care management to ensure that only appropriate and effective treatment is authorized. We also saw that care management could be implemented in different ways. Many health plans hire specialized managed behavioral health care companies to provide mental health services for plan members. In other cases, these companies manage services available from the health plan's existing network of providers. Other health plans successfully manage service delivery themselves. From the standpoint of our administration of the program, all of these different delivery mechanisms could be integrated into existing benefít designs without disrupting the fundamental nature of the program itself.
Even more telling was a 1998 study by the National Advisory Mental Health Council. Their report demonstrated actual industry experience producing 30 to 50 percent cost savings on managed mental health benefits in settings with little prior managed care experience. In situations where managed care techniques were being used, the study showed that total health plan premiums increased by less than 1 percent. In a June 2000 report, the Council reviewed more recent research supporting earlier findings. Using that data, the Council estimated total health insurance premium costs increase approximately 1.4 percent when parity is implemented.
Based on this growing body of evidence, we concluded it would be possible to expand access to mental health care in a substantive and affordable way. The groundwork had been laid for achieving parity in a managed care setting.
PARITY IMPLEMENTATION At the White House Conference on Mental Health in June 1999, the President directed OPM to achieve benefit parity for mental health and substance abuse treatment in the Federal Employees Health Benefits Program by contract year 2001. At this point, we were confident we could implement parity successfully, so long as it was part of an effective managed care environment.
To help us develop specific guidance for implementation of parity, we contracted with the Washington Business Group on Health for a report on the experiences of other large employers who currently provide parity or near parity benefits, with recommendations on best practices and potential pitfalls. the report is available on our web site. Additionally, we continued our liaison with public and private experts, meeting with various mental health and substance abuse agencies within the us Department of Health and Human Services, and others.
In keeping with our well-established practice of collaborating with health plans on attaining program goals, our negotiation objectives for 2001 contained a broad outline of the essential components of parity. For example, covered services would
include medically necessary treatment for all categories of mental health and substance abuse conditions listed in the diagnostic and statistical manual of mental disorders, fourth edition. Participants would have a choice between in-network mental health benefits—the managed parity benefit—and out-of-network mental health benefits, which would remain at or near pre-parity levels. We also emphasized the importance of developing effective strategies for educating plan members and medical providers about mental health and substance abuse network entry and referral procedures.
During the Spring and Summer of 2000, we conducted rate and benefit negotiations on the entire package of health benefits for the year 2001. Ultimately, these negotiations resulted in a parity design that expands the range of mental health and substance abuse benefits offered to enrollees while managing benefits cost-effectively. When provided through the health plan's treatment network under an approved treatment plan, coverage for mental health illnesses is identical to coverage for other medical conditions. Deductibles, coinsurance, copayments, and day and visit limitations parallel those for other medical benefits under parity.
From the standpoint of costs, parity implementation resulted in an average premium increase of 1.64 percent for fee-for-service plans, 0.3 percent for HMOs, and an aggregate program increase of 1.3 percent for 2001. In terms of the impact on individuals, those with a self-only enrollment pay $0.46 for parity every two weeks, while family enrollees pay $1.02. In the Federal Employees Health Benefits Program, participants on average pay 28 percent of the total premium. As the employer-sponsor, the Government pays the remaining premium, an average 72 percent.
Health plans have implemented the parity benefit in a variety of ways, with the degree of management within their networks varying from plan to plan. Some health plans are using the services of managed behavioral health care organizations and their networks, while others are managing their own provider networks. Most plans have augmented their existing care management arrangements to deliver parity benefits. The Blue Cross and Blue Shield service benefit plan, the largest health plan in the Federal employee program, is administering its parity benefits through its participating local plans. Some Blue Cross and Blue Shield local plans use managed behavioral health care organizations while others administer the benefit internally.
Early indications are that parity implementation is going well. In the few cases where coverage or access problems have arisen, we were able to address them quickly to ensure that Federal enrollees are receiving the benefits to which they are entitled under their plans. In our policy guidance for next year, we clarified a few areas. For example, when we implemented parity in 2001, we accepted a provision that allowed plans to limit parity benefits when patients did not substantially follow their treatment plans. Our intent was to provide an incentive for people to get the services they need. However, some stakeholder groups expressed concern. That the provision ould be sed to cut off critical services to people in need. Therefore, in our recent policy guidance, we affirmed our original intent that all members will receive medically necessary services.
For a more comprehensive analysis, we are collaborating with the Department of Health and Human Services in a three-year evaluation of the Federal employee parity initiative. Among other things, this evaluation will analyze the implications of parity for other employers, health plans, and plan participants. We also well continue our liaison with stakeholders and others examining the impact of parity, such as the Mental Health Liaison Group, the Washington Psychiatric Society, and the American Psychiatric Institute for Research and Education. Additionally, we will encourage cooperative efforts between health plans and national independent accrediting organizations to develop standards and measures to assist purchasers in evaluating the delivery of mental health and substance abuse services.
As you can see, the introduction of parity in 2001 culminated a careful, step-bystep effort by the Office of Personnel Management. It was an initiative characterized by a great deal of collaboration with experts, practitioners and others. Early indications suggest our goal of expanding access to mental health benefits in an affordable way was achieved, though we remain open to suggestions on improving how we administer this benefit within the program.
This concludes my overview of the implementation of mental health and substance abuse parity in the Federal Employees Health Benefits Program in 2001. I will be happy to answer any questions you may have at this time.