MANAGED CARE IN THE PUBLIC MENTAL-HEALTH SYSTEM

The movement towards managed care in the public mental health system h as surpassed efforts to develop a systematic literature concerning its theory, practice, and outcome. In particular little has been written about potential challenges and difficulties in translating managed car e systems from their origins in the private sector to the delivery of public sector mental health services. This paper provides an overview of managed care definitions, organizational arrangements, administrati ve techniques, and roles and responsibilities using a theoretical fram ework adopted from economics referred to as principal-agent theory. Co nsistent with this theory, we assert that the primary function of the managed care organization is to act as agent for the payor and to mana ge the relationships between payers, providers, and consumers. From th is perspective, managed care organizations in the public mental health system will be forced to manage an extremely complex set of relations hips between multiple government payers, communities, mental health pr oviders, and consumers. In each relationship, we have identified many challenges for managed care including the complexity of public financi ng, the vulnerable nature of the population served, and the importance of synchronization between managed care performance and community exp ectations for the public mental health system. In our view, policy reg arding the role of managed care in the public mental health system mus t evolve from an understanding of the dynamics of government-community -provider-consumer ''agency relationships.''