RISK CONTRACTS IN MANAGED MENTAL-HEALTH-CARE

Private employers and state Medicaid programs are increasingly writing risk contracts with managed behavioral health care companies to manag e mental health and substance abuse benefits. This paper analyzes the case for a carve out program and makes recommendations about the form of the payer managed behavioral health care contract. Payers should co nsider using a ''soft'' capitation contract in which only some of the claims' risk is transferred to the managed behavioral health care comp any. To avoid incentives to underserve seriously ill persons, we recom mend that payers not allow choice by enrollees among risk contractors.