COSTS AND USE OF MENTAL-HEALTH-SERVICES BEFORE AND AFTER MANAGED CARE

This paper tracks access, utilization, and costs of mental health care for a private employer over nine years during which mental health ben efits were carved out of the medical plan and managed care was introdu ced. Prior to the carve-out, mental health costs increased by around 3 0 percent annually; in the first year after the change, costs dropped by more than 40 percent; in the six follow-up years, costs continued t o decline slowly. This cost reduction was not attributable to decrease d initial access, as the number of persons using any mental health car e increased following the change. Instead, the cost reduction was the result of (1) fewer outpatient sessions per user, (2) reduced probabil ity of an inpatient admission, (3) reduced length-of-stay for an inpat ient episode, and (4) substantially lower costs per unit of service.