COSTS AND INCENTIVES IN A BEHAVIORAL HEALTH CARVE-OUT

A carve-out of mental health and substance abuse services initiated in 1993 by the Group Insurance Commission (GIG) of the Commonwealth of M assachusetts resulted in changes in the costs of those services. Those changes were related to incentives in the contract between the GIC an d its managed behavioral health vendor. Total and plan costs were redu ced by 30-40 percent after adjusting for trends. Incentives to produce savings of this magnitude not only were a consequence of the payer/ve ndor contract but, we speculate, derive from the growth potential faci ng companies in the managed behavioral health care market.