Cutting Mental Health Services Costs Companies and Employees Sick Days and Dollars, Yale Study Finds

A reduction in mental health services at a large Connecticut corporation triggered an increase in medical care use and sick leave, costing the company more money rather than less, according to a Yale study.

A reduction in mental health services at a large Connecticut corporation triggered an increase in medical care use and sick leave, costing the company more money rather than less, according to a Yale study.

The results support the long-held belief that reductions in mental health service delivery have adverse effects, not only on employees with mental illnesses, but also on the companies that cut services, according to Robert Rosenheck, M.D., professor of psychiatry and public health at Yale University School of Medicine.

“This is the first study to show that there exists a point where reducing mental health dollars can be bad for both employees and employers,” said Dr. Rosenheck, who also serves as director of the Veterans Administration (VA) Northeast Program Evaluation Center (NEPEC). “There has been widespread concern that by increasing barriers to mental health service utilization, managed care organizations may generate unintended adverse consequences. This study is one of the first to present evidence that may reflect such consequences.”

Published in the September/October issue of the journal Health Affairs, the study relies on data taken from 20,814 employees of an anonymous private corporation. Between 1993 and 1995, employees experienced large reductions in mental health services. Costs were cut by over one-third – three times as much as the decline in non-mental health services. However, employees who used mental health services showed a 37 percent increase in use of non-mental health services and significantly increased sick days, while other employees showed no such increases.

“The company’s plan for saving money actually backfired,” said Dr. Rosenheck. “The savings the company realized by cutting mental health services were fully offset by increased use of other services and lost work days.”

As part of the effort to cut mental health services, the company introduced new types of cost containment mechanisms. First, it offered a series of indemnity and point-of-service plans with reduced premiums but substantially increased deductibles and co-payments. These plans, therefore, provided incentives for employees to elect plans which had less expensive monthly premiums, but which discouraged service use, since they required higher out-of-pocket deductibles.

Second, the company established relationships with several managed care organizations that introduced prior authorization requirements and added review procedures for both inpatient and outpatient care.

Although not a central objective of the study, the data also demonstrate some of the serious economic and functional consequences of mental illness in insured populations.

“These data underline the importance of improving both the efficacy of mental health treatments, and the quality and accessibility of their delivery–for both individual well-being and for societal economic productivity,” said Dr. Rosenheck.

Other members of the Yale research team included Benjamin Druss, M.D., M.P.H., Marilyn Stolar, M.S., Douglas Leslie, Ph.D. and William Sledge, M.D. Benjamin S. Bunney, M.D., facilitated the study.

Dr. Rosenheck can be reached at (203) 937-3850.

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Media Contact

Karen N. Peart: karen.peart@yale.edu, 203-980-2222