Can Insurers Afford to Cover Substance Abuse Treatment the Same as Other Mental Health Services?

Assessment of the impact of providing "parity" for substance abuse benefits under managed care

Investigators at RAND estimated the fiscal consequences of requiring health insurers to cover substance abuse treatment at a level of parity with coverage for other health care services.

The project was part of the Robert Wood Johnson Foundation's (RWJF) national Substance Abuse Policy Research Program (SAPRP) (for more information see the Program Results Report).

The investigators studied drug and alcohol abuse benefits, utilization, costs and quality under managed care. They then simulated the effects of enacting legislation mandating parity in substance abuse treatment, a move that would parallel efforts in some states to ensure parity in mental health care.

Key Findings: In three published articles, the researchers reported:

  • Limits on substance abuse health benefits tend to be more restrictive than limits imposed on mental health services, and those limits affect a large portion of patients with substance abuse problems.
  • Patients losing insurance coverage are likely to end treatment prematurely or switch to public funding sources, neither of which is a preferred outcome.
  • Providing parity for substance abuse services among employer-sponsored health plans is affordable so long as care is well managed. This finding contradicts the common belief that providing unlimited substance abuse benefits is costly and therefore not a realistic policy option.
  • Parity-level benefits under managed care would reduce the number of people who lose coverage, increase continuity of treatment, and reduce transferring the more severely ill patients to public programs and funding sources.
  • The transition from unmanaged care or traditional health maintenance organizations to arrangements in which substance abuse treatment is "carved-out" of regular managed care and funded separately is associated with changes in the types of services provided and with an increase in the quality of care.
  • Further research is needed to better understand how changes that are occurring under newer managed care techniques affect not only costs and patterns of service utilization but also treatment outcomes.