The Changing Demand for Mental Health Treatment
- Presenter:
Chair: Ching-to Albert Ma; Discussant: Todd Gilmer Tue June 6, 2006 13:45-15:15 Room 313
The availability of new pharmacological treatment alternatives and rapid rise of managed behavioral health care organizations during the 1990s have significantly influenced utilization patterns of mental health services in the United States. While inpatient costs were reduced through managed care and more effective outpatient treatment, the use of pharmacotherapy by specialty mental health providers and primary care physicians increased substantially. We seek to understand the underlying behavioral and economic dynamics driving changing utilization patterns, and in particular, the rising demand for pharmacotherapy and substitution between this treatment approach and behavioral therapy. Therefore, we derive a mental and non-mental health care demand model that incorporates the relevant costs influencing consumption decisions, including out-of-pocket payments (cost-sharing) for ambulatory services, out-of-pocket prescription drug costs, and insurance premiums. The model makes use of the expected end-of-year price concept (Ellis, 1986; Ellis and McGuire, 1986), to derive theoretically consistent measures of out-of-pocket price. Our model of the joint demand for pharmacotherapy, behavioral therapy, and non-mental health treatment is estimated using the 1996-2002 Medical Expenditure Panel Survey (MEPS), a nationally representative survey of the U.S. civilian, non-institutionalized population. We exploit the longitudinal dimension of the MEPS to control for the endogeneity of out-of-pocket prices and health insurance coverage using a correlated random effects specification (Chamberlain, 1982). This allows us to relax the untenable assumption of standard random effect models that out-of-pocket price and health insurance are uncorrelated with the individual specific random effects as well as account for time invariant measurement error processes. In addition, we use a Zero-Inflated Ordered Probit specification to model the skewed distribution of ambulatory visits and prescription drug fills. Elasticity estimates from the model suggest that the demand for ambulatory mental health treatment is now much less elastic than it was during the RAND Health Insurance Experiment. In fact, consumers are now less responsive to the price of ambulatory mental health treatment than non-mental health treatment. The elasticity of demand for mental health drugs, however, is found to be relatively large, and higher than the elasticity of demand for non-mental health drugs. In order to check the robustness of our findings, we re-estimate Horgan’s two-part model (1986) of the demand for specialty providers and find that the price elasticity of demand she estimated for 1977 has likewise decreased substantially. We also provide alternative instrumental variables estimates. The findings of our study suggest that moral hazard problems associated with the coverage of ambulatory mental health services may be less severe than previously thought, with the implication that coverage could be expanded without substantially increasing use of mental health services.
