Study Reveals Discrepancies in Care for Medicaid Recipients with "Carve-Out" Insurance

May 03, 2004

Cindy Lepore
Public Affairs

Belmont, MA - Health insurers commonly hire subcontractors to manage their mental and behavioral health benefits for them, but a study headed by a researcher at McLean Hospital suggests Medicaid patients with schizophrenia whose treatment is managed under a so-called "carve-out" arrangement are less likely to receive some treatments associated with improved outcomes.

The study, in the May issue (PubMed) of the Archives of General Psychiatry, is led by Alisa B. Busch, MD, MS, and utilizes a large database from a single state to illustrate the effect of a carve-out on evidence-based treatments for patients with schizophrenia in a publicly funded insurance program. It found that patients with schizophrenia enrolled in the carve-out were significantly less likely to receive some evidence-based outpatient treatments, compared to those enrolled in the traditional state Medicaid program. Notably, in this Medicaid program the carve-out and associated clinical programs had a financial incentive to limit hospital and outpatient services.

     "While there were quality of care problems independent of the carve-out, the carve-out was associated with a substantial cut in the likelihood of receiving these treatments," says Busch, an assistant psychiatrist in the Alcohol and Drug Abuse Treatment Program at McLean Hospital. For example, the study found that patients whose care was managed by a carve-out were much less likely to receive individual or group therapy compared to those in the state comparison regions. Individual or group therapy was reduced by 71 percent after the carve-out took over, while the chances for those in the traditional state Medicaid program dropped by just 34 percent in the same comparison period.

     In contrast, for both the carve-out and comparison groups, there was a large increase in the use of any antipsychotic medication, even the newest, most expensive drugs. Additionally, there was essentially no difference between the two groups in the likelihood of patients receiving these drugs. But the carve-out arrangement called for the Medicaid program to pay for the drugs, with the subcontractors taking no financial risk.

     "Our results indicate that high-powered financial incentives to contain costs of caring for disadvantaged and vulnerable patient populations may lead to substantial savings but may also result in important reductions in the quality of care, particularly if the contract does not include performance standards that measure the treatment services at greatest financial risk," she says.

     McLean Hospital is the largest psychiatric facility of Harvard Medical School, an affiliate of Massachusetts General Hospital and a member of Partners HealthCare.

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