NCPA - National Center for Policy Analysis


January 12, 2009

It was easy to miss, but buried in the middle of the bailout bill was a mental health parity law, says John C. Goodman, president of the National Center for Policy Analysis.  The one good thing about it is that it may not have any more impact than the previous mental health parity bill, so employers may not have to cover mental health at all.  If there is coverage, employers can pick and choose which disorders they will cover.

Why does this interest us?  Because it is an example of very bad law, says Goodman.  With respect to insurance for any health condition, we should consider three public policy questions:

  • Is there a legitimate social interest in whether private insurance covers treatment costs at all?
  • Is there a legitimate social interest in how private insurance contracts allocate coverage between third-party insurance and individual self-insurance?
  • If the answer to second question is "yes," what should the allocation be?

The new law implicitly says "no" to question one, "yes" to question two and "equal allocations for all covered services" to question three.  These are the wrong answers to all three questions, says Goodman.

There may be a legitimate social interest in whether people insure for catastrophic mental health care costs, just as they may be a legitimate interest in insurance for other catastrophic costs.  But given some level of catastrophic coverage, there is rarely any good reason to substitute the judgment of legislators for the judgment of the marketplace with respect to the division between self-insurance and third-party insurance, explains Goodman.

On the contrary, people should self-insure for those services where it is appropriate and desirable for patients to exercise discretion, and they should rely on third-party insurance for services where it is inappropriate and undesirable for patients to exercise discretion, says Goodman.

Source: John C. Goodman, "Mental Health Parity Law Takes Wrong Approach," Heartland Institute, February 2009.


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