NCPA - National Center for Policy Analysis

Mental Health Care Costs

August 9, 2002

Advocates argue that mental health parity will end discrimination against the mentally ill and make health care better. However, mental health parity would increase costs:

  • According to PricewaterhouseCoopers, mandating parity nationwide would increase insurance premiums by 10 percent.
  • Higher costs will force people to drop insurance -- a Congressional Budget Office study estimates that for every 1 percent increase in premiums, 200,000 Americans lose their insurance.
  • This implies that a nationwide parity law would cause 2 million additional people to be uninsured.

This would lead to other consequences. While money spent on health care would rise, the supply of doctors would not, causing health care inflation that hurts everyone. Additionally, the number of "quack" doctors might rise to cash in on the new parity money. Moreover, as the number of uninsured rises, so will public health care expenditures -- which means a higher burden on taxpayers.

Parity would lead to less flexibility:

  • Since managed care is usually exempt from parity laws, they would have an automatic cost advantage over other payment structures.
  • Parity requirements would essentially outlaw attempts to experiment and innovate with different payment schemes (such as Medical Savings Accounts).
  • Furthermore, more mandates may follow mental health care parity, restricting innovation and experimentation to the benefit of special interests.

Even the ultimate goal of better care for the mentally ill will be impaired. According to the General Accounting Office (GAO), the last mental health parity law reduced the number of health insurance benefits for the mentally ill.

Source: John C. Goodman (President NCPA) and Wess Mitchell (Research Assistant), "The Case against Mental Health Parity, Part II: Predictable Harms," Brief Analysis No. 411, National Center for Policy Analysis, August 9, 2002.


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