NCPA - National Center for Policy Analysis

Critics Claim Mental Health Parity Has Limited Effect

July 21, 2000

According to the General Accounting Office (GAO), the Mental Health Parity Act of 1996 (MHPA) has had only a limited effect on coverage of mental illness by employer-sponsored health plans. The MHPA said plans that provide mental health benefits in addition to medical and surgical benefits cannot impose lifetime or annual expense limits on the mental health benefits -- unless such limits are also imposed on medical and surgical benefits. Because the MHPA only addressed dollar limits, critics contend the law left a large loophole for these plans to set other restrictions on mental health benefits.

In testimony before a Senate Committee, a GAO official testified:

  • The percentage of employers offering mental health parity in compliance with the law rose from 55 percent in 1996 to 86 percent in 1999.
  • Most health plans made other changes to their mental health benefits, such as limiting the number of hospital days or outpatient visits covered, but did not make such changes in their medical and surgical benefits.
  • As of March 2000, 43 states and the District of Columbia had laws regarding mental health parity, 29 states had more comprehensive laws than the federal law and 16 states required full parity.

The GAO also estimated the cost of mental health parity was 2 percent to 4 percent of health plan expenses. However, critics testified that the studies showing little or no cost were flawed because they reviewed plans which adopted managed care at the same time as mental health parity so that the savings from the adoption of managed care masked the cost of expanded mental illness coverage.

Two recent studies concluded that both access and quality of care have declined since the enactment of mental health parity laws, with individuals suffering from mental health disorders losing coverage more often than they gained it.

Sources: "Mental Health Parity Act: Employers' Mental Health Benefits Remain Limited Despite New Federal Standards," May 18, 2000, General Accounting Office; "Mental Health Parity Law Having Limited Effect," May 18, 2000, Reuters Health; and Ori Twersky, "Legislators Debate Expanding Mental Health Coverage" May 18, 2000, WebMD.

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