Spillover Effects of Benefit Expansions and Carve-Outs on Psychotropic Medication Use and Costs

Abstract

This paper extends the previous literature examining the impacts of managed behavioral health care carve-outs and mental health parity mandates on mental health and substance abuse (MH/SA) specialty treatment use and costs by considering the effects on psychotropic prescription medication costs. We use multivariate panel data methods to remove underlying secular growth trends, driven by increased demand for improved MH/SA treatment related to pharmaceutical innovations. We find that psychotropic medication costs continued to increase after the introduction of a substantial benefit expansion and carve-out to a managed behavioral health organization (MBHO), offsetting large declines in inpatient specialty MH/SA costs. However, we find evidence that the MBHO may have restrained growth in prescription medication spending.