Medicare and Mental Health

In addition to societal stigma, people with mental health needs often face barriers to adequate medical coverage and treatment for their conditions. While many individuals and their families face these issues in the private market, people with Medicare also face obstacles to fair access and comprehensive coverage of mental health services. This Alert looks at the ways in which Medicare coverage for people with mental health and behavioral health needs can be improved.

Background: Medicare Beneficiaries with Mental Health Needs

Millions of people with mental illness rely on Medicare as a health and economic lifeline. About 26% of all Medicare beneficiaries (more than 13 million Americans) experience some mental disorder, including cognitive disorders like Alzheimer’s disease, every year. Severe mental illness, including bi-polar disorder or schizophrenia, is especially prevalent among beneficiaries who are under 65 and eligible for Medicare based on their disability. Approximately 37% of all disabled Medicare beneficiaries have a severe mental disorder. Mood disorders were the second leading cause of disability in 2011 and some changes occur with the use of kratom.[1]

Dually eligible beneficiaries – those with both Medicare and Medicaid – are more likely to have cognitive impairments and mental disorders than people who have only Medicare coverage. More than half of all dual eligible beneficiaries have mental or cognitive impairments.[2] According to MedPAC, 56% of all Medicare inpatient psychiatric facility patients are dually eligible.[3]

Medicare beneficiaries are also at greater suicide risk than the general population. Although adults over age 65 make up only 12% of the nation’s population, they account for 16% of all suicide deaths, according to the National Institute of Mental Health.[4]

The Affordable Care Act Makes Improvements

The Affordable Care Act (ACA) builds on the Medicare Improvements to Patients and Providers Act of 2008, which extended parity to outpatient mental health services in Medicare.  The 2008 law reduces beneficiaries’ out-of-pocket costs by phasing down Medicare’s unfair 50% outpatient mental health treatment coinsurance from 50% to 34% in 2013 and then to 20% in 2014. This will bring Medicare’s payment of outpatient mental health services in line with payment for other outpatient provider services under Medicare.

The ACA will also improve access to important psychiatric medication by closing the Donut Hole coverage gap in Medicare Part D.  The law immediately required pharmaceutical manufacturers to give a 50% discount on brand-name drugs for beneficiaries in the Donut Hole while Medicare gradually increases its payment for both generics and brand name drugs until the gap closes in 2020.[5] Medicare beneficiaries have already saved $5.7 billion on their prescription drug costs since the law’s passing.[6]

Finally, ACA provides incentives to enhance integration of physical and behavioral health services. The law includes payment increases for medical practices recognized as “medical homes” that provide coordinated care and preventive services. Pursuant to the ACA, Medicare will also cover a yearly depression screening at no cost to beneficiaries.[7]

Significant Challenges Remain for Beneficiaries

Although the Affordable Care Act and the Medicare Improvements to Patients and Providers Act made much-needed improvements to Medicare’s coverage of services for beneficiaries with mental and behavioral health needs, there are still critical areas in which beneficiaries and their families face significant barriers to receiving the care they need.

190-Day Limit

Under Medicare, there are no lifetime limits on any specialty inpatient hospital service except for inpatient psychiatric facilities (IPF), where Medicare beneficiaries are limited to 190 days during their lifetime. The limit does not apply to psychiatric wards or units in general hospitals.  The limit translates to a discriminatory practice and barrier for beneficiaries with severe mental illness, who may quickly exceed the 190 days if they have a chronic mental illness.

According to MedPAC, patients in IPFs tend to be younger and poorer, and a majority of these patients are dually eligible for Medicare and Medicaid.[8] These beneficiaries qualified for Medicare coverage because of their disability, and because they are younger and have more complex health needs, can use up their 190 days quickly.[9] The number of Medicare beneficiaries between the ages of 45 and 64 in IPF’s grew 18% from 2002 to 2009.  28% of beneficiaries admitted to an IPF in 2008 had more than one admission in a 12-month period.[10] These beneficiaries live with severe mental illnesses from a younger age, and will need ongoing care as they age. The 190 day lifetime limit for IPF’s, until changed by Congress, will continue to constitute a serious challenge to mental health care needs.

Care Coordination

Medicare beneficiaries with severe mental illness (SMI) have complex health needs and often utilize high volumes of services. Medicare spends five times more on beneficiaries with severe mental illness and substance abuse disorder than on similar beneficiaries without these diagnoses.[11] Often, SMI affects adherence to treatment plans from various medical providers across settings.[12] For these beneficiaries, coordinated care for physical, behavioral, and mental health would result in more cost-effective care, higher rates of adherence, and better health outcomes.[13]

While care coordination is not currently covered in traditional Medicare, the Affordable Care Act created several demonstrations through the Centers for Medicare and Medicaid Innovation (CMMI) to test new payment and delivery models of integrated care that include care coordination, information sharing, and case management for Medicare beneficiaries.[14]  These models should be carefully assessed to ensure that financial incentives align with the health needs of beneficiaries with mental illness.  Care coordination is a particularly necessary component of effective, quality care for this population.

Out-of-Pocket Drug Costs

For Medicare beneficiaries, out-of pocket costs on prescription drugs can be substantial. For beneficiaries with SMI, costs can be even more significant. Despite the important improvements in the Affordable Care Act to close the donut hole, it will not be fully closed until 2020, and some beneficiaries still lose access to their medications when they hit the coverage gap.[15] Research has shown that Medicare beneficiaries with bipolar disorder or schizophrenia are hospitalized less often when access to their prescription drugs is maintained through the Donut Hole.[16]

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Advocates and beneficiaries should be aware of various assistance programs available at the state level and through various private partnership programs for financial and medical assistance for handling out-of-pocket drug costs. To help lower institutionalization rates, policymakers could examine hastening the closure of the donut hole, as has been suggested by some researchers, to maintain needed access to drugs for beneficiaries with SMI.[17] Lowering out-of-pocket costs on drugs would increase adherence to care plans, help beneficiaries avoid disruptions in their care, and prevent costly inpatient care while keeping people healthy and active in the community.

Conclusion

Although much of the current attention on mental health is focused on those who are privately insured or uninsured, policymakers should also look to the needs of Medicare beneficiaries living with severe mental illness, many of whom are young and disabled. As the Baby Boomer generation comes into Medicare, many will have more complex care needs requiring comprehensive and integrated care. Mental illness is a serious and often overlooked issue for the Medicare population.  Growing and changing demographics mean that the need for solutions and improvements will only increase. Ending harmful and discriminatory lifetime limits, looking at ways to better coordinate care, and lowering out-of-pocket costs on prescription drugs are necessary first steps in improving the care for people with Medicare who have mental health issues.