Outpatient Benefits for Mental Health Services in Medicare: Alignment with the Private Sector?

Revision of Medicare's benefit for outpatient mental health care is long overdue. The Omnibus Reconciliation Act of 1987 expands the covered limit to $2,200 (from the $500 set in 1966) but retains the 50% coinsurance requirement for beneficiaries. There are several strong arguments supporting further changes in the benefit to reduce the coinsurance and include psychologists as covered providers. These are need among the elderly, changes in Medicare's inpatient reimbursement system, and innovations in treatment. Outpatient mental health care is a very small portion of Medicare expenditures, amounting to less than .1% of total costs. Using data from the Bureau of Data Management and Strategy at the Health Care Financing Administration (HCFA), it was estimated that $41.8 million was paid by HCFA for outpatient mental health care in fiscal year 1984. This article estimates the costs to Medicare and beneficiaries of reducing the coinsurance to 20% and including psychologists as eligible providers. (May 1989)