These denials for high-cost hospitalizations and residential care run counter to the essential purpose of insurance. The goal of insurance isn’t to pool money with which to buy low-cost treatment, but to spread risk, Therefore, if disaster strikes, and a loved one someone becomes very ill and is in need of costly treatment, he is financially protected. Insurance works for both medical and psychiatric illness because these catastrophic illnesses are relatively rare.
The figures below make this point, as they show the average costs for an individual’s treatment for depression and diabetes over the course of a year. The data are based on the Truven Health MarketScan® Research Databases which include de-identified data from millions of insured individuals. The median annual cost for treating diabetes is $292 and for treating depression is $260. Thus, the typical individual with these diseases would do fine without insurance or insurance parity. However, a small portion of both individuals with diabetes and depression are extremely ill and need a significant amount of expensive treatment. One percent of people with depression incurred over $12,506 for depression treatment in a given year and one percent of people with diabetes incurred over $10,177 in costs for treating diabetes in a given year. These are the people for whom insurance was designed to protect.
Hundreds of well designed studies have shown that treatment for a range of mental illnesses are effective and that most people, even people with severe mental illness, can recover from mental illnesses and go on to lead productive and fulfilling lives (http://www.nimh.nih.gov/index.shtml). The argument that insurers should never have to pay for the rare case when someone needs a lot of inpatient care to treat their mental illness undermines the very point of buying insurance in the first place and the main objective of the Mental Health Parity and Addiction Equity Act.
Tami L. Mark, PhD
Vice President, Behavioral Health and Quality Research