OBJECTIVE:

To determine whether managed mental health care for Medicaid enrollees in King County, Washington, has led to indirect cost-shifting to substitute treatments, such as jails and state mental hospitals that are free goods to providers.

DATA SOURCES:

Complete service records for 47,300 adults who used at least one of the following systems from 1993 to 1998: King County jail system, Medicaid, or the King County mental health system. Data were also obtained from the Washington State Hospital System.

STUDY DESIGN:

A quasi-experimental analysis that compares the difference in outcomes between the pre- and post-managed care periods for Medicaid enrollees compared to non-Medicaid enrollees. The outcomes-jail costs, state hospital costs, and county outpatient mental health costs-were estimated with two-part difference-in-differences models. The regressions control for person-level fixed effects on up to 66 months of data per person.

DATA COLLECTION METHODS:

Administrative data were collected from the jail, Medicaid, and mental health systems, then merged and cleaned. Additional data on costs were obtained in interviews.

PRINCIPAL FINDINGS:

There is a striking increase in the probability of jail use for persons on Medicaid following the introduction of managed care. There was a significant decrease in expenditures in the county mental health system for outpatient care.

CONCLUSIONS:

Managed care led to indirect cost-shifting, probably through poor access to services, which may have led to an increased probability of jail detention.