Abstract

Schizophrenia affects from 0.5 percent to 1.0 percent of the population and is often a chronic relapsing illness with high morbidity. Because it strikes young adults, the lifetime direct and indirect costs are considerable. One method of budgeting the costs of treatment is through a prospective method with the development of "risk-adjusted" capitation rates that take into account a patient's past use of services, perceived health status, and level of disability. Such a system may provide opportunities to improve the quality of mental health services by increasing service flexibility, particularly in the development and differentiation of outpatient services. The essence of the approach is to encourage early intervention by reducing financial barriers for patients, especially barriers to alternatives to expensive inpatient services. One method currently employed in Rochester, New York, which creates a capitation payment system for the chronically mentally ill, will be described. The implications of this system for public policy will be discussed as we struggle to treat and care for chronic schizophrenic patients in humane and compassionate ways.