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Institute of Medicine (US) Committee on Quality Assurance and Accreditation Guidelines for Managed Behavioral Health Care; Edmunds M, Frank R, Hogan M, et al., editors. Managing Managed Care: Quality Improvement in Behavioral Health. Washington (DC): National Academies Press (US); 1997.

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Managing Managed Care: Quality Improvement in Behavioral Health.

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3Challenges in Delivery of Behavioral Health Care

The most unusual aspect of the care and financing system for mental health and substance abuse is the presence of a distinct and substantial publicly managed care system that serves as a safety net. Thus, public services are available for those with public insurance, as well as for those who have private insurance, under circumstances that will be described in this chapter. Public services are funded through a large number of categorical programs administered by different agencies, creating both duplication and gaps in service, and these programs almost always have different eligibility requirements. In addition, funding is fragmented, which leads to fragmented service delivery.

Another challenge is that much mental health and substance abuse care, for perhaps as many as half of all episodes, is provided in primary care settings, not in specialty programs (IOM, 1996). Despite clinical practice guidelines, continuing education courses, and other training programs, however, primary care practitioners tend to underdiagnose depression, substance abuse, and other behavioral health problems (IOM, 1996). This is changing, but there is a great need to improve the quality of mental health and substance abuse care delivered in primary care settings and also to better coordinate the care delivered in primary care and specialty sectors (IOM, 1996).

In addition, a significant portion of the public care system for individuals with the most disabling conditions extends beyond health care services to rehabilitative and support services, including housing, job counseling, literacy, and other programs. The coordination of these services requires collaborative and cooperative relationships among many agencies, including public health, mental health, social services, housing, education, criminal justice, and others. Most of these services are not covered by private insurance and have not been developed by most private behavioral health care companies.

Any approach to reform of mental health and substance abuse care services or to the problem of accountability must reckon with these factors, which are not simultaneously present in any other substantial sector of health care services. The dynamics of the three interrelated sectors—privately funded primary and specialty health care and public health care systems—are complex and also highly idiosyncratic from state to state, community to community, and plan to plan. An additional layer of complexity comes from the historical separation of treatment systems for mental health, drug abuse, alcohol abuse, and the primary care system in both the public and private sectors.

This chapter will set out the committee's views about the unique challenges in the delivery of behavioral health care. The chapter includes a description of the prevalence and costs of mental health and substance abuse problems, the difficulties and fragmentation of the current system for the delivery of care, the role of primary care, and a description of some of the support services that are needed for the long-term management of mental health and substance abuse problems. Historical perspectives on separate systems are also provided.



The social consequences of mental health and substance abuse problems are much greater than generally appreciated. The prevalence of these conditions in society is quite large, and the economic burdens are substantial.

The most recent estimates of the prevalence of behavioral health disorders suggest that almost a third of the adult population experiences some impairment due to a behavioral health problem in any one year (Kessler et al., 1994). The most common problems experienced by the adult population annually are anxiety disorders (17 percent), alcohol dependence (7 percent), and affective disorders (11 percent) (Kessler et al., 1994) (see Table 3.1).

TABLE 3.1. Estimated Annual Prevalence of Behavioral Health Problems in the United States (Ages 15–54).


Estimated Annual Prevalence of Behavioral Health Problems in the United States (Ages 15–54).

Many of the most serious and often disabling mental disorders (e.g., schizophrenia, major depression, bipolar illness, or manic depression) affect a total of 1 to 2 percent of the adult population annually. The incidence and prevalence of child and adolescent problems is not as well established, but levels of emotional disturbance that affect functioning are noted in about one of every eight children and adolescents (SAMHSA, 1996) (see Table 3.2a). Estimated annual prevalence of drug use among children and adolescents is presented in Table 3.2b.

TABLE 3.2a. Sample of Estimated Annual Prevalence of Behavioral Health Problems in Children and Adolescents.

TABLE 3.2a

Sample of Estimated Annual Prevalence of Behavioral Health Problems in Children and Adolescents.

TABLE 3.2b. Estimated Annual Prevalence of Drug Use Among Children and Adolescents, 1995.

TABLE 3.2b

Estimated Annual Prevalence of Drug Use Among Children and Adolescents, 1995.

Estimates of the impact of mental health and substance abuse problems reveal the substantial effects of these conditions. The direct and indirect costs to society have been estimated at $257 billion for substance abuse (Rice, 1995) (see Table 3.3) and $148 billion for mental illness in 1990 (Rice, 1995; Rice and Miller, 1996; Varmus, 1995) (see Table 3.4). Mental health and substance abuse factors are associated with a majority of suicides, whereas alcohol abuse alone is implicated in 50 percent of all homicides and 30 percent of all accidental deaths (NIAAA, 1990). One third of all criminal justice costs relate to mental health and substance abuse problems (Rice et al., 1990), and general health care costs are significantly increased by the presence of these disorders (NAMHC, 1993). Perhaps the simplest summary of the scope of these conditions is that mental health and substance abuse problems are comparable in magnitude to cancer and heart disease (see Table 3.5).

TABLE 3.3. Estimated Annual Economic Costs of Substance Abuse, 1990 (millions).


Estimated Annual Economic Costs of Substance Abuse, 1990 (millions).

TABLE 3.4. Estimated Annual Economic Costs of Mental Disorders by Disorder, 1990 (millions).


Estimated Annual Economic Costs of Mental Disorders by Disorder, 1990 (millions).

TABLE 3.5. Estimated Annual Costs of Illness for Selected Diseases and Conditions (billions of dollars).


Estimated Annual Costs of Illness for Selected Diseases and Conditions (billions of dollars).

Underestimating the Scope of the Problem

Although the stigma associated with seeking treatment for mental or addictive disorders is a significant factor in masking the scope of these problems by keeping them “in the closet,” the unusual fragmentation of these sectors of care is also part of the problem. A first factor is that, unlike most other health conditions, separate publicly managed health care systems are maintained for mental illness and substance abuse treatment. The publicly managed systems, with responsibility divided between federal, state, and local governments, and also divided for mental illness and substance abuse care, permit a de facto catastrophic insurance function that allows private purchasers to strictly limit behavioral health care coverage because they know that they will not be leaving their employees without an alternative. The magnitude of the public-sector role is substantial, especially in caring for individuals with histories of chronic mental illness, alcoholism, and drug dependence.

The public-sector commitment is not just in the form of public insurance programs like Medicare and Medicaid but is also through state and local funding of systems of care. Estimated 1994 mental health care costs were about $81 billion, of which state and local funding was about $22 billion (Oss, 1994). In several states, Medicaid supports about one third of the community mental health center program and may be the sole funding source for community support and rehabilitation services funded through state mental health agency appropriations and reimbursed by Medicaid (AMBHA and NASMHPD, 1995). Thus, the public role is much larger than that in the rest of the health care system, and there is a fragmented division of labor between the public and private sectors. This makes estimating total treatment costs more difficult.

High Indirect Costs

Some costs incurred in the care of behavioral health disorders—especially for patients with the greatest disabilities cared for in public-sector programs—are not health care-related costs. The services needed by these individuals may include housing supports, job training and rehabilitation, and a wide variety of other forms of assistance not considered and rarely funded by health insurance. Partly because of the disability associated with serious mental health and substance abuse problems and partly because of poor private insurance coverage for treatment of these conditions, many people with serious conditions permanently lose employment and require income maintenance benefits for extended periods. Because they are transfers rather than social costs, these expenses often are not included in estimates of total costs.

Some of the problems attributed to behavioral health disorders have already been mentioned, including higher mortality, disability, and lost employment. In general, levels of impairment are comparable for mental disorders and common medical disorders. Because of this pattern and poor access to treatment, a significant proportion of societal costs due to behavioral health problems are not a result of treatment costs but are due to lost productivity and related costs.

The Potential of Treatment

In broad terms, research on treatment outcomes seeks to answer questions such as whether an intervention has been successful, whether it is more effective than other treatments, whether its effectiveness is better with some groups than with others, whether the setting of care makes a difference, and so on. Outcomes research has many subfields, including quality of care, consumer satisfaction, quality of life, provider-patient relationships, patterns of practice, technology assessment, cost-effectiveness, and bioethics (e.g., Brook and Lohr, 1985; Bunker, 1988; Eddy, 1990; Greenfield et al., 1992; Guadagnoli and McNeil, 1994; Lohr, 1988). Surprisingly little is known about the comparative effectiveness of different practitioners, because most outcomes research focuses on the treatment setting or approach rather than the practitioners who deliver care.

It is exceedingly difficult if not impossible to generalize about the findings from treatment research in behavioral health, which includes drug abuse, alcohol abuse and alcoholism, and mental illness. Research histories stretch back decades in some cases, such as methadone maintenance, whereas other areas are relatively recent. Studies tend to be published in dozens of specialty journals, and relatively few studies have been published in mainstream medical journals. Moreover, the quality of the evidence is generally viewed outside the fields as unconvincing, and this is given as one reason for justifying a lack of insurance coverage for behavioral health.

For at least 20 years, drug abuse researchers have been studying treatment effectiveness, including work with cocaine abuse, methadone maintenance, and marijuana abuse (e.g., Hubbard et al.,1989; IOM, 1990a, 1996; McLellan et al., 1980, 1982). Research on drug abuse treatment has shown consistently that effectiveness depends on the length of time in treatment, the intensity of treatment, and the availability of aftercare to maintain recovery (CSAT, 1995). Alcoholism treatment research is generally a research “culture” separate from drug treatment research, but the two areas of research have come to many of the same conclusions: no single treatment approach works for everyone, but most people benefit from a combination of modalities (e.g., IOM 1990b; McLellan et al., 1996).

Drug and alcohol treatment research thus focuses on the use of a particular substance. In contrast, much more clinical uncertainty is associated with the diagnoses in mental health. Still, mental health outcomes research studies tend to be concentrated according to diagnosis; the majority of research has been conducted on depression, anxiety disorders, schizophrenia, and attention deficit and hyperactivity disorder in children (Burnam, in press). Randomized controlled clinical trials have been conducted to test the effectiveness of medications, whereas other studies have compared the differential effects of therapeutic strategies, such as cognitive therapy or psychosocial support for depression (McLellan et al., 1996). Thus, generalizations are difficult to make with the existing data, but it would be appropriate to say that individuals can benefit from a variety of treatment strategies, including medication and psychotherapy or counseling, and that most practitioners seek to find an effective combination for each individual whom they treat.

In the committee's view, then, the available evidence suggests that most forms of mental health and substance abuse treatment are effective for some of the many people affected by behavioral health problems (see Box 3.1), but much remains to be learned about which treatments work best for which individuals to improve their functioning and reduce their symptoms. The lack of systematic studies of treatment outcomes, however, is not unique to behavioral health. From an outcomes research perspective, relatively little has been done to substantiate the majority of medical practice. In other words, the accuracy and reliability of diagnosis and the effectiveness of behavioral health treatment are viewed as comparable to equivalent measures for medical care in general (NAMHC, 1993).

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BOX 3.1

The Case for Treatment of Mental Disorders and Addiction. Mental Disorders In the United States, more than 50 million Americans are faced with a mental disorder or addiction each year. Of these Americans, fewer than half receive treatment (Regier et al., (more...)

In the mental health field, there is justified optimism about improving the effectiveness of treatment. In the case of schizophrenia alone, for example, improved medications including clozapine and risperidone have become available in recent years, other antipsychotic medications will soon be made available, and the effectiveness of relatively new psychosocial treatments including assertive community treatment and multiple family group treatment has been validated (AHCPR, 1995). There is more evidence that the long-term prognosis of recovery is better than was previously thought, even for the most serious disorders (Harding et al., 1992). Thus, the mental health field shares considerable optimism that was neither present nor justified in past generations.

In the drug treatment field, there is confidence about the effectiveness of treatment when it is delivered appropriately. Some of the most recent data have been developed in the National Treatment Improvement Evaluation Study (NTIES) sponsored by the Center for Substance Abuse Treatment (CSAT) (1995). CSAT is supporting pilot studies to develop and test outcomes monitoring measurement systems in a number of states. Preliminary data indicate that treatment is effective in reducing drug use and associated crime and that the reductions are more likely to be maintained with case management and ongoing aftercare (CSAT, 1995). In essence, the challenge for the drug treatment field is not so much developing more evidence of treatment effectiveness as it is convincing decision makers that investments in treatment are worthwhile and cost-effective.

Treatment effectiveness is discussed further in Chapter 7, Outcomes, and in the papers by McLellan et al. and Steinwachs, in Appendix A, Appendix B and Appendix C, respectively.


Primary care has been defined by the Institute of Medicine (IOM) as follows:

Primary care is the provision of integrated, accessible health care services by clinicians who are accountable for addressing a large majority of personal health care needs, developing a sustained partnership with patients, and practicing in the context of family and community (IOM, 1996, p. 32).

In this definition, integrated care refers to comprehensive, coordinated, and continuous services whose processes are seamless across different levels of care. Accountability refers to the responsibility for quality of care, patient satisfaction, efficient use of resources, and ethical behavior. The context of family and community refers to an understanding of the importance of living conditions, cultural background, and the impact of family dynamics on health status and also recognizes the caregiving role of families. The committee agrees with this definition and endorses it.

In a given year, an estimated 10 to 20 percent of the general population consult with a primary care physician about a mental health problem (Hankin and Otkay, 1979; IOM, 1996; Schulberg and Burns, 1988). More than a dozen studies have looked at the rate of recognition of mental health and substance abuse problems in primary care settings (IOM, 1996). Most often a person will present with a physical complaint, and about half the time the primary care clinician will recognize the underlying behavioral health issues (Bridges and Goldberg, 1985; Kirmayer et al., 1993). In the small number of cases in which the presenting problem is emotional or psychological, the mental health or substance abuse diagnosis is correctly determined about 90 percent of the time (Bridges and Goldberg, 1985).

Depression is the best known and most widely studied behavioral health problem in primary care, and the only guidelines for behavioral health treatment in primary care settings are for depression (AHCPR, 1993). The Medical Outcomes Study (Sturm and Wells, 1995) followed individuals with severe depression and compared the treatment effectiveness of treatment by primary care physicians, psychiatrists, and other mental health professionals. The quality of care provided by psychiatrists was found in that study to be significantly better than the quality of care given by primary care practitioners, but the cost of care was significantly less in the general medical sector.

Some studies have demonstrated that the integration of mental health and substance abuse professionals into primary care settings can improve patient outcomes with minimal changes in costs (Katon et al., 1995; Schulberg et al., 1995). For this integration to work, clear clinical protocols and standards of care are needed, the mental health professionals should be on-site, and the relationship between the patient and the primary care provider should continue (IOM, 1996). In summary, there is evidence that treatment in primary care settings given by behavioral health professionals can be effective and cost-effective.

We encourage physicians to have enough skill to be able to know when there is a problem and something needs to be done, and then enough self-awareness to know whether they are the ones to do it or somebody else should.

Linda Bresolin

American Medical Association

Public Workshop, April 18, 1996, Washington, DC

The alternative to integration is carve-outs, in which patients are referred to completely separate systems for behavioral health care. These systems sometimes consist of contracts with private mental health professionals who work on a capitated or fee-for-service basis. More often, they include plans with teams of psychiatrists, psychologists, family therapists, social workers, substance abuse counselors, or various combinations of these professionals. The rapid growth in carve-outs has been attributed to the failures of primary care clinicians to adequately diagnose and treat individuals who have mental health and substance abuse problems (England and Vaccaro, 1991; Iglehart, 1996).

One advantage of carve-outs is that they operate separately from primary care and thus reserve resources that might be displaced in an integrated system. They also protect a patient's confidentiality through the use of separate clinical records and billing systems. Conversely, the separation of systems can make the coordination of care more difficult. At this time, there is no clear evidence that carve-outs provide care that is any more or less effective than the care provided in integrated systems. In both systems, however, there are disincentives for primary care practitioners to identify and treat mental health and substance abuse problems (IOM, 1996). The provision of care depends almost entirely on the fee structure and on the time needed to conduct the procedures that are reimbursed. When primary care clinicians are not paid for the time that they spend interviewing primary care patients about mental health and substance abuse problems, the incentive structure works against the identification and treatment of mental health and substance abuse problems. These issues are discussed in detail in the IOM (1996) report Primary Care: America's Health in a New Era, and interested readers are referred to that report.

We're working with our primary care docs to use a screening instrument. The patients can fill this out in the office, and it can be faxed directly to us and optically scanned. We can get the information back to the primary care doc while the patient is still in the office. We can help the doc make a decision as to whether or not this is a patient that can be managed in their own setting, or needs to be referred out, based on the depression guidelines that we helped create with them.

Peter Panzarino

Vista Behavioral Health

Public Workshop, May 17, 1996, Irvine, CA

A challenge for quality assurance is to assess, monitor, and regulate mental health and substance abuse care in primary care settings. This is a pervasive problem, given the high percentage of mental health and substance abuse care provided in these settings, but the breadth of the issue is tempered by the fact that there may be less risk of serious problems in this arena, in that many patients whose mental health and substance abuse problems are treated in primary care settings are less ill or disabled (IOM, 1996). On the other hand, failure to recognize or appropriately treat a mild depression or dysthymia, for example, may have modest short-term consequences but may also fail to prevent an otherwise unnecessary escalation of the illness into severe depression.

The challenges in monitoring behavioral health care in primary care settings are magnified by the increased scope and complexity of the health conditions that are expected to be treated in the primary care settings, the wide variability in the extent of psychiatric training received by family physicians and other primary care practitioners, and the rapid development of new treatments that makes it increasingly difficult for practitioners to stay current. However, as a matter of policy, the committee agrees with the IOM Committee on the Future of Primary Care and its recommendation to develop and evaluate collaborative care models with primary care clinicians and behavioral health professionals (IOM, 1996).


Many challenges are related to measuring, ensuring, and improving the quality of care in specialty settings and, especially, in managed behavioral health care settings. The field of managed behavioral health care is new, diverse, and highly competitive. Therefore, it is not regulated as intensively as more traditional forms of managed care. For example, both the federal government and the states regulate health maintenance organizations (HMOs) as insurance entities and in terms of the practice of health care (See Table 2.1 in Chapter 2). There is little regulation, however, of insurance or medical care issues in managed behavioral health care companies. This issue will be discussed further in Chapter 6, Process, which includes a description of the accreditation process.

General Dynamics of Care and Coverage

Changing Coverage

Coverage for behavioral health care continues to change. The history of coverage for alcoholism is a good example. Until relatively recently, most health insurance did not include coverage for alcoholism. In 1968, alcoholics were excluded from 60 percent of the general hospitals, and 40 percent of the Blue Cross and Blue Shield plans explicitly excluded coverage for alcoholism treatment (NIAAA, 1974). NIAAA advocated for the inclusion of alcoholism treatment as a benefit under health insurance and encouraged employers to support treatment for alcoholic employees (IOM, 1990a). The agency also contracted with the Joint Commission on Accreditation of Hospitals to develop accreditation standards for hospitals and specialty treatment services, supported counselor credentialing standards, and had Blue Cross and Blue Shield develop a model benefit package (Regan, 1981). Resistance to the inclusion of alcoholism treatment benefits in employer-sponsored health plans, however, was still strong.

Because a voluntary expansion of benefits appeared unlikely, states changed insurance regulations and laws to mandate coverage for alcoholism treatment in group health insurance plans (NIAAA, 1974; Scott et al., 1992). The first states to require coverage for inpatient alcoholism treatment were Wisconsin (in 1972), Illinois, Massachusetts, Minnesota, and Washington State (NIAAA, 1974; Scott et al., 1992). Massachusetts also required coverage for outpatient care. The National Association of Insurance Commissioners in 1981 adopted a model of benefits for alcoholism treatment —30 days of inpatient care and 30 outpatient visits per year (Scott et al., 1992). A 1991 review found that 41 states either require coverage (23 states) or require that coverage be offered (18 states); most of the states, however, have never altered the original benefit, so the value of the benefits may have eroded (Scott et al., 1992).

Although insurance mandates were an important policy strategy and stimulated the development of many private-sector alcoholism treatment services, health care financing and reimbursement systems evolved to better control the costs associated with alcoholism treatment. The Employee Retirement Income Security Act of 1974 (ERISA) exempts self-insured employers from state insurance mandates; thus, state insurance mandates have decreasing influence on the structure of health care. Employer-purchased managed care plans therefore may not need to be responsive to insurance mandates. As a result, managed care strategies are altering the organization and delivery of private- and public-sector services.

Current Coverage for Behavioral Health

Currently, the vast majority of individuals who have health insurance also have some coverage for behavioral health treatment (see Chapter 1). As has already been discussed, a substantial number of people with behavioral health disorders—especially those with less acute or disabling conditions—receive some care from their primary care practitioners.

Although most private health plans provide some coverage for care of behavioral health problems, most of these plans and Medicare have coverage limits that tend to be more restrictive than the coverage limits for treatment of physical illnesses. Annual limits on the number of outpatient visits and inpatient hospital days are common (IOM, 1993). Other limits in insurance coverage (low lifetime coverage caps, restricted benefits, higher coinsurance) mean that most private health care coverage does not offer protection against catastrophic mental or addictive disorders.

Service-Sector Boundaries

In thinking about health care in general, the special problems faced by uninsured individuals are usually recognized. Behavioral health care faces a distinct problem: in addition to the substantial population of uninsured individuals, who by definition have no coverage for specialty care, the limits described above create gaps in coverage for the privately insured. This is where the public sector comes in. Since the establishment of asylums for the treatment of mental illness in the 19th century, the public system has specialized in the care and support of indigent individuals with the most serious and protracted conditions. In fact, it can be argued that the existence of this public safety net has mitigated against improvements in private coverage.

Individuals who have severe mental illness thus are a group with special needs under managed care, and advocates have identified specific concerns about how well those needs will be met. Less frequently identified as having special needs are those individuals who do not have severe mental illness but who have severe personality disorders or post-traumatic stress disorder. These patients often use extensive treatment resources with little clear improvement. If private coverage for these patients is limited, they may leave the prepaid system or pay out of pocket for their treatment. They do not usually qualify for public-sector services, but they may need more than private coverage may provide.

The result of this counterproductive division of labor is that private coverage tends to be available for the time-limited and traditional treatments for behavioral health problems (e.g., benefits for limited inpatient treatment and limited counseling or psychotherapy). However, individuals with serious or prolonged disorders or the parents of children with serious or prolonged disorders can easily use up their private insurance coverage benefits, creating economic hardships for them and their families. The end result is that the public system will pay for their care. Table 3.6 provides the relative contributions of the private and public sectors.

TABLE 3.6. Uses of Funds for Mental Health and Substance Abuse: United States, 1990.


Uses of Funds for Mental Health and Substance Abuse: United States, 1990.

In a number of states we are seeing what we refer to as a divided benefit. Managed care organizations are responsible for the acute care benefit for children, while the public sector retains responsibility for extended care for those with serious emotional disorders.

Sybil Goldman

National Technical Assistance Center

Georgetown University

Public Workshop, April 18, 1996, Washington, DC

Therefore, advocates have strong concerns that reforms could threaten this system. On the other hand, the current divisions of labor between the public and private sectors contribute to many consumers being stuck in a lifetime of public care and unemployment. They find it necessary to remain poor to maintain their Medicaid eligibility, which is needed to cover the costs of medication and other treatments. The problem is compounded because they typically have not been able to obtain private coverage because of their “preexisting condition.” Reforming a system with these interrelated problems is extremely difficult, although the Kassebaum-Kennedy bill of 1996 was aimed to ensure job-to-job coverage.

Drug and alcohol problems are pervasive in our society, whether we address them or not. And I could sum it up this way: they don't just fade away. They go to another funding stream.

Gwen Rubinstein

Legal Action Center

Public Workshop, April 18, 1996, Washington, DC

Cost Shifting

In both public- and private-sector service systems, financial arrangements may promote cost-shifting—the cost of caring for untreated problems is shifted to another service system. Untreated alcohol and drug dependency, for example, leads to increased utilization of emergency rooms and acute care hospitals. Similarly, men and women with serious mental illnesses may be more likely to be incarcerated for public order offenses if community services and supports are not provided. For individuals in need of long-term care, costs and responsibilities may be shifted to the family and other support systems, and family members increasingly provide relatively complicated medical care because patients with managed care plans are discharged rapidly from acute care hospitals.

Although the fundamental dynamics associated with separate public and privately paid systems have been remarkably stable in recent years, the evolution of financing and care in each sector has been remarkable. Understanding these dynamics is central to designing relevant accountability and consumer protection systems, as the following section will show.


Since World War II there have been dramatic expansions of privately paid behavioral health care. National data on patterns of care in the past 50 years reveal that powerful trends have been at work. The expansion of employer-financed group health insurance during and after World War II set the stage for more accessible behavioral health care. The number of members in such plans grew from 12 million in 1940 to more than 100 million by 1955, fueled by substi tution of benefits for wages under wage and price controls and then by the preferential tax treatment of benefits (Bodenheimer and Grumbach, 1994).

Following this expansion of basic health care coverage, dramatic increases in the use of behavioral health care occurred. In response to reduced stigma, better evidence of treatment effectiveness, and consumer demand, many companies added behavioral health benefits for their employees' health plans during the 1980s.

Not surprisingly, the costs of these benefits increased rapidly and, in fact, increased faster than the costs in the rest of the health care system. As a direct result of these increased costs of employee benefits, companies and insurance plans turned to specialty managed care firms to rein in the costs of care. By 1995, more than 125 million Americans were enrolled in some form of managed behavioral health care plan, running the gamut from utilization review plans to fully capitated managed care plans, and the rate of increase in the penetration of managed care versus indemnity plans in behavioral health care exceeded that of health care in general (Oss, 1994).

Although there is variability in the performance of managed behavioral health care plans and companies, several trends in this field are evident. First, specialty behavioral managed care approaches have clearly demonstrated their ability to contain costs, reducing the rate of growth in costs of behavioral health care in all known instances and, in fact, actually reducing costs in the majority of instances. Second, the primary strategy used by this sector has not been to limit benefits per se but rather to limit or manage access to high-cost services, primarily hospitalization. Generally, these plans have maintained and sometimes increased access to outpatient treatment, whereas they have limited outpatient costs by using selective provider contracting, fee discounts, and various utilization management activities. Third, the field is becoming more competitive, and competition is having several effects: price increases are small, larger companies are increasingly dominating the market, and the use of a variety of sophisticated methods are being introduced to manage access.

The strengths of the private-sector managed behavioral health care industry include demonstrated competence at managing care for a privately insured population and the development of management tools relevant to this task, for example, information systems and provider credentialing approaches. The weaknesses of this sector include a lack of experience with managing comprehensive treatment and providing support to the more disabled population served in the public sector. More states are contracting with managed care firms to manage Medicaid behavioral health care services, but this is a new trend: currently, Medicaid covers only a portion of the costs of mental health and substance abuse care and support for individuals in the public sector.


The high degree of competition for behavioral health care contracts is itself a factor regarding quality. Competition can drive prices down or quality up. There is much evidence of intense price competition, but there is not much evidence that contract decisions tend to be made primarily on the basis of quality. On the other hand, it is clear that competition is encouraging adaptation and innovation in the field and that the rapid development of new products and approaches is occurring. This is a positive sign for the quality of care, but it is one that raises challenges for accreditation and quality assurance approaches. These issues will be discussed further in Chapter 6, Process.

The variability in the structure, funding, focus, and competency of public mental health and substance abuse systems and the fact that they are primarily directed by the 50 state governments creates challenges for behavioral health care and for consumer protection, quality assurance, and accreditation. Solutions that rely on the action of the federal government must recognize the limited, if pervasive, role of federal funding (e.g., Medicaid). Other approaches that are national in scope, for example, recommendations on accreditation, must recognize that it is not clear whether these approaches will be adopted at the state and local levels and that their implementation may be variable from state to state.


Although there is much variability from state to state, public behavioral health care services are coordinated and funded through state authorities for mental health and substance abuse. Those authorities revolve around organized systems of care, are managed by designated not-for-profit agencies or units of county governments, and provide broad and diverse services. Public behavioral health care systems usually employ many elements of managed care, such as alternatives to hospitalization, case management to coordinate services for needy individuals, and crisis intervention services.

We have a public mental health system that helps us, that delivers both care and services and helps us to be stable in our own communities, despite having disabling mental illnesses.

Ray Bridge

Northern Virginia Consumers Association

Public Workshop, April 18, 1996, Washington, DC

Many who provide and receive care in the public mental health and substance abuse service systems believe that these systems generally have done well in managing coordinated, long-term treatment and providing support for individuals who have chronic conditions.

The weaknesses of public mental health and substance abuse care systems relate to their broad missions, limited resources, and governmental auspices. They typically include poorly developed administrative infrastructures, including the information systems needed to manage large amounts of clinical and outcomes data, and a lack of experience with the managed care tools relevant to the needs of a privately insured population (CSAT, 1994). In addition, the state-to-state variability in public mental health and substance abuse care is a significant challenge, underlined by the lack of a broad federal commitment to financing care and magnified by devolution, in which many responsibilities are shifting from the federal government to the states.

Solutions to improving mental health and substance abuse care must build on the recognition that these are complex clinical and social problems involving medical, social, and disability factors manifested variably over time. Yet the service systems that have evolved to deal with them are fragmented between private and public responsibilities and among various levels of government. The juxtaposition of these factors led Marmor and Gill (1989) to conclude that basic aspects of U.S. political character and governance (e.g., suspicion of governmental solutions, the separation of powers, and federalism) mitigate against adequate solutions in the area of serious mental illness.


The historical development of services for the treatment of alcoholism, drug abuse, and mental illness reflects prevailing political currents and a persistent ambivalence toward full recognition of these illnesses as medical rather than moral or criminal justice problems. Although alcoholics and drug addicts were frequently admitted to mental health institutions and sought care from psychiatrists and psychologists, poor-quality and ineffective services were the consequences of little understanding of addiction, and after completing withdrawal, chemically dependent patients were difficult to treat in the mental health system (IOM, 1990a, b). Similarly, individuals with serious mental illnesses received poor care in alcoholism and drug abuse treatment programs (IOM, 1990a, b).

As a result, the service systems evolved and matured relatively independently. The history of tension between the service systems continues to inhibit full integration of the service systems. It is therefore important to understand how autonomous service systems developed, the needs that they addressed, and the unique role of public funding in the creation and delivery of services for individuals struggling with mental illness, alcoholism, or drug abuse. Box 3.2 provides a timeline with highlights of the discussions presented in the following sections.

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BOX 3.2

Historical Perspective on the Development of Behavioral Health Systems. 1784 Dr. Benjamin Rush, a signer of the Declaration of Independence and surgeon general of the Continental Army, publishes a pamphlet entitled “An Inquiry into the Effects (more...)

Mental Health Services

Historical Overview

In 1996, when national legislation began to address parity of mental health care coverage, the origins of mental health care in the United States seemed even more distant. During the colonial era, however, individuals who had mental disorders were jailed or placed in poorhouses (Hamilton, 1944). Dr. Benjamin Rush began a study of mental illness at Pennsylvania Hospital in 1800, and by the 1840s, 18 hospitals were exclusively devoted to caring for the mentally ill (Hamilton, 1944).

In 1834, at the urging of Dorothea Dix, the Massachusetts legislature voted to make all indigent mentally ill individuals wards of the state. In 1890, the state of New York passed a law requiring that all mentally ill individuals be moved out of jails and poorhouses and into state hospitals, and other states passed similar legislation (Bromet and Parkinson, 1992). By the turn of the century, most states had established state-supported mental hospitals, and by the 1930s, nearly all state mental hospitals had established outpatient clinics, partly to eliminate overcrowding and partly because of the growth in outpatient psychiatric services in those years (Caton, 1984).

In 1946, Congress passed the National Mental Health Act, which created the National Institute of Mental Health (NIMH), thus establishing the first federal responsibility for prevention, diagnosis, and treatment. In 1963, President John Kennedy proposed the development of comprehensive community mental health centers, which led to the passage of the Community Mental Health Centers (CMHC) Act of 1963. By 1980, there were more than 700 community mental health centers across the country, reflecting a federal investment of more than $1.5 billion (Bromet and Parkinson, 1992).

In 1977, President Jimmy Carter signed an executive order establishing the President's Commission on Mental Health. The commission made a total of 100 recommendations addressing community linkages, expanding services to underserved populations, phasing down large state mental hospitals, and developing of a case management system (Bromet and Parkinson, 1992). One of the great unintended consequences of the shift from state hospitals to community mental health centers, given the lack of adequate resources, was an increase in the number of homeless mentally ill individuals.

Discredited and demoralized during the era of deinstitutionalization (dating roughly from the 1963 CMHC Act and the 1965 enactment of Medicaid until 1980), public mental health and substance abuse systems have improved dramatically in the past 15 years. Several forces and developments have contributed to this change.

The Community Support Model and the Reagan Legacy

It is ironic that federal agency (NIMH) leadership during a time of presidential initiatives to limit the federal government was so crucial in improving public-sector mental health care. Yet this was clearly the case. The Community Support Program (CSP) was a small demonstration effort in NIMH that had a significant impact on improving public mental health care. CSP promoted guidelines that urged a coordinated, community-based, long-term, and practical approach to caring for serious mental illness and provided a new and relevant conceptual model at a time when the field was searching for new solutions. Through a mix of national meetings and targeted demonstration grants aimed at implementing the new model, CSP leveraged change in all the states.

President Ronald Reagan's “new federalism” approach, emphasizing a diminished federal role in favor of state responsibility, was also a boon to the improvement of public-sector programs. Mental health had fundamentally been a state responsibility since the founding of asylums in the 19th century. Indeed, President Franklin Pierce's veto of 1852 legislation to establish a land-grant program aiding construction of asylums—as an unwarranted assumption of federal responsibility—set the tone for the federal government's role in mental health, and the states picked up the slack.


An aggressive federal role had developed in the 1960s with CMHC and Medicaid legislation. Although both pieces of legislation would play a positive role in improving public care in the long run, in the short term each undercut state responsibility. CMHC funding was channeled directly from the federal government to local programs, bypassing state government and thus creating obstacles in the way of states seeking to ensure community-based care for patients being discharged from state hospitals. Sometimes, however, the CMHC was a state entity.

Medicaid was designed to be administered by the state welfare agency, since at the time of its enactment this was the only relevant agency existing in every state. This strategy also undercut the role of state mental health agencies, although at first Medicaid had only a limited mental health benefit. But changes around 1980 made both programs more relevant to the state mental health agencies. President Reagan's block grant approach gave the states control of the federal mental health block grant, albeit with a 26 percent cut in funding, and this helped states better coordinate programs. At the same time, changes in Medicaid to make it more relevant to the community-based care of seriously mentally ill individuals—resulting from recommendations of the President's Commission on Mental Health in 1978—provided a viable source of funding for CSP programs. As a result of the improved (CSP) service approach, better state coordination, and targeted funding, public-sector care has steadily improved since 1980.

Alcoholism Services

In the United States, efforts to treat alcoholism began with the observations of Dr. Benjamin Rush in 1785 (IOM, 1990a). The temperance movement grew in strength during the 19th century (Aaron and Musto, 1981; Rorabaugh, 1979), and concern about inebriates led to informal and formal treatment systems. Washingtonian Societies, formed during the 1840s, promoted the potential for self-reform and fostered the first residential treatment programs for inebriation (Baumhol, 1986, 1990). In the 1850s and 1860s, formal publicly sponsored asylums for the treatment of inebriation were proposed, but the few that opened were frequently converted to institutions for the mentally ill (Baumhol, 1990). The Massachusetts State Hospital for Dipsomaniacs and Inebriates, for example, opened in 1893, but it was treating shell-shocked veterans of World War I by 1918 (Baumhol and Room, 1987). At the end of the 19th century, rescue missions and shelters provided outreach to homeless inebriates and offered programs based on prayer, food, shelter, and work (Glaser et al., 1978; Stoil, 1987).

The most pervasive strategy for the treatment and control of inebriates, however, was arrest and jail (McCarty et al., 1991). New York City established a police force in 1845, in part to deal with chronic inebriates causing public disorder problems in the Bowery (Murtagh, 1956). With the passage of the Volstead Act in 1919 and the imposition of Prohibition between 1920 and 1933, the control of alcohol and alcohol abuse was fully relegated to the criminal justice system and the need for formal treatment institutions dissipated (Aaron and Musto, 1981; IOM, 1990a). Resources dedicated to alcoholism treatment were directed elsewhere.

Contemporary treatment systems for alcoholism and drug abuse therefore began shortly after the repeal of Prohibition. In retrospect, the first programs were more likely to be based on personal experience than scientific research. The women and men who helped one another initiate and sustain a stable recovery were guided primarily by trial and error. Born in June of 1935 in Dr. Bob's kitchen in Akron, Ohio, and gradually replicated in homes and meeting rooms all over the United States (W., Bill, 1957), Alcoholics Anonymous (AA) meetings provided peer support for individuals seeking sobriety. The demonstrations of stable recovery from alcohol dependence among individuals involved in AA encouraged a reevaluation of the social and medical processes used to intervene with alcoholics and inebriates. Moreover, men and women in recovery began to advocate for more humane treatment for alcoholics.

The scientific and medical basis for understanding and treating alcoholism began with Jellinek's work in the 1940s and the 1942 establishment of the Yale Center for Alcohol Studies (IOM, 1990a). Formal treatment programs began to develop in the 1940s and 1950s. Yale Plan Clinics tested outpatient strategies for the treatment of alcoholism. AA meetings were held in mental health institutions and prisons (W., Bill, 1957). The first hospital-based treatment services were also developed. Bill W. (a co-founder of AA) recalled that in 1945 the Knickerbocker Hospital in New York City became the first hospital to open an AA ward for the treatment of alcoholics (W., Bill, 1957). In 1951, Boston established a 300-bed rehabilitation program at Long Island Hospital for the treatment of alcoholics; a 3-year follow-up study of 101 men found 12 of them to be sober and living independently (Myerson, 1956). Most hospitals were reluctant to admit alcoholics. Although the American Medical Association (AMA) recognized in a 1956 policy statement that alcoholism was an illness that physicians and hospitals could address (Committee on Alcoholism, 1956), an NIMH review during the 1960s found that many hospitals actively discriminated against alcoholics in admissions for health and psychiatric services (Plaut, 1967). Most chronic alcoholics therefore were still cared for in the criminal justice system. The dominant treatment intervention was arrest for public inebriation, detoxification in the drunk tank, and a drying out period on the state farm.

Courts in major metropolitan areas were overwhelmed in processing arrests for public intoxication (The President's Commission, 1967). Advocates challenged state laws that permitted the arrest and incarceration of individuals for chronic inebriation and appealed convictions for public intoxication. Decisions in two U.S. circuit courts in 1966 (Easter v. District of Columbia and Driver v. Hinnant) ruled that public intoxication was an involuntary consequence of the illness of alcoholism and that incarceration for an involuntary behavior was not permissible (Hutt, 1967; Kurtz and Regier, 1975; NIAAA, 1971; Room, 1976).

The stage was set for a U.S. Supreme Court decision in 1968 (Powell v. Texas). Although the Court's 5 to 4 decision upheld a conviction for public intoxication, a reading of the majority and minority opinions indicated that a majority of justices held that because alcoholism is a disease, inebriation is an involuntary consequence of the illness and, because homeless individuals cannot drink in private, homeless alcoholics cannot be convicted of public intoxication (NIAAA, 1971). The three court rulings drew attention to the lack of formal treatment systems for alcoholism, encouraged the decriminalization of public intoxication, and stimulated state and federal legislation that promoted the development of publicly funded continuums of care for the treatment of alcoholism (McCarty, 1995).

At the federal level, Senator Harold Hughes, a freshman senator and former governor of Iowa who was in recovery, chaired public hearings across the nation during 1969 on the extent and effects of alcoholism; publicly recognized men and women acknowledged their recoveries and testified to advocate for a national program to address alcoholism and to develop more humane systems of care (Hewitt, 1995). The Comprehensive Alcohol Abuse and Alcoholism Prevention, Treatment, and Rehabilitation Act of 1970 (Hughes Act) was introduced and sponsored by Senator Hughes and was signed into law by President Richard M. Nixon as P.L. 91-616 after campaign supporters dissuaded his veto of the legislation (Hewitt, 1995; Lewis, 1988; Pike, 1988; Smithers, 1988).

The Comprehensive Act is generally known as the Hughes Act and authorized a federal infrastructure and federal funding for the treatment and prevention of alcoholism. The act authorized the creation of the National Institute on Alcohol Abuse and Alcoholism (NIAAA) within NIMH, created a National Advisory Council on Alcohol Abuse and Alcoholism to foster policy development, required states to designate state alcoholism authorities, established federal for mula grants for states to facilitate the creation of comprehensive state plans for the treatment and prevention of alcoholism, mandated treatment and prevention services for federal employees, encouraged hospitals to admit and treat alcoholics, protected the confidentiality of patient records, and funded research.

Many credit the Hughes Act for the development of contemporary public and private treatment systems for alcoholism and alcohol abuse (Hewitt, 1995; IOM, 1990a; Lewis, 1988). The 1974 (P.L. 93-282) and 1976 (P.L. 94-371) reauthorizations of the Hughes Act supported the development of independent institutes for alcoholism, drug abuse, and mental health within the Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA) and authorized incentive grants to encourage states to adopt the Uniform Act (Hewitt, 1995; Lewis, 1988).

The Uniform Alcoholism and Intoxication Treatment Act (Uniform Act) was model legislation drafted to guide state reforms. The model act prohibited prosecution of alcoholics solely because of alcohol consumption (i.e., it decriminalized public intoxication) and supported the development of a comprehensive continuum of care to promote recovery from alcoholism; the initiative also created a state authority to fund, regulate, and coordinate treatment and prevention services and established a citizens' advisory council (NIAAA, 1971). More than two-thirds of the states (i.e., 34 states) fully implemented the provisions of the Uniform Act (Finn, 1985). A review of the act's implementation concluded that the burden of public intoxication on the criminal justice system was dramatically reduced and that a change in the health care delivery system occurred (Scrimgeour and Palmer, 1976).

At the state level, the Uniform Act fostered the development of treatment services and empowered a public authority to develop and regulate services (McCarty, 1995). The legislation encouraged the development of community-based treatment services and typically specified the creation of emergency detoxification services, short-term inpatient care, residential care in halfway houses, and outpatient services. Voluntary treatment was emphasized. Implementation differed in each state, and consequently, state systems for the treatment of alcoholism vary substantially in structure, organization, and size.

In many states, men and women in recovery formed private, nonprofit, community-based organizations to operate the continuum of care specified in the Uniform Act. State authorities used the grassroots activism to lobby for additional resources and build continuums of care that often relied on individuals with personal histories of addiction and recovery to deliver care. Service systems in many areas continue to reflect this history and highlight a persistent tension between professional practitioners and experiential practitioners.

Drug Abuse Treatment

Passage of the Harrison Narcotic Act of 1914 marked a policy evolution from reliance on informal social influences to the vigorous use of enforcement, prosecution, and incarceration to control the distribution, sale, and use of heroin and cocaine in the United States (Courtwright et al., 1989; Musto, 1973). The act requires legitimate manufacturers and distributors of narcotics to register, pay a tax on transactions, and record all transactions. Federal enforcement agencies interpreted the legislation as prohibiting the use of prescribed narcotics to maintain individuals dependent on opiates, and U.S. Supreme Court rulings in 1919 upheld the constitutionality of the legislation (King, 1953; Musto, 1973).

The unintended consequences were to inhibit the treatment of opiate and cocaine abuse and dependence in medical settings, stifle development of treatment services, and enhance the segregation of addiction treatment from medical care (Jaffe, 1979; Schur, 1962). As a result, for much of the 20th century there was little systematic effort to develop effective treatment options.

The only formal treatment programs for most individuals dependent on opiates, cocaine, or marijuana were two U.S. Public Health Service Narcotic Hospitals. Federal funding for programs for the isolation and rehabilitation of narcotic addicts was authorized in 1929; the first hospital opened in Lexington, Kentucky, in 1935, and a second, smaller program began in Fort Worth, Texas, in 1938 (Courtwright et al., 1989; Walsh, 1973). Most of the hospitalized individuals were sentenced to the facilities for drug crimes, but individuals could also voluntarily commit themselves. Lexington was the major research and training center for the treatment of opiate addiction

Many individuals (perhaps 90 percent or more), however, relapsed quickly after release (Courtwright et al., 1989; Schur, 1962). The poor outcomes were due in part to a lack of community-based aftercare and follow-up services (Walsh, 1973). The institutions were maintained, despite high relapse rates, because the hospitals were effective at removing and isolating addicts from their communities. Harry J. Anslinger, the director of the Federal Bureau of Narcotics from the time of its creation in 1930 until his retirement at age 70 in 1962, strongly supported prosecution and incarceration for individuals with addictions and opposed community-based services (Courtwright et al., 1989). Control of the two narcotic hospitals was transferred to the Bureau of Prisons (Fort Worth in 1971 and Lexington in 1974); elimination of the hospital function was consistent with increased reliance on community-based services (Walsh, 1973).

Support for more humane policies and effective treatments emerged in the late 1950s and early 1960s. The Joint Committee of the American Bar Association and the American Medical Association on Narcotic Drugs (1961) released an interim review of drug policies in 1958. The report critiqued prosecution and enforcement strategies and recommended increased research, including establishment of an experimental outpatient clinic that could potentially provide drugs to addicts. A final report was released in 1961. In June 1962, the U.S. Supreme Court ruled in Robinson v. California that prosecution of individuals simply because they were addicted to illegal drugs was cruel and unusual punishment; medical treatment, not incarceration, was appropriate (Courtwright et al., 1989). New treatment strategies also appeared during this embryonic period.

In 1958, Chuck Dederich, a recovering alcoholic, opened a residential treatment program for heroin addicts known as Synanon (Courtwright et al., 1989; Jaffe, 1979). Synanon did not accept public funds and was based to some extent on the treatment strategies used by Maxwell Jones (1953), a British psychiatrist, and on the AA model, using recovering addicts and group encounters to confront residents to take responsibility and live without using drugs (Courtwright et al., 1989; IOM, 1990b). Synanon demonstrated that recovery from heroin abuse was possible and became the prototype for therapeutic communities.

Daytop Village, the first second-generation therapeutic community, began in 1963 with support from the city of New York and was designed to correct the deficits that the founders identified in the Synanon model. Reentry to the home community was planned, research on effectiveness was encouraged, staff included professionally trained individuals, and many unorthodox practices were avoided (interview with William B. O'Brien in Courtwright et al., 1989).

About the same time that Daytop Village opened, Vincent Dole and Marie Nyswander began a program of research with heroin addicts at Rockefeller University. Dole and Nyswander administered various narcotics to addicts to assess their effects. They found that individuals given methadone stabilized and that their social and interpersonal functioning improved (interview with Vincent Dole in Courtwright et al., 1989). Despite opposition from the Federal Bureau of Narcotics, they continued their work and published their first research report in the Journal of the American Medical Association (Dole and Nyswander, 1965). Methadone maintenance research programs began in 1965 with support from New York City (Courtwright et al., 1989).

Replication and expansion of these early treatment initiatives were inhibited until an infrastructure to support state and federal treatment systems developed during the late 1960s and early 1970s. The Narcotic Addict Rehabilitation Act of 1966 (P.L. 89-793) created a federal program for the civil commitment to and treatment of individuals dependent on narcotics and provided a framework for the evolution of a federally funded drug treatment system during the early 1970s (Besteman, 1992). NIMH consolidated the administration of research, training, and treatment related to drug abuse in the Division of Narcotic Addiction and Drug Abuse and funded community-based outpatient programs to provide assessments and aftercare (Besteman, 1992). A 1968 census of drug treatment programs identified 183 facilities (private and public) located primarily in urban areas of the Northeast (Connecticut, Massachusetts, New Jersey, and New York), Midwest (Illinois), and the West Coast (California); most (77 percent) had opened within the previous 5 years and reflected the influence of the Narcotic Addict Rehabilitation Act (Jaffe, 1979).

The most important federal initiative was President Nixon's declaration of a “war on drugs” (IOM, 1990b). Responding to concern about drug-related crime in urban areas and to growing drug use among adolescents and young adults, President Nixon's 1969 message to the U.S. Congress emphasized reduced access to illegal drugs while supporting the need for treatment and prevention services (IOM, 1995). The Comprehensive Drug Abuse Prevention and Control Act of 1970 (P.L. 91-513) legislatively clarified, for the first time since the passage of the Harrison Act in 1914, the roles of physicians in the treatment of narcotic addiction and authorized the secretary of the U.S. Department of Health, Education, and Welfare to determine methods for treating addiction (IOM, 1995).

In June 1971, President Nixon issued an executive order creating the Special Action Office for Drug Abuse Prevention (SAODAP) within the Executive Office of the President and appointed Jerome Jaffe, M.D., as the director (Besteman, 1992; IOM, 1990b; Jaffe, 1979). The Drug Abuse Office and Treatment Act of 1972 (P.L. 92-255) provided legislative authority for SAODAP; the legislation also authorized direct funding for community-based treatment and formula grants for state treatment systems if a state drug abuse treatment authority was designated and a state plan was submitted (Besteman, 1992). The legislation promoted a coordinated federal strategy to reduce the incidence of drug abuse (IOM, 1995).

SAODAP implemented services quickly: the use of inpatient facilities was limited, unused inpatient capacity was converted to outpatient services, treatment guidelines were issued, administrative costs were limited to 8 percent, and waiting lists were purchased to dramatically improve access to community-based outpatient and residential services (Besteman, 1992).

Under Dr. Jaffe's leadership, the office participated in the development of the 1972 federal methadone regulations and promoted the expansion of methadone treatment capacity (IOM, 1995). SAODAP purchased outpatient and residential services based on a “treatment slot” (i.e., “the projected utilization of capacity to deliver a given mix of services. . . to a population of clients” [Jaffe, 1979, p.11]) rather than a more traditional fee-for-service model. Jaffe (1979) felt that this approach encouraged flexible care for the clients based on their individual needs and discouraged incentives to maximize revenues from each client through the provision of more services. From the beginning, therefore, publicly funded drug abuse treatment programs were organized and financed by using reimbursement and administrative structures that differed from those used by the rest of medical services.

The federal infrastructure evolved rapidly. In 1971, the creation of NIAAA within NIMH and advocacy from the alcoholism treatment field for an identity separate and distinct from that of mental health fostered interest in reorganization of the federal authorities for mental health, alcoholism, and drug abuse. ADAMHA was formed (P.L. 93-282) in 1974, and three separate institutes were created: NIMH, NIAAA, and the National Institute on Drug Abuse (NIDA) (Besteman, 1992; Lewis, 1988). The director of SAODAP, Robert DuPont, M.D., became the first director of NIDA (Besteman, 1992; IOM, 1990b).

NIDA consolidated federal funding for services into grants to states rather than direct funding for service providers, and the states were encouraged to develop treatment systems (Besteman, 1992; IOM, 1990b). New federal awards required a transition of support to state funding and stimulated increased state appropriations for the treatment of drug abuse (Besteman, 1992). Federal funding and oversight declined throughout the 1970s, and NIDA increasingly emphasized biomedical research (IOM, 1990b).

Federal funding and oversight for the treatment of alcoholism, drug abuse, and mental illness declined most dramatically in 1981 when the Omnibus Budget Reconciliation Act (P.L. 97-35) combined funds from direct project grants and state formula grants into the Alcohol, Drug Abuse, and Mental Health Services Block Grant (Lewis, 1988; McCarty, 1995). Total funding was reduced 26 percent, but reporting requirements that were perceived as burdensome to the states were eliminated (IOM, 1990a; GAO, 1995). Treatment advocates perceived the reduction of federal support for the treatment and prevention of alcoholism, drug abuse, and mental illness as a major retreat, and the administrator of ADAMHA stated publicly that the federal government was unlikely to resume its role in the treatment of alcohol and drug abuse (Lewis, 1982).

In a period of less than 20 years (1964 through 1981), alcohol and drug abuse treatment services incubated in NIMH and community-based mental health centers. After brief developmental periods in separate federal institutes, they were transitioned to states to grow into treatment systems that reflected the unique needs and personalities of the states, and these services varied substantially among the states. Three separate treatment systems evolved with federal support and incentives, because (1) alcoholism and drug abuse treatment were not integrated with medical or psychiatric care, (2) drug abuse and crime policies frequently overlapped, and (3) there was strong advocacy for autonomy in the alcoholism treatment field.

Ultimately, the funding reductions associated with the implementation of the Alcohol, Drug Abuse, and Mental Health Services Block Grant may have facilitated integration of alcoholism and drug abuse treatment systems in many states. The cutbacks required program consolidations and, even if it was not immediate, created pressures that weakened many services and encouraged the eventual combination of treatment systems. At the same time, the men and women seeking treatment were increasingly likely to report abuse of both alcohol and other drugs.

Block grant requirements emphasized an increased capacity for the treatment of drug abuse and priority access to treatment for pregnant women abusing drugs and injection drug users (GAO, 1995). In many states, the best source of additional capacity was a strong alcoholism treatment system. Consequently, during the 1980s, state authorities for alcoholism and drug abuse were combined, and treatment services for alcoholism and drug abuse began to be fully integrated.

Criminal Justice System


As just described, a unique relationship has developed between the criminal justice system and the public addiction treatment system. During the 1960s and 1970s the numbers of crimes related to illegal drug use increased dramatically. The drug of abuse of most concern to politicians and policymakers was heroin, which had been shown to be related to highly recidivistic criminal behavior, particularly income-generating property crimes. Thus, programs were born to interrupt the drug-crime cycle.

During the 1980s the drug of abuse among offenders shifted from heroin to cocaine, and by the late 1980s crack cocaine had become a major concern. Research such as the National Institute of Justice's Drug Use Forecasting (DUF) project, begun in the 1980s, showed alarmingly high rates of substance abuse among offenders nationwide (IOM, 1990b, 1996). With the simultaneous increase in the human immunodeficiency virus infection rate among intravenous drug abusers, efforts to direct treatment resources to the criminal justice population intensified. At the same time, criminal penalties related to drug abuse increased nationwide, mandatory minimum prison sentences were imposed and increased for drug-related crimes, and many drug misdemeanors were upgraded to felonies (IOM 1990b, 1996). By the end of the decade, the criminal justice system was flooded with substance-abusing offenders.

Another factor that has added to the pressure on the treatment system is the increasing interest of public policymakers in addressing the toll of drunk driving on society. This has led to the development of specialized intervention and referral programs that mandate drivers convicted for driving under the influence to involuntarily participate in treatment programs. Jurisdictions vary in the degree to which courts use referrals for evaluation and treatment and in the use of treatment as a sentencing option (IOM, 1990a).

Extent of the Problem

The National Institute of Justice's DUF report on adult and juvenile arrestees provides drug use information for those arrested or detained for committing crimes. DUF data indicate that nationally in 1994, 69 percent of males and 72 percent of females tested positive for an illicit drug at the time of arrest (NIJ, 1995). These rates are significantly higher than the current use data reported in the National Household Survey on Drug Abuse, which report 7.9 percent for males and 4.3 percent for females (SAMHSA, 1996).

The Center for Substance Abuse and Treatment (CSAT) has also provided funding for technical assistance to individual states for studies of drug use by their incarcerated populations. Recent studies conducted by the Criminal Justice Policy Council, State of Texas, and the Illinois Department of Alcoholism and Substance Abuse and Illinois Department of Corrections have found similar high rates of illicit drug use among inmates entering state correctional systems. In Texas, 34.7 percent of male inmates and 43.8 percent of female inmates reported that they had used illicit substances in the month before being incarcerated. In Illinois, 65.6 percent of male inmates and 62.4 percent of female inmates indicated that they had used illicit drugs in the month before being incarcerated.


The Bureau of Justice Statistics has reported that inmates sentenced for drug offenses accounted for 54 percent of the federal prison population in 1990 and over 20 percent of the total state prison population in 1991 (BJS, 1992). Treatment programs based in prisons are most often therapeutic communities, which operate in varying degrees of separation from the general prison population, and 12-step approaches are also found (IOM, 1996).

Because of the numbers of persons addicted to drugs who are arrested for drug-related crimes, the public sector has developed a variety of treatment programs designed to serve addicted nonviolent offenders. These programs may be operated as pretrial drug courts, the programs may be alternatives to incarceration, or they may be treatment programs operated within correctional institutions. Funding for some of these programs is available through the Substance Abuse Prevention and Treatment Block Grant, and for others through CSAT's discretionary funds. CSAT has also provided technical assistance to support the development of state correctional treatment plans. The goal of these programs, in addition to the treatment of addiction, is to remove a substantial number of people from jails and prisons to relieve overcrowding, although an unintended consequence is to increase the pressure on community-based programs.

Most of the treatment of drug-involved offenders takes place in community-based settings as an alternative to incarceration or as a condition of parole or probation (IOM, 1996). The best-known example is Treatment Alternatives for Special Clients (formerly known as Treatment Alternatives to Street Crimes), which is found in more than 25 states. In general, programs that link treatment to parole and probation produce favorable results (Chavaria, 1992; IOM, 1996; Van Stelle et al., 1994).

Researchers have found that drug treatment is less expensive than the alternatives, including incarceration, probation, and drug control strategies and costs less than the costs of crime and lost productivity associated with untreated addiction (Gerstein et al., 1994; IOM, 1996). A RAND Corporation study analyzed the costs required to achieve a 1 percent reduction in cocaine usage by comparing treatment (demand control) with three strategies for controlling the supply: domestic enforcement, interdiction, and source country control. At a cost of $34 million, treatment was the least expensive, with the costs of the other strategies ranging from $250 million to $800 million (Rydell and Everingham, 1994).

Implications for Managed Care

The result of criminal justice system involvement with treatment for addictions is that a number of people are mandated to attend treatment programs for a specified amount of time. These models are consistent with a sentencing rather than a medical or a clinical necessity approach. This situation places requirements on programs to serve clients for a minimum period of time, which is often unrelated to the client's medical need or clinical progress. Nonetheless, the requirement exists, and compliance is necessary for the offender to complete his or her obligation to the court.

Consistent with national trends, some health care in prisons is provided under contract with independent managed care organizations. Although specialty behavioral health companies are not yet contracting with prisons, the committee believes that it should be possible to provide appropriate substance abuse treatment within the criminal justice framework. Planning should involve the criminal justice and the addiction treatment experts and must address the lack of fit of the managed care principles with the current structure of the criminal justic system.

Employee Assistance Programs

The field of employee assistance programming began in the mid-1930s, coinciding with the founding of AA. Major corporations such as the New England Telephone Company, Western Electric Company, E. I. DuPont de Nemours & Company, Eastman Kodak Company, and Illinois Bell Telephone Company recognized the negative impact that alcoholism had on employee productivity (Presnall, 1981). These companies chose to develop programs that encouraged the use of AA, which was at that time referred to as occupational alcoholism programming or occupational programming. In the beginning of the field of employee assistance programming, the primary focus was on dealing with the employed alcoholic; however, employers such as Caterpillar Tractor Company and DuPont also addressed mental health problems (Presnall, 1981).

Several events over the next 20 years began to establish a foundation for the field. The Yale (later Rutgers) Center for Alcohol Studies was founded in 1942, and in the 1950s, along with the National Council on Alcoholism, collected and disseminated information on effective programs in different companies (IOM, 1990a). The passage of the Hughes Act in 1970 created the single most important influence on the growth of the field of employee assistance programming. The Hughes Act established NIAAA, which included the Occupational Programs Branch. In 1972, the Occupational Programs Branch provided funding for each state in the country to hire two professionals known as occupational program consultants.

The occupational program consultants received extensive training and were charged with influencing the growth of employee assistance programs (EAPs) within the states that they represented. As a result, hundreds of EAPs were formed, typically with public agencies providing services to employers. The first professional association for those working within the field was founded during this period of growth. The Association of Labor-Management Administrators and Consultants on Alcoholism later became the Employee Assistance Professionals Association (EAPA), as it is known today (EAPA, 1996).

The 1980s brought about the evolution of the private-sector side of the EAP field. Individuals who had been trained in the public sector began moving to the private sector and established private companies to serve employers. The number of employers contracting for EAP services grew at a rapid pace during this decade as employers realized that they had to deal effectively with mental health and substance abuse problems to be competitive in the marketplace. During the 1980s, EAPA led an effort to establish the principal credential for professionals within the field, called the certified employee assistance professional. By 1996, the number of certified employee assistance professionals had grown to more than 4,000 (EAPA, 1996).

In the 1990s, the EAP field experienced the same kinds of transitions as other sectors in the health care industry. The public-sector EAP effort began to diminish as public funding decreased, and employers began to debate whether to have internal programs or to contract those services out to external vendors. The acquisition of local and regional companies offering EAPs began to take place as delivery systems began consolidating. Employers began to ask for “integrated services,” referring to the linkage of EAPs with managed care services. This integration creates system efficiencies and avoids the potential for overlap of services. Employers also began seeking the consultation of employee assistance professionals on a multitude of issues such as stress, violence, change, child and elder care, disability management, regulatory compliance, financial and legal matters, and critical incidents (EAPA, 1996).

For more than 60 years, the EAP field has grown from a simple approach of assisting major employers in dealing with their employees with alcohol problems to a sophisticated approach of servicing the employer as a consultant in the workplace on a wide array of behavioral issues. EAPs maintain a set of core technologies, and on this foundation, it has become recognized as a critical component in the effective management of difficulties of employees and reducing the impact of these problems on workplace productivity.


Currently, state and federal budget reductions are again creating pressures and incentives to integrate services. By now, many states have initiated integration of the state authorities for mental health and substance abuse. Although state agency integration is primarily an issue of merging staff and reducing duplication, in most states, the mental health and substance abuse treatment systems are still distinct and separate. Thus, differences in patient populations, organizational cultures, programmatic philosophies, and funding mechanisms will continue to inhibit full integration for some time.

We are in the process of moving ultimately toward integrated delivery systems. We have a long way to go to get there. It may take seven to ten years for that to occur.

Robert Valdez

Deputy Assistant Secretary for Health, Department of Health and Human Services

Public Workshop, April 18, 1996, Washington, DC

The IOM (1996) report on the future of primary care has called for the development of models of coordinated, integrated care, including better integration among mental health and primary health care professionals. Studies of existing models would help to identify the best practices in the coordination of all care, particularly primary and behavioral health care. Carved-out behavioral health services do not necessarily lead to poor coordination of care or to coordination poorer than that in a fee-for-service system. However, the separation of primary care and behavioral health care systems brings risks to coordination and integration that may not be in the best interest of patients and consumers.


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Copyright 1997 by the National Academy of Sciences. All rights reserved.
Bookshelf ID: NBK233224


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