Risk Contracts in Managed Mental Health Care

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Abstract
Prologue: The term risk contracting has become a familiar part of the vocabulary and the landscape of managed care. Risk contracting refers to an arrangement whereby the cost or claims risk for an insured population is borne by the entity that is designated to bear risk: a prepaid plan or, as is increasingly the case for mental health care, a specialty managed behavioral health care plan. Such plans have gained an enormous foothold in the United States over the past five years; one estimate is that virtually half of all Americans with insurance (including public plans) are enrolled in some type of “carve-out” managed behavioral health care plan. In addition to bearing claims risks, these plans are responsible for providing and managing mental health care services. In this paper economists Richard Frank, Tom McGuire, and Joe Newhouse make the case for risk contracting in behavioral health care, describing the economics of risk contracting and its implications for the quality and cost-effectiveness of a lar...