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The Mental Health Parity Act of 1996 left me with a "mental health tax" of $4,300 — more than my federal income tax liability for last year.
As a policy analyst for a free-market consumer group, I research how government regulation makes health care less affordable and leaves patients with fewer options. Last month, a letter arrived from my health insurance company that made my work a little less academic and a little more personal. Thanks to changes mandated by the Mental Health Parity Act of 1996, seeing my therapist will be about $4,300 more expensive in 1998. (Yes, I am in therapy. Everyone in this town either is or should be.)
Last year, my health plan had a $10,000 limit on mental health benefits. With this limit in place, they would have been happy to cover $4,360 of the cost of my individual and group therapy this year. Unfortunately, the Mental Health Parity Act made it illegal to have lower benefit limits for mental health care.
When my health plan raised the mental health limit to achieve "parity," they effectively added an expensive benefit. Like most of the industry, they also tightened mental health benefits in other ways to keep premiums stable. Under the new rules, they will cover only $60 of my therapy, leaving me with a "mental health tax" of $4,300 — more than my federal income tax liability for 1997.
Senators Pete Domenici (R-NM) and Paul Wellstone (D-MN) championed the "parity" law as a way to expand mental health coverage. Yet, my mental health benefits didn’t expand. They simply shifted from people like me who stay below the limits to people with serious conditions who would blow right through them. That’s not an expansion. That’s robbing Peter to pay Paul.
This shift may help patients who require hospitalization for a chronic mental illness. However, it will hurt those who seek counseling to get through or prevent a divorce; cope with a rape; grieve the loss of a loved one; or work through their pain and isolation so they can step away from the ledge of suicide. Perversely, by making early care more costly, this mandate will cause many emotional problems to intensify as they go untreated.
A string of government blunders. The Mental Health Parity Act backfired. Yet, it is just the latest in a string of government health care blunders, each ostensibly meant to protect patients from the higher costs and reduced choices brought on by previous blunders. Among the government’s more prominent blunders is a bias in the federal tax code dating back to 1954 that lets employers — and only employers — buy health insurance tax-free. It, too, was ostensibly intended to expand coverage, yet gave rise to numerous unintended consequences.
This bias encourages us to pay for routine medical care through insurance, the equivalent of using auto insurance to pay for oil changes. It makes individuals pay up to twice what employers pay for equally priced coverage.1 Thus, six out of seven people with private insurance do not own their own policies, their employers do.2 It causes us to lose coverage when we switch jobs. It pushes prices higher, for we consume more medical care when someone else pays. It traps us in our employers’ plans, leaves us with fewer choices, and stifles competition and quality.
With consumers unsatisfied and disengaged, special interests (psychologists, chiropractors, and so forth) have won passage of laws requiring our insurance to cover their services. The states have enacted about 20 such laws each; the Mental Health Parity Act is one of the first at the federal level. These laws deny access to coverage by raising its cost by 30 percent or more3 and spurring benefit shifts like the one that came my way.
Put consumers in the driver’s seat. Unlike our current employer-based system, a market where individuals buy their own health insurance would give consumers more choices, tame health care inflation, and eliminate the problems of portability, special interest mandates and having to share sensitive medical information with the boss. Ultimately, this would require tax reform, such as a low, flat, loophole-free income tax. In the meantime, medical savings accounts (MSAs), more equitable tax treatment for individuals and other baby steps can undo some of the damage caused by years of government blunders.
The mental health community had the right idea when they set out to expand mental health coverage. Unfortunately, by pursuing that goal through a coercive mandate — rather than consumer choice — they blundered. My story is testimony to that.
1Joseph L. Bast, Richard C. Rue and Stuart A. Wesbury Jr., Why We Spend Too Much On Health Care, The Heartland Institute (Chicago), 1993, p. 63.
2Robert L. Bennefield, "Health Insurance Coverage: 1996," Current Population Reports, P60-199, U.S. Census Bureau, September 1997.
3John C. Goodman and Merrill Matthews Jr., "The Cost of Health Insurance Mandates," Brief Analysis, National Center for Policy Analysis, August 13, 1997.