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ESTIMATING the COST of PREVENTIVE SERVICES
in Mental Health and Substance Abuse Under Managed Care

Executive Summary

This document presents cost estimates for six preventive interventions previously identified through a literature review and analysis of peer-reviewed, published research in mental health or substance abuse services (Dorfman, 2000). That report was commissioned by the Center for Mental Health Services and yielded a number of well-designed research studies. Twenty-one of those studies supported six preventive interventions that demonstrated patient benefits (i.e., better outcomes) or lower use and cost of medical care. The report by Dorfman should be useful to the reader as a companion to this report, as it provides the background, criteria, and methodology for screening hundreds of articles, selecting and describing 54 studies, and further narrowing the field to 21 articles that directly support the six recommended services. Each intervention had at least two rigorous, peer-reviewed, published studies to support its inclusion.

In this technical report, models are presented to project the range of potential cost for the following interventions when they are provided to members of a managed care organization (MCO). The services span the developmental stages from prenatal to later life:

1. Prenatal and infancy home visits for high-risk mothers
2. Targeted cessation education/counseling for smokers
3. Targeted short-term mental health therapy
4. Health promotion through self-care education
5. Presurgical educational intervention with adults
6. Brief counseling/advice to reduce alcohol use

The models are spreadsheet-based and include the various factors (input variables) that drive the costs of each intervention: professional and clerical labor, supplies and materials, and general and administrative (G&A) overhead as well as profit margin. Based on the values published in the research studies reviewed by Dorfman (2000) and other published studies or surveys, each model included estimates of each intervention's probable users, units of service per user, and price per unit.

To achieve these estimates, a method of computer simulation in common use, known as "Monte Carlo," was applied to each spreadsheet model to estimate the potential variability in each input variable and combinations of input variables. This simulation method allows for a single, specific variable to be replaced by a distribution of all possible values. Each simulation resulted in a distribution or range of costs expressed as a per member per month (PMPM) cost across four "scenarios," from a Least Expensive Scenario to a Most Expensive Scenario. Each successive scenario represented increasingly higher estimates in the assumed input variables, such as the professional staff salaries or the number of enrolled women of child-bearing age. To achieve one number, all the variations in input variables or factors were run across thousands of iterations to produce a range of outcome costs with a median and midpoint. Further details on the Monte Carlo simulation are presented in the Technical Appendix, and its application to estimating use and costs can be reviewed in Broskowski and Harshbarger (1998).

The single PMPM cost reported in this publication represents the midpoint value between the median cost of the least expensive scenario and the median cost of the most expensive scenario. In their relative order of cost, here are the calculated midpoints between the median PMPM costs for the six interventions:

Even the most expensive of these interventions, Health Promotion Through Self-Care Education, would add less than 1 percent to the average health maintenance organization (HMO) premium, based on 1997 rates reported by Baker, Cantor, Long, and Marquis (2000). In fact, the average increase in premium across all six interventions would be less than 0.5 percent.

A Milliman and Robertson (2000) survey of 591 HMOs, with a one-third response rate, estimated national average HMO premiums in 2000 as $187.49 a month for a single employee. The average PMPM cost of all six preventive interventions combined is $0.77, which is only 0.41 percent of that average premium.

Since these low-cost interventions have been shown to improve medical outcomes, increase patient satisfaction, and reduce medical use and cost, and given that they would require an increase of less than 0.5 percent of the typical current premiums, MCOs should consider implementing such behavioral interventions. The reader should refer to the original studies, Dorfman's (2000) review of the original 54 published studies, and the attached Technical Appendix, which provides many of the details regarding cost assumptions used for each intervention.

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