The Outsourcing of Mental Healthcare to the Public Sector


Who should be delivering healthcare? Private companies? The government? The debate over what works best will go on for years. As it continues, what clearly isn’t working is this strange hybrid situation we current have in which some aspects of healthcare are predominantly within the private world (including “not for profit” organizations that operate very much like private entities) while others are much more likely administered by federal, state, and local governments.

Which type of healthcare goes one way or the other is fairly predictable, and is primarily driven by, big shocker, money. Certain areas of healthcare are simply more profitable than others. Surgery, imaging and radiology, cardiac care – these things tend to bring in dollars so it is no surprise that private healthcare providers build lots of capacity and offer plenty of access for these services. Primary care, not so much, but since primary care clinicians are the ones who often refer patients to these more profitable areas they tend to be tolerated and kept close within the organizational structure. What type of care is at the bottom of the heap? That would be mental health, which tends to be time-intensive, less procedure-based, and disproportionately needed by people with fewer financial resources.

If times get tough, then, it can be very tempting to drop the less profitable areas of your business while holding on to the more profitable ones, and this is exactly what has been happening when it comes to large private hospitals and clinics and mental health care. And who is expected to pick up the slack for providing critical areas of care that tend to make less money? That would be you – in the form of state or county clinics that are funded and run by taxpayers.

This form of public subsidy that permits private healthcare organizations to retain more profitable sectors of medicine while offloading the less profitable ones to the public has been going on for decades in mental health. In many areas around the county, things have now reached crisis levels, as anyone who has recently needed outpatient or inpatient mental health treatment (and who isn’t wealthy enough to pay out of pocket for it) can well attest. Hospital psychiatry units are closing fast, almost as fast as elective surgery centers are opening up.

And while these private healthcare organizations may save money in the short-term, the long-term effect may be to convince more and more people that the whole private healthcare thing is fundamentally flawed and needs to be taken over (all of it) by the government.

Short of that, however, there are some things that can help bring this system into better balance.

  1. Major healthcare providers are typically subject to regulation, often by state government. These regulatory bodies might consider using this power. Sure, big hospital, you can open up that shiny new vascular surgery center, but you have to keep your inpatient psychiatry unit going as well.
  2. Insurance providers, starting with federal and state ones like Medicare and Medicaid, could adjust their payment rates to bring mental health care closer to parity with physical health. Just imagine what might happen if a 3-hour autism evaluation (a complicated and potentially life changing assessment) was compensated anywhere near the rate of a 3-hour procedure or medical test. If this happened, I guarantee you that parents would no longer be waiting a year or more to get their child evaluated.
  3. We can continue to move away from traditional “fee for service” models, that provide financial incentives to do as many expensive tests and procedures as possible, to models that pay healthcare organizations a fixed amount of money per individual per month. These “capitated” models tilt the financial incentive the other way, rewarding organizations to keep people healthy. Given the research showing that mental health is a foundation for all health, the value of good mental health care, both preventively and for those already struggling, becomes hard to ignore.

In summary, the ability of big private healthcare organizations to simply “opt out” of providing critically needed mental healthcare cannot continue and needs to be actively confronted. It is not the responsibility of the public taxpayer to balance the budgets of big corporations through the outsourcing of mental healthcare to publicly run clinics and hospitals. We can do better using existing tools that don’t require a complete overhaul of the system….yet.


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