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Mental Health Costs and Access Under Alternative Capitation Systems in Colorado


  • Joan R. Bloom,

  • Teh-wei Hu,

  • Neal Wallace,

  • Brian Cuffel,

  • Jaclyn W. Hausman,

  • Mei-Ling Sheu,

  • Richard Scheffler

This project is supported by the National Institute of Mental Health, Grant R01 MH 54136. We would like to acknowledge other members of the Berkeley team which includes Lonnie Snowden, Ph.D., William Hargreaves, Ph.D., William McConnell, Ph.D., Ann Morris, Ph.D., and Kelly Devers, Ph.D., as well as the Colorado team which includes Nancy Wilson, M.A., Donna Bass, B.A., and seven interviewers, Robin Levin, Sylvia Garcia, Ira Slotkin, Trish Neveils, Cindy Lurie, Deb Sprague, and Nick Butler. We would also like to acknowledge the contributions of Dale Peterson, MSW, MPA, CEO of Weld CMHC, Bill Bush, MPA, Richard Ellis, Ph.D., Gary Toerber, Ph.D., Tom Barrett, Ph.D., and Anita Coen, MSW, of Colorado's Mental Health Services.

Address correspondence to Joan R. Bloom, Ph.D., Professor, School of Public Health, University of California at Berkeley, 409 Warren Hall MC7360, Berkeley, CA 94720-7360. Teh-wei Hu, Ph.D., is a Professor of Public Health at the University of California, Berkeley. Neal Wallace, Ph.D., is an Assistant Professor in the Hatfield School of Government at Portland State University. Brian Cuffel, Ph.D., is the Vice President for Research at United Behavioral Health, San Francisco, CA. Jaclyn W. Hausman, M.P.P., M.P.H., is a Research Associate at the University of California, Berkeley. Mei-Ling Sheu, Ph.D., is an Assistant Professor at Taipai Medical School, Taiwan. Richard Scheffler, Ph.D., is a Professor of Public Health at the University of California, Berkeley.


Objective. To examine service cost and access for persons with severe mental illness under Medicaid mental health capitation payment in Colorado. Capitation contracts were made with two organizational models: community mental health centers (CMHCs) that manage and deliver services (direct capitation [DC]) and joint ventures between CMHCs and a for-profit managed care firm (managed behavioral health organization, [MBHO]) and compared to fee for service (F.F.S.).

Data Sources/Study Setting. Both primary and secondary data were collected for the year prior to the new financing policy and the following two years (1995–1998).

Study Design. A stratified random sample of 522 severely mentally ill subjects was selected from comparable geographic areas within the capitated and FFS regions of Colorado. Major variables include service cost, utilization, and access (probability of service use) derived from secondary claims data, subject reported access collected at six-month intervals, and baseline outcomes (symptoms, functioning, and quality of life).

Principal Findings. In comparison to the FFS area, cost per person was reduced in the capitated areas in each of the two years following implementation. By the end of year two, cost per person was reduced by two-thirds in the MBHO areas and by one-fifth in the DC areas. Reductions in access were found for both capitated areas, although reductions in utilization for those receiving service were found only in the MBHO model.

Conclusions. Medicaid mental health capitation in Colorado resulted in cost reducing service changes for persons with severe mental illness. Assessment of outcome change is necessary to identify cost effectiveness.