Objective. To determine whether managed mental health care for Medicaid enrollees in King County, Washington, has led to indirect cost-shifting to substitute treatments, such as jails and state mental hospitals that are free goods to providers.
Data Sources. Complete service records for 47,300 adults who used at least one of the following systems from 1993 to 1998: King County jail system, Medicaid, or the King County mental health system. Data were also obtained from the Washington State Hospital System.
Study Design. A quasi-experimental analysis that compares the difference in outcomes between the pre- and post-managed care periods for Medicaid enrollees compared to non-Medicaid enrollees. The outcomes—jail costs, state hospital costs, and county outpatient mental health costs—were estimated with two-part difference-in-differences models. The regressions control for person-level fixed effects on up to 66 months of data per person.
Data Collection Methods. Administrative data were collected from the jail, Medicaid, and mental health systems, then merged and cleaned. Additional data on costs were obtained in interviews.
Principal Findings. There is a striking increase in the probability of jail use for persons on Medicaid following the introduction of managed care. There was a significant decrease in expenditures in the county mental health system for outpatient care.
Conclusions. Managed care led to indirect cost-shifting, probably through poor access to services, which may have led to an increased probability of jail detention.