Managed Care and the Next Generation of Mental Health Law: An Update

Psychiatric TimesPsychiatric Times Vol 15 No 12
Volume 15
Issue 12

To understand how mental health law is changing, one must begin with a sense of its traditional orientation. The underlying principle of the law that governs psychiatric practice has been that patients require protection from unjustified restrictions on their liberty, especially at the hands of the state.

What will mental health law look like in the future? The answer to this question is of no small concern to psychiatrists, since our clinical work is shaped in infinite ways by the laws that govern our practices. Nearly three years ago, I argued that we were on the verge of a major redirection in the evolution of mental health law, a change driven by the powerful forces reshaping our systems of care: managed care, privatization of public sector services and use of nontraditional treatment settings, among others (Appelbaum, 1996). I would like to offer some further reflections and an update on this process.

To understand how mental health law is changing, one must begin with a sense of its traditional orientation. The underlying principle of the law that governs psychiatric practice has been that patients require protection from unjustified restrictions on their liberty, especially at the hands of the state. As early as the 1860s and 1870s, when allegations of patients being railroaded into asylums by relatives and conniving physicians were surfacing throughout the United States, the courts and legislatures responded by creating a body of law designed to protect patients' interests. Judicial oversight of involuntary commitment was established in many states, and patients in mental health care facilities were guaranteed such rights as unfettered contact with their attorneys and public officials, an opportunity to worship according to their beliefs, and even the right to trial by jury.

This governing paradigm continued for more than a century, dominating the widespread reforms in mental health law in the 1970s. As the standards for commitment tightened, criminal-style courtroom procedures were introduced and rules developed to preclude involuntary treatment with antipsychotic medications. The justification for these measures continued to protect patients' liberty from unwarranted intrusion.

Protection and advocacy systems, patient representatives and other mechanisms were created to defend patients against the risk of illegitimate incursions on their freedoms. Even today, when new restrictions are placed on the use of seclusion or restraint or on the participation of psychiatric patients in research, the motivation is the historic concern with protecting patients' liberty.

A new paradigm for mental health law may be emerging, however, growing out of the cataclysmic changes in how we pay for and deliver psychiatric care. This model may give less emphasis to patients' liberties, and focus more on ensuring that appropriate care is delivered in a manner that minimizes the costs involved. Law changes slowly. Indeed, it is commonplace in legal studies to note that alterations in the law may lag a decade or more behind shifts in the substantive areas regulated. At this point, therefore, we can only hint at what may be looming ahead. But these hints may be enough to help us anticipate where mental health law is headed. What follows are several areas of change in psychiatric services and the effects they are likely to have on the shape of the law.

Managed Care

Commentators frequently note that the near-complete demise of indemnity insurance has left us with a system that might better be called managed cost than managed care. The emphasis of the current system is on restraining utilization rather than on customizing and optimizing the services that patients receive. HMOs and behavioral health managed care carveouts are given incentives to limit the amount of care provided and, as capitation becomes more common (or mechanisms such as case rates are introduced), those incentives are passed along to the caregivers themselves. In such an environment, the traditional concern that psychiatrists will overtreat patients-hospitalizing them unnecessarily and giving them medications they do not need-seems ironic at best.

The most prevalent danger, of course, is that patients in need of care will not receive it. If mental health law is to retain its relevance, it will need to shift its orientation-at least in part-from patients' negative rights (e.g., the right to be left alone) to their positive rights (e.g., the right to receive needed care). This will not be an easy reorientation for a system that evolved in order to protect patients from the very care they now seek, but are being denied. Nonetheless, there are more than a few signs that the shift is already underway.

In my home state of Massachusetts, for example, the major state-funded patients' rights protection group, the Mental Health Legal Advisors, once roamed the halls of state hospitals to identify instances of allegedly unnecessary seclusion or other infringements of patients' liberties. Now its staff members provide the most detailed tracking available of the state's Medicaid mental health care program, the operation of which has been turned over to a private managed care company.

The private mental health care bar also has joined the fray. Lawyers who once made their living challenging involuntary treatment practices are now suing insurers and managed care companies on behalf of plaintiffs to whom care has been denied. The effectiveness of these efforts has been limited by ERISA (the Employee Retirement Income Security Act). ERISA protects administrators of employer-provided health benefits from most forms of liability. But clever use is being made of the Americans with Disabilities Act and of ERISA itself to make inroads on the companies' immunity. There is also much talk in Congress of altering ERISA to permit victimized patients to hold insurers and their managed care partners accountable for denials of care.

Similarly, legislatures in almost every state have considered, and sometimes passed, statutes that restrict the ability of managed care companies to deny care to patients. These statutes may require notice of the grounds for rejection of payment for a service, and provide the right to an independent appeal of the decision.

President Clinton has implemented by executive order a similar set of protections for patients receiving care as part of the federally funded Medicare and Medicaid programs. Laws guaranteeing access to care are widespread in most other industrialized countries, many of which have mandatory national health insurance. We are likely to see a growing body of such laws covering health care in general, and mental health care in particular, in this country as well.

Evidence-Driven Policy-Making

As the percentage of gross national product devoted to health care has soared in recent decades, the serious study of health care policy has increased proportionately. With policies being crafted on a state and national level, there is an urgent need for comprehensive data on which to base decisions. Medical records, including psychiatric records, which once had value only to caregivers, have now become prized resources for policy "wonks." Their covetousness of this information challenges another pillar of mental health law: the protection it has traditionally provided for the confidentiality of patients' communications.

There has been widespread recognition of the critical need for confidentiality in psychiatric treatment. Every state in this country has some form of psychotherapist-patient testimonial privilege statute, preventing patients' disclosures in treatment from being revealed in legal proceedings without their consent.

The U.S. Supreme Court's 1996 decision in Jaffee v Redmond extended such a privilege as a matter of common law to the federal courts, and offered strong support for the importance of protecting the privacy of the therapist's office. Other statutes in most states provide penalties for the unauthorized disclosure of medical records information, with psychiatric information often given special protection. But all this may be about to change.

For several years now, Congress has considered legislation that would abrogate many of the traditional protections for medical records information, including psychiatric records. Each year these bills, supported by a coalition of employers, insurers, computer companies and researchers who crave access to these data, inch closer to passage. These groups envision regional or even national data banks, with each person's records linked across their lifetimes by means of unique identifiers. Clinicians would have similar identifiers, allowing near-instant determination of patterns of care.

The threats to privacy by such an agglomeration of data are staggering, but the pressures to have this data available for policy decisions-many of which would presumably lead to reductions in expenditures on health care-are so strong that they may prove impossible for Congress to resist. A century-and-a-half of mental health privacy law could be thrown out with the stroke of a presidential pen.

Substituting Economic for Legal Controls

Changes in the mental health care system are altering mental health law in different directions. One direction opens a new area of patients' rights (the right to access care), and a second closes a traditional area of patient protection (privacy rights). But there is a third way in which mental health law may be affected by the current changes. It may, in some areas, simply become irrelevant.

Commitment law offers the best example. The traditional function of commitment law has been to define that group of mentally ill persons susceptible to involuntary hospitalization, and to set limits on the period during which they could be kept against their will. When the current generation of commitment laws were adopted in the 1970s, lengths of stay on acute units were measured in weeks or even months. Laws specified that patients could not be held without a court hearing for more than five or 10 days, effectively limiting the emergency commitment power of psychiatrists and hospitals.

Now, however, typical lengths of stay on acute units are only five to seven days. It is difficult for the legal system to act quickly enough to make a difference in how long patients are held. Instead, managed care companies, and by implication the market, have taken over that task. The legal system has become substantially irrelevant to the task of regulating the duration of involuntary commitment. Consequently, pressure to change the law in one way or another has diminished. Proposals were made this year in Massachusetts, for instance, stimulated by a newspaper expos of alleged abuses, to shorten the period of time that patients could be held prior to a court hearing. However, these proposals died in the legislature upon recognition that almost no one was being held for the maximum 24 days theoretically available under existing law.

A complementary process can be seen at the time of hospital admission. Strict commitment criteria emphasizing dangerousness to self or others were an innovation in the 1960s and 1970s. Courts and legislatures attempted to limit the pool of patients eligible for involuntary commitment in this way. Today, however, these criteria have been adopted by many managed care companies as the sole basis for hospitalization. Whether patients desire hospitalization or not, they cannot get approval of payment for their care unless they meet dangerousness criteria. Again, the law as a mechanism of control has been replaced by economicfactors.


Law is a creature of policy, and policy responds to changes in the economic, social and political environment. The remarkable stability of mental health law since the middle of the 19th century is in the process of being shaken by truly dramatic changes in the delivery of psychiatric care. It is likely, as this evolution continues, that the law's focus will broaden in some areas and narrow in others, perhaps to the point of irrelevance. Guiding these developments-and trying to shape the resulting doctrines, case law and statutes in ways that are favorable to psychiatrists and their patients-is our agenda for the next generation.




Appelbaum PS (1996), Managed care and the next generation of mental health law. Psychiatr Serv 47(1):27-28. See comments.


Dr. Appelbaum is professor and chair of the department of psychiatry at University of Massachusetts Medical School and secretary of the American Psychiatric Association.

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