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Managed Care, Mental Health, and the Marketplace

Howard F. Stock, MD
JAMA. 1994;271(8):588. doi:10.1001/jama.1994.03510320027023.
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To the Editor.  —Drs Jellinek and Nurcombe1 in their excellent article on managed care in psychiatry make one error that it is important to correct. They describe the explosion in psychiatric care as a "free-market competitive expansion." In fact it was not. The explosion (as with all medical costs) occurred in a cost-plus market in which increased costs were simply passed on in the form of increased premiums. It was not competition for limited resources: virtually unlimited capital was made available. This occurred because neither the majority of users of medical services (patients) nor the buyers of medical coverage (employers or government) cared about cost. There was no buyer-seller negotiation as there would be in a free market. Had there been, the explosion could not have occurred. When buyers of coverage began to protest about the rising costs, managed care became a profitable business partner in the economic equation


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