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Are state Medicaid policies sentencing people with mental illness to prison?

Findings come amid a wave of scrutiny surrounding the cost and consequences of failing to adequately provide for mental health care

by Sadena Thevarajah

People with schizophrenia are more likely to end up in prison in states with tight Medicaid policies governing antipsychotic drugs, according to research from USC’s Leonard D. Schaeffer Center for Health Policy and Economics.

The study comes amid media scrutiny over whether cutbacks in mental health actually save money, when other costs are taken into account.

Is drug access to blame?

Some health plans require an extra approval step before tests or treatments can be ordered for patients. This step – called prior authorization – is intended to encourage physicians to select cost-effective options by requiring justification for the selection of more expensive options. Likewise, prior authorization policies adopted by state Medicaid programs aim to reduce costs associated with some medications, especially those drugs used to treat schizophrenia. However, an unintended consequence of these policies may be that more mentally ill patients are being incarcerated, raising questions about the cost effectiveness of these formulary restrictions.

Prior authorization of atypical antipsychotics was associated with a 22 percent increase in the likelihood of imprisonment.

In a study published July 22 in The American Journal of Managed Care, researchers found that states requiring prior authorization for atypical antipsychotics had less serious mental illness overall but higher shares of inmates with psychotic symptoms than the national average. The study concluded that prior authorization of atypical antipsychotics was associated with a 22 percent increase in the likelihood of imprisonment, compared with the likelihood in a state without such a requirement.

Dana Goldman briefing

Dana Goldman conducts influential health economics research. (Photo/Dave Scavone)

“This paper demonstrates that our policies around schizophrenia may be penny wise and pound foolish,” said Dana Goldman, director of the Schaeffer Center. “Limiting access to effective therapy may save states some Medicaid money in the short run, but the downstream consequences – including more people in prisons and more criminal activity – could be a bad deal for society.”

State policy implications

Researchers examined survey data from 16,844 prison inmates in states with and without restrictive authorization requirements overlaid with state Medicaid policies and data, as well as usage rates of atypical antipsychotics (a newer drug class that is frequently targeted by prior authorization requirements).

The study’s findings come amid a wave of scrutiny surrounding the cost and consequences of failing to adequately provide for mental health care, including the nexus between shortchanging mental health and rising prison expenditures.

“The media has picked up on how incarcerating the mentally ill raises a range of troubling concerns, from the high cost of incarceration to the inadequate treatment of mentally ill inmates, and the potential for self-inflicted harm among these patients,” said Darius Lakdawalla, Quintiles Chair in Pharmaceutical Development and Regulatory Innovation, and a professor at the Schaeffer Center. “At the same time, the American public is increasingly worried about untreated mental illness triggering violent behavior in the community. Our study suggests state Medicaid policies may be part of the solution to these problems.”

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