Costs and incentives in a behavioral health carve-out

A carve-out of mental health and substance abuse services initiated in 1993 by the Group Insurance Commission (GIG) of the Commonwealth of Massachusetts resulted in changes in the costs of those services. Those changes were related to incentives in the contract between the GIC and its managed behavioral health vendor. Total and plan costs were reduced by 30-40 percent after adjusting for trends. Incentives to produce savings of this magnitude not only were a consequence of the payer/vendor contract but, we speculate, derive from the growth potential facing companies in the managed behavioral health care market.