FOR RELEASE
UPON DELIVERY

ALL HEALTH INSURANCE PLANS MUST COVER MENTAL ILLNESS

 

STATEMENT AT PUBLIC HEARING
NEW YORK STATE JOINT LEGISLATIVE COMMITTEE ON HEALTH INSURANCE PLANS
THURSDAY, NOVEMBER 13, 1958
STATE OFFICE BUILDING, BUFFALO, N.Y.
by
MIKE GORMAN, Washington, D.C.
Executive Director, NATIONAL COMMITTEE AGAINST MENTAL ILLNESS

Senator Metcalf and members of the committee:

I feel it a particular privilege to testify before this very
important committee this morning, because I know of no greater
problem in the field of mental illness than the inability of most
people afflicted by emotional disturbances to pay for the psychi-
atric care which they so desperately need.

Sigmund Freud, the father of modern psychiatry, was deeply
aware of the economic barrier which prevented the great masses of
people from gaining access to psychiatric treatment. Toward the
close of a life dedicated to the relief of suffering humanity,
Freud wrote that "at present we can do nothing for the crowded
ranks of people who suffer exceedingly from neuroses."

Looking a bit into the future, Freud expressed his hope for
the dissemination of psychiatric care to the great masses of

people in the following words written in 1919:
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"Now let us assume that by some kind of organization we were
able to increase our numbers to an extent sufficient for treating
large masses of people. Then on the other hand, one may reasonably
expect that at some time or other the conscience of the community
will awake and admonish it that the poor man has just as much right
to help for his mind as he now has to the surgeon's means of saving
his life; and that the neuroses menace the health of a people no
less than tuberculosis, and can be left as little as the latter to
the feeble handling of individuals,"

In 1958, some forty years after the aforementioned statement
by Freud, there appeared a remarkable book "Social Class and
Mental Illness" by Dr. Frederick C. Redlich and Dr. August B.
Hollingshead of Yale University. In essence, this book is a
meticulously detailed study of the economic factors involved in
the availability of psychiatric care to the American people, It
includes a study of the psychiatric care available to, and the
economic costs borne by, close to 2,000 patients and their families.

The patients studied in the survey were divided up into five
classes according to their residence, occupation and formal edu-
cation. These criteria basically reflected their economic status.
They ran the scale from the wealthy group in Class I to the low-
income group in Class V.

At the outset of the eight-year study, the authors posed this
fundamental question: "Are expenditures on psychiatric care linked
to the class status of the patients?”

They have produced 400 pages of documentation in answering

the question affirmatively. Since this committee is most
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interested in the care of psychiatric patients in general hospitals
or in private mental hospitals, I will restrict most of the data to
that area. The Class V patients-~the low income group--rarely use
any general or private psychiatric facilities. In the other four
classes, the length of hospital stay is directly related to the
pocketbook. For example, the average length of stay for the Class
I group is 138 days as against 27 days for the low-income Group IV
patients. Furthermore, the authors document the very interesting
point that the wealthy patients even get much better discount rates
based upon their class position.

"Clearly, a patient's class status is linked to the length of
time he remains in a private mental hospital. .. . Private
mental hospitals are oriented primarily toward the aristocratic
tradition," the authors report.

They also explode the sacred myth of charity care for indigents
in the following incisive comment:

"The folklore of medical practice fosters the belief that a
considerable portion of patients are carried free by practitioners.
This belief may be true in the general practice of medicine, but
it needs to be modified before it fits the facts of private psy-
chiatric practice. Only nine patients were carried free by private
practitioners, and no psychiatrist carried more than one free
patient. . . . Not a single psychoanalyst and analytically-
oriented private practitioner is treating a patient free, although
a few patients are treated at slightly reduced fees."

I was most shocked by the amount of caste distinction prevalent

in public psychiatric clinics. I was under the impression that
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these clinics treated all people equally, regardless of social
status. The Redlich and Hollingshead study flatly refutes this.
Leaving aside Class I patients, who rarely use a public clinic,
the survey documents the fact that Class II patients receive the
most therapy and Class V patients the least, leading the authors
to conclude that "the subtleties of status enter into the practice
of psychiatry in clinics as well as in private hospitals and in
private practice."

The economic discrepancies are really appalling in this so-
called democracy of ours. For example, the average cost of caring
for the Class I and II well-heeled psychotics in private facilities
is approximately $3,400; the cost for the low-income Class V psy-
chotic is $13. Some of the bills for the care and cultivation of
wealthy psychotics are really staggering. One family studied in
the survey paid $160,000 over nine years for analytic therapy and
treatment for a family member in four private hospitals, and they
received heavy discounts from each hospital.

All of this data, and much more which limitations of space
prevent me from introducing, led the authors to this somewhat
bitter summation:

"Social inequalities in treatment are seen most clearly among
schizophrenic patients. The Class IV or V schizophrenic, once
cast off by his family and community, may receive one or two series
of organic treatments in a public hospital. If these treatments
do not succeed, the patient drifts to the back wards where, in

stultifying isolation, he regresses even more into a world of his
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own. Rarely, however, do we see in the Class I or II schizophrenic
patients in private hospitals, who may get the benefit of psycho-
therapy and environmental treatment, deterioration comparable to
what we see regularly in the chronic wards of the state hospitals.
Indeed, in wealthy families who can afford to provide show farms
and boat yards as occupational therapy for their schizophrenic
scions, we have observed over a period of years unmistakable
schizophrenic symptomatology, but little deterioration. ..

These differences add up to deep social fissures in psychiatric
treatment, such as we do not encounter in the rest of medicine with
the possible exception of peacetime cosmetic surgery."

The Redlich-Hollingshead data is but one of a number of im-
pressive studies of the economic problems involved in getting psy-
chiatric care. At the 1957 convention of the American Psychiatric
Association, Mrs. Edith Alt, of the Health Insurance Plan of
Greater New York, presented some interesting figures on income
levels in relation to obtaining private psychiatric care. A study
of the subscribers to HIP revealed that only about 10 per cent of
the group is in a financial position to buy even minimal private
psychiatric care. She pointed out that a family of four with an
income of $10,000 would not have much more than $20 a week for pay-
ment of psychiatric fees. At the present level of private psy-
chiatric fees in New York, this would buy from 30 to 45 minutes a
week of psychotherapy. On the basis of a great deal of data col-
lected by her organization, Mrs. Alt conciuded:

"Tt 1s probably no exaggeration to acknowledge that this

challenge of providing psychiatric care, particularly on an
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ambulatory basis, for low and middle income groups may well head
the list of unresolved health service problems facing our country."

The solution to this critical problem seems to me rather
simple. The non-profit and commercial insurance companies must
cease and desist from any further discrimination against mental
illness in their basic policies. The present insurance coverage
of mental illness is sporadic and really an actuarial joke. Let
me cite you a few examples taken from the 1955 official Blue Cross
Guide published by the Blue Cross Commission.

If you live in the Commonwealth of Pennsylvania, the insura-
bility of acute mental illness depends upon the city in which you
reside. If you live in Harrisburg, you are entitled to only ten
days of hospital coverage during your entire lifetime. In Phila-
delphia, with the same illness, you can get 20 days of hospitali-
zation a year, and in Allentown you can get 30 days a year. If
you live in Pittsburgh, you can stay in the hospital until your
malady is diagnosed as mental illness. At that awful moment you
are no longer covered, and you have to either pay out of your own
pocketbook or get out of the hospital.

As you members of the committee know, the situation in New
York is even worse. In the city of Buffalo, where we are presently
assembled, you are covered until diagnosed. The same holds true
for the capital city of Albany. If you live in Syracuse, Utica,
Watertown, or Jamestown, you better not get mentally ill--you can't
get one single solitary day of coverage in your entire lifetime.

If you live in the great city of New York, you get only ten days
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a year if they use the shock machine on you. If they do anything
else, such as psychotherapy, you are not covered. However, you
can get 21 days of surgical coverage from the day of operation,
although I don't know what this covers outside of the possible re-
moval of the patient's head.

If you live in other parts of the country, you are much more
fortunate. In Cleveland and Cincinnati, you can get from 70 to 120
days a year of hospital coverage for mental illness. If you live
in the empire of Texas, where everybody is supposed to be normal,
you can get 70 days of hospital coverage for each confinement. If
you live in California, for once it is better to live in Los
Angeles. You can get 70 days of coverage in Los Angeles, but if
you live in Oakland, for example, you get none.

The whole thing is actuarially absurd. For example, Cleveland
Blue Cross can cover mental illness for 120 days in a year, but
Columbus Blue Cross can't cover it at all. It is the same kind of
illness, it has pretty much the same kind of diagnosis, and yet
geographic location pretty much determines the length of coverage.

Why these differences in coverage? They really reflect two
important factors--the varying prejudices of individual insurance
companies and the general apathy of the public.

Take the example of one of the most enlightened insurance
companies in the country, Cleveland Blue Cross. In 1934, when it
was founded, it provided 21 days of hospital care for physical
illness, but it specifically excluded "nervous and mental condi-

tions." In 1939, the 21 days of coverage was extended to mental
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conditions. Between 1945 and 1953, the days of coverage were ex-
tended from 21 days per year for physical and mental illness to
120 days per year.

How did Cleveland do this? As John R. Mannix, executive vice
president of the Cleveland plan, explained to the American Psychi-
atric Association last year, it came about "only as a result of
public demand and could come only as fast as the public was willing
to meet the necessary cost of such care on a prepayment basis."
What does it cost the average family in Cleveland? It costs $12.40
a month for a comprehensive 120 day semi-private contract and a
broad medical-surgical contract covering both physical and mental
illness. It is important to note also that Cleveland Blue Shield
provides the same physicians! benefits in psychiatric cases as in
other medical cases. Like the hospital plan, these benefits cover
physicians! services in hospitalized cases for a period of 120 days.

Some actuaries say that the addition of psychiatric care to
insurance coverage will bankrupt the companies. What are the facts?
Cleveland Blue Cross has been covering mental illness for approxi-
mately 20 years. The cost of such care has been running somewhat
less than one per cent of total hospital claims of all types.

Then there is the old bromide about the length of hospital
stay of psychiatric patients. In other words, people love schizo-
phrenia so much that they will do anything to prolong its miserable
course. What are the facts? While the Cleveland Blue Cross plan
provides 120 days of hospital care for mental illness, the average

length of stay of psychiatric patients is only about 30 days.
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Furthermore, insurance actuaries argue that as you increase the in-
surance coverage of mental illness, you will prolong the hospital
stay of psychiatric patients. The Cleveland experience is exactly
the reverse of this. Although the days of coverage were extended
from 21 to 120 days between 1945 and 1953, the average length of
stay of the psychiatric patient decreased from 37 days in 1947 to
29 days in 1956. This latter figure is undoubtedly due in great
part to improved treatment procedures now available to psychiatric
patients.

The Cleveland Blue Cross experience is not atypical; it is
really quite representative of the experience of most insurance
plans which cover mental illness without discrimination. Take the
cost of hospital coverage. Dr. Louis Reed, formerly a health econ-
omist with the United States Public Health Service and one of the
nation's top authorities on health insurance, made a comprehensive
study of the costs of coverage of mental illness which he reported
to the American Psychiatric Association.

"As regards costs, at present about two per cent of all pa-
tient days in short-term general hospitals are provided to patients
in the psychiatric units of these hospitals. This should indicate
that on the basis of prevailing practices, full coverage of psychi-
atric cases in the general hospitals should not increase a plan's
cost by more than two per cent," Dr. Reed told the association.

. . . "One Blue Cross plan, which covers mental cases for up to
120 days in general hospitals and 30 days in other hospitals, re-

ports that its payments for mental, psychoneurotic, and personality
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disorder cases amount to 3.2% of its total in-patient payments.

An insurance company estimates that under its basic hospitalization
plan, three to five per cent of its hospital expense is for psycho-
neurotic disorders."

The National Association of Private Psychiatric Hospitals re-
cently issued a study which confirms both the findings of Dr. Reed
and of the Cleveland Blue Cross plan. For example, it reports the
actuarial experience of the Dallas Blue Cross plan, which since
1941 has covered mental and emotional illnesses, alcoholism, and
drug addiction without discrimination. In a cost study of more
than 12,000 consecutive patients, mental and emotional disorders
accounted for only 2.7% of the total claims of the Dallas plan.
Compared to this, tumor cases accounted for about five per cent of
the claims, and heart diseases between five and six per cent of
the claims.

The persistent myth about the excessive length of hospital-
ization for psychiatric illness is also exploded by much additional
data across the country which corroborates the Cleveland Blue Cross
experience, For example, Blue Cross of Southern California reports
that mental and emotional cases have an average hospital stay of
15.8 days as against 45.8 days for tuberculosis and 13.9 for virus
diseases.

At the Syracuse hearing of this committee, you received evi-
dence from the managing director of the Rochester Blue Cross plan
that the average stay in a psychiatric facility is about 21 days,

from which he concluded that a 30-day hospital benefit is sufficient
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for the vast majority of patients. At that same hearing you re-
ceived impressive data from Strong Memorial Hospital, which has
one of the finest psychiatric wings in the nation. Over a ten
year period, Strong Memorial has given an average of 11,000 in-
patient days of care a year to about 700 patients. The average
hospital stay in the psychiatric wing has been about 16 days.

Over 90 per cent of the patients treated at Strong Memorial have
been discharged back to the community, their jobs, and normal pro-
ductive lives.

All of the aforementioned data, and much more which time pre-
vents me from including, offer incontrovertible evidence that emo-
tional illness can, and should be, covered for a minimum of 30
days a year by every health insurance plan. Furthermore, I want
to make it crystal clear that this should be included in the basic

coverage of the plan. I am against an extra rider for mental 1i11-

 

ness which asks the family to pay an extra charge for this cover-

age. This is actuarial nonsense. If the Insurance companies of

 

America cannot cover the most prevalent illness in the nation in

 

in their basic policies, they really forfeit the right to the pa-

 

tronage of the people.

 

I know that there are serious and controversial problems in-
volved in the rising costs of Blue Cross premiums due to increased
professional salaries, a rise in the cost of equipment, and in-
creased demands for a higher level of hospital care. Rate adjust-

ments have had to be made, here in New York and elsewhere.
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However, I do not think that Blue Cross and Blue Shield rates
should be as high as they are. At public hearings of the Presi-
dent's Commission on the Health Needs of the Nation, of which I
was staff Director, we received an enormous amount of data indicat-
ing excessive over-hospitalization of patients by doctors. One
reason for this over-hospitalization lies in the narrow limitation
of many insurance contracts. For example, in thousands of cases
patients are hospitalized for diagnostic procedures which are not
covered if given outside of the hospital. I think these procedures
should be covered on an out-patient basis; health insurance must
reach the point where it covers physicians! care in the office or
the clinic.

Doctors have additional reasons for hospitalization of pa-
tients. It is convenient for them to have the patients in one
place so that they can make quick morning rounds and then get on
to the 50 patients in the waiting room at their office. Further-
more, in this way the doctors are assured that their bills will be
paid, and this is no minor incentive in the over-hospitalization
of patients.

Many of the thoughtful leaders of the insurance industry have
pleaded with the medical profession to stop killing the golden
goose which feeds them. Many leaders of Blue Shield, the doctors!
own plan for coverage of surgical expenses, have warned their col-
leagues against excessive surgical procedures which are threatening
the solvency of a number of Blue Shield plans. They remember, with

some bitterness, the Blue Shield scandals in California a few years
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back when more than a million dollars in excessive and false bill-
ings by the doctors themselves threatened the very future of that
plan.

Organized labor is pretty well fed up with some of these
practices. For a number of years, the United Mine Workers tried
to cover their workers in a contractual plan with the doctors.

Tt failed. Dr. Warren Draper, the former Deputy Surgeon General
of the United States Public Health Service and now Executive
Medical Officer of the United Mine Workers, has presented evidence
to the American Medical Association on a number of occasions of

the false and excessive billings his organization was saddled with
by doctors in Pennsylvania, West Virginia, and elsewhere. On the
basis of this unfortunate experience, the United Mine Workers has
set up its own hospital and medical care plan. Within the past
year the United Auto Workers have begun to move in the same direc-
tion, and just two weeks ago the newspapers reported that the
United Steel Workers of America are planning a similar hospital

and medical care system of their own. I mention these developments
because they directly concern this hearing today. I strongly favor
the continuance of voluntary health insurance in America. But I
say, categorically, that its days are numbered if it continues to
jack up its premiums because of over-hospitalization and excessive
billings by the medical profession.

Mr. Chairman, there is no doubt in my mind that every health
policyholder in the state of New York can be covered for a minimum

of 30 days per year for psychiatric illness. I am delighted that
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the Rochester Blue Cross has pioneered in this coverage, and I
hope that its example will persuade other Blue Cross and insurance
companies in the state to cover mental illness for the same length
of time.

If persuasion does not work, there are several alternatives.
These plans are licensed by the state of New York, and their rates
are subject to approval by the State Insurance Commissioner. I

think no health insurance plan in the state should continue to re-

 

ceive a license if it refuses to cover psychiatric illness for at

 

least 30 days per year. If the State Insurance Commissioner needs

 

some persuasion on this matter, then it might be necessary for this
distinguished committee to prepare legislation making it mandatory
for all health insurance plans licensed in the state of New York to
cover psychiatric illness.

Mr. Chairman, we are on the move in this state and in the
nation in the provision of an increased number of beds in general
hospitals for the care of psychiatric illness. However, too many
of these beds are out of the economic reach of the average citizen.
The only solution is complete and non-discriminatory coverage of
psychiatric illness so that these beds and these facilities can

achieve their full treatment potential.

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