Unintended Outcomes of Medicaid Drug Cost-Containment Policies on the Chronically Mentally Ill

Cost-containment policies frequently focus on reducing drug expenditures, although prescriptiondrug costs are a relatively small proportion of total health care expenditures. Data show that very fewdrug cost-containment policies can selectively reduce unneeded care while maintaining essential care.In the early 1980s, the New Hampshire Medicaid program introduced a drug-payment limit (a “cap”)that set the number of reimbursable medications a patient could receive per month at 3. Analyses reviewedin this article indicate that New Hampshire’s drug cap, while in effect, reduced the use of prescriptiondrugs among the elderly and the mentally ill but increased hospital and nursing home admissions,partial hospitalizations, distribution of psychoactive medications by community mental healthcenters, and use of emergency mental health services. Vulnerable populations are most likely to experienceadverse effects from hastily-applied drug cost-containment policies, and resulting compensatorymeasures may create more expenses than the policy removes.