Capitation of Public Mental Health Services in Colorado: A Five-Year Follow-Up of System-Level Effects

Objective:Capitated Medicaid mental health programs have reduced costs over the short term by lowering the utilization of high-cost inpatient services. This study examined the five-year effects of capitated financing in community mental health centers (CMHCs) by comparing not-for-profit with for-profit programs. Methods:Data were from the Medicaid billing system in Colorado for the precapitation year (1994) and a shadow billing system for the postcapitation years (1995–1999). In a panel design, a random-effect approach estimated the impact of two financing systems on service utilization and cost while adjusting for all the covariates. Results:Consistent with predictions, in both the for-profit and the not-for-profit CMHCs, relative to the precapitation year, there were significant reductions in each postcapitation year in high-cost treatments (inpatient treatment) for all but one comparison (not-for-profit CMHCs in 1999). Also consistent with predictions, the for-profit programs realized significant reduc...