Effects of a limiting Medicaid drug-reimbursement benefits on the use of psychotropic agents and acute mental health services by patients with schizophrenia

N Engl J Med. 1994 Sep 8;331(10):650-5. doi: 10.1056/NEJM199409083311006.


Background: We examined the effects of a three-prescription monthly payment limit (cap) on the use of psychotropic drugs and acute mental health care by noninstitutionalized patients with schizophrenia. We hypothesized that reducing access to such drugs would increase the use of emergency mental health services and the rate of partial hospitalizations (full-day or half-day treatment programs) and psychiatric-hospital admissions.

Methods: We linked Medicaid claims data for a period of 42 months with clinical records from two community mental health centers (CMHCs) and the single state psychiatric hospital in New Hampshire, where Medicaid imposed a three-prescription limit on reimbursement for drugs during 11 months (months 15 through 25) of the study. For comparison, we used Medicaid claims for a period of 42 months in New Jersey, which had no limit on drug reimbursement. The study patients (n = 268) and the comparison patients (n = 1959) were permanently disabled, noninstitutionalized patients with schizophrenia, 19 through 60 years of age, who were insured by Medicaid. We conducted interrupted time-series regression analyses to estimate the effects of the cap on the use of medications and mental health services.

Results: The cap resulted in immediate reductions (range, 15 to 49 percent) in the use of antipsychotic drugs, antidepressants and lithium, and anxiolytic and hypnotic drugs (P < 0.01). It also resulted in coincident increases of one to two visits per patient per month in visits to CMHCs (range of increase, 43 to 57 percent; P < 0.001) and sharp increases in the use of emergency mental health services and partial hospitalization (1.2 to 1.4 episodes per patient per month), but no change in the frequency of hospital admissions. After the cap was discontinued, the use of medications and most mental health services reverted to base-line levels (measured in the first 14 months of the study). The estimated average increase in mental health care costs per patient during the cap ($1,530) exceeded the savings in drug costs to Medicaid by a factor of 17.

Conclusions: Limits on coverage for the costs of prescription drugs can increase the use of acute mental health services among low-income patients with chronic mental illnesses and increase costs to the government, even aside from the increases caused in pain and suffering on the part of patients.

Publication types

  • Research Support, Non-U.S. Gov't
  • Research Support, U.S. Gov't, P.H.S.

MeSH terms

  • Adult
  • Cohort Studies
  • Cost Control / legislation & jurisprudence
  • Drug Utilization / legislation & jurisprudence
  • Female
  • Humans
  • Male
  • Medicaid / economics
  • Medicaid / legislation & jurisprudence*
  • Mental Health Services / economics
  • Mental Health Services / statistics & numerical data*
  • Middle Aged
  • New Hampshire
  • Psychotropic Drugs / economics*
  • Psychotropic Drugs / therapeutic use*
  • Reimbursement Mechanisms / economics
  • Schizophrenia / drug therapy*
  • Schizophrenia / economics
  • State Health Plans / economics
  • United States


  • Psychotropic Drugs