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Richard G. Frank, PhD; Haiden A. Huskamp; Thomas G. McGuire, PhD; Joseph P. Newhouse, PhD

Arch Gen Psychiatry. 1996;53(10):933-937.

Abstract
We discuss the rationale for benefit carve-out contracts in general and for mental health and substance abuse in particular. We focus on the control of adverse selection as a principal explanation and find that this is consistent with the widespread use of sole-source contracting with periodic rebidding. We also find that some degree of risk sharing is common; we interpret this as a method of balancing cost-containment incentives with incentives to maintain access and quality on unmeasured dimensions.

Author Affiliations
From the Departments of Health Care Policy (Drs Frank and Newhouse and Ms Huskamp), and Health Policy and Management (Dr Newhouse), Harvard School of Public Health; Department of Economics, Boston University, Boston, Mass (Dr McGuire); and Kennedy School of Government, Cambridge, Mass (Dr Newhouse).

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