The treatment of Medicaid enrollees diagnosed with depression or schizophrenia was examined to determine whether adherence to treatment guideline was associated with health care financing strategy, clinical outcomes, and cost-effectiveness. Individuals in a fee-for-service condition were significantly more likely to receive treatment consistent with guidelines than those in managed care. Mental health costs were higher for individuals diagnosed with schizophrenia, individuals in an acute phase of illness at intake into the study, and those receiving treatment consistent with practice guidelines. Being in an acute phase of illness and having treatment that comported with recommended practice guidelines were associated with higher total social costs. Policy implications of the findings and recommendations for future research are discussed.
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