Narrator: This is Science Today. In the mid 1990s, the state of Colorado found itself swamped by the high cost of Medicaid benefits for the mentally ill. So two years ago, the state switched to a system called capitation, where the state pays a set amount per Medicaid recipient to contractors who decide which services the patients need. At the time, mental health advocates feared that the system might deny vital services to patients in order to save money. But according to a new study by Joan Bloom, a public health expert at the University of California, Berkeley, the fears were mostly unfounded.

Bloom: What we found in our study was that as you might expect, that hospitalizations decreased but also outpatient services decreased.

Narrator: Bloom also notes that the study indicates those treated in the new program showed no signs of worsening mental health-despite the decreased cost to the state.

Bloom: The silver lining is that even though services were reduced, presumably they were services that weren't necessary. And quality of life or other kinds of mental health outcomes were not reduced.

Narrator: For Science Today, I'm Larissa Branin.