Bailout legislation approved last week by Congress and signed by President George W. Bush, as a way to try to save the financial markets, appears to also expand mental health coverage.

The rescue package passed 263-171 in the House of Representatives was tacked onto a bipartisan measure requiring health insurers to give the same level of coverage for mental illness and substance abuse treatment as other ailments. Mental illnesses affect one in five Americans, according to recent figures.

The legislation, also known as mental health parity, becomes law after 12-year quest by advocates for the mentally ill who say insurers often shortchange people with mental conditions ranging from depression to schizophrenia. According to the law, insurance companies will now have to treat those who suffer from mental illness no differently from those with physical ailments. They will no longer be allowed to charge higher deductibles, co-payments, coinsurance, or out-of-pocket expenses. Also they will no longer impose limits including frequency of treatment, number of visits and days of coverage for mental health and additional care.

The law is the work of Sen. Pete Domenici, a New Mexico Republican, and Sen. Paul Wellstone, a Minnesota Democrat, both of them giving the name of the law. Sen. Domenici’s daughter Clare, one of his eight children, was diagnosed with schizophrenia. He got involved in the parity issue after joining a National Alliance on Mental Illness support group nearly 20 years ago. Last year, he was diagnosed with a progressive form of brain disease. He is retiring from the Senate.

“No longer will we allow mental health to be treated as a stepchild in the health care system. If you have insurance, then your mental health care must be equal to the benefits you get for any other disease,” Sen. Domenici said.

Sen. Wellstone whose brother was hardly hit by severe mental illness was killed in a plane crash in 2002. Sen. Domenici then asked Edward “Ted” Kennedy to become the bill’s cosponsor. Kennedy had long been a champion of the mentally ill. His son Patrick, a Rhode Island Democrat and Representative Jim Ramstad, a Minnesota Republican, had both become leading House proponents of parity law.

“After 10 years of debate, Congress has finally agreed to end the senseless discrimination in health insurance coverage that plagues persons living with mental illness for so long,” Sen. Kennedy said in a statement.

The National Alliance on Mental Illness welcomed the parity law. Andrew Sperling, one of its lobbyists said the law will lead to more aggressive management of mental health benefits because insurers can no longer impose arbitrary limits.

According to federal officials, the law would improve coverage for 113 million people, including 82 million in employer-sponsored plans that are not subject to state regulation. The law will take effect Jan. 1, 2010 for most health plans.