National Expenditures for Mental Health Services and Substance Abuse Treatment 1991–2001

Expenditures for mental health services and substance abuse treatment comprise a significant portion of the health care economy, $104 billion out of a total of $1,372 billion in 2001. This represents a substantial investment in treatment. One analysis estimates that more than 30 million people reported receiving MHSA treatment in 2001 (Zuvekas, 2004).

This report highlights a number of important trends in overall MHSA growth rates and by payer, provider, and site of care. Among these changes, three of the most salient are the growth in spending on prescription medications, the decline in inpatient treatment, and the shift to publicly financed care.

MHSA expenditures increased by 5.6 percent annually from 1991 to 2001. From 1991 to 1996, the growth rate was 4.8 percent, while from 1996 to 2001 the growth rate was 6.3 percent. The higher growth rate in the second half of the ten-year series is almost entirely because of the higher growth rate of MHSA prescription drugs. If prescription drugs are excluded, the MHSA growth rate was 4.1 percent from 1991 to 1996 and 4.2 percent from 1996 to 2001. In comparison, the growth rate for all health care was 6.5 percent from 1991 to 1996 and 6.4 percent from 1996 to 2001.

The largest category of prescription medications are antidepressants, accounting for more than 50 percent of MHSA drug expenditures. Antipsychotics made up 22 percent of total MHSA drugs, antianxiety drugs comprised 13 percent, and other MHSA drugs (which include stimulants and other drugs) comprised 12 percent. Prescription medication expenditure growth stems from a combination of increased use of medications and higher prices for medications. During the time period, a number of new psychotropic medications entered the market. In addition, more people began taking MHSA drugs (Olfson et al., 2002).

A second major trend apparent in the data is the movement away from inpatient care. This is a long-term shift that also was noted in the previous estimates that covered the 1987 to 1997 period. Analyses of several other data sources have found that the length of stays have been declining dramatically over time. Studies are more equivocal about whether the admission rates also declined (Mark and Coffey, 2003; Zuvekas, 2001).

MHSA inpatient hospital care has also been shifting away from specialty hospitals toward general hospitals. During the 1990s, psychiatric hospitals and psychiatric hospital beds continued to close. As a result, general hospital inpatient MHSA expenditures were flat, and the MHSA specialty hospital growth rate was negative, driven mostly by MH. However, for SA spending, the growth rate of spending on specialty hospitals was positive. Within general hospitals for MHSA, there also has been a movement away from specialty units toward non-specialty unit care or "scatter beds." One question raised by these trends is what impact the increased provision of acute inpatient services and treatment in less specialized settings might have on access and the quality of clinical care.

A third important finding is that public payers grew in importance relative to private payers. This was caused by the fact that growth in MHSA expenditures diverged for public and private payers. MHSA public expenditures grew by 6.8 percent, while private insurance increased by 4.7 percent. Looking more closely, one finds that the gap in the growth rate was only apparent during the first five-year period from 1991 to 1996. During that time period, private insurance MHSA expenditures grew by 2.5 percent, while public expenditures grew by 7.2 percent. From the 1996 to 2001 period, private insurance grew by 6.9 percent and public by 6.3 percent. To some extent, this gap in growth reflects overall health care trends. For all health during the first five years, public expenditure growth outpaced private insurance growth, while during the last five years the reverse was true. This pattern stems in part from the imposition of private cost controls through managed care during the first half of the period, which later moderated (Levit et al., 2003).

The public sector traditionally has played a greater role in supporting mental health services and substance abuse treatment than is the case for other diseases. Historically, State and local mental health providers have been providers of last resort for persons who are uninsured or underinsured. MHSA expenditures continue to represent a sizeable portion of State and local government budgets. MH comprised more than one-fifth of State and local health care expenditures in 2001. However, over time other programs have grown in importance, in particular, Medicaid. As people with MHSA disorders are increasingly served through Medicaid, questions arise about how to integrate social services, general health services, and MHSA services across diverse funding streams.

For substance abuse, the difference between public and private sector growth rates was even greater and existed during both the first and second parts of the series. During the first five years, substance abuse private insurance expenditures fell by 2.4 percent annually, and during the last five years grew only by 0.1 percent annually. The trend clearly raises questions as to why substance abuse expenditures under private insurance are not keeping pace with inflation. The large decline in private substance abuse expenditures is unlikely to be caused by a change in the number of plans offering substance abuse insurance benefits. According to the U.S. Bureau of Labor Statistics, in 1991, 96 and 97 percent of employees in medium and large establishments with medical benefits had drug abuse and alcohol abuse treatment coverage, respectively. In 1997, the percentages had grown to 97 percent and 98 percent. The change in use of substance abuse services may be attributable to the growth in managed care. Managed care can have a dramatic effect on substance abuse treatment. For example, Shepard and colleagues (2002) studied the effect of the Massachusetts Medicaid program´s risk-sharing contract with a private, for-profit specialty managed behavioral health care carve-out. They found that per episode spending decreased by 76 percent and there was a 99 percent reduction in the use of hospital-based settings after the carve-out was put into place. Clearly, these trends merit additional research.

There are several other distinctions that can be drawn between the substance abuse expenditures and mental health expenditures. In terms of the payer distribution, a greater proportion of substance abuse treatment expenditures (76 percent) came from public payers as compared with MH (63 percent). Among the public payers there are also differences. For substance abuse a greater proportion of public dollars came from other State and local funding and other Federal funding (together comprising 69 percent of total public SA dollars) and less came from Medicaid and Medicare. Thus, more money for SA is coming from grants and State and local program dollars and less from insurance programs, compared to MH dollars.

The distribution of expenditures among providers between MH and SA also revealed significant differences. Physicians and other professionals played a much larger role in treating MH care (on a dollar basis) than in SA care. While 21 percent of MH dollars went to physicians and other professionals, only 12 percent of SA dollars went to physicians and other professionals. The difference was most significant for psychiatrists. Ten percent of MH expenditures were for psychiatrists, as compared with only two percent of SA expenditures. Specialty clinics played a greater role in SA treatment. Thirty-nine percent of SA expenditures occurred in specialty substance abuse centers, as compared with 18 percent of MH expenditures that occurred in multi-service mental health organizations. Within general hospitals, a greater proportion of SA dollars occurred in specialty units as compared with MH. Finally, retail medications comprised about one-fifth of MH expenditures and totaled approximately $17 billion, while expenditures on retail medications were less than one percent of total SA expenditures and less than 100 million dollars.

National expenditure analyses provide a bird´s-eye view of the mental health and substance abuse system. Their strength comes from their ability to portray broad trends in types of services provided, in providers furnishing those services, in financing, and in specialty/non-specialty concentrations. Aggregate analysis helps to identify issues and focus attention on important trends. However, aggregate analysis is not designed to address underlying causal factors which are best left to studies designed to test cause and effect. Studies of the MHSA system with more detailed data on specific types of providers and payers can complement and inform the expenditure data. With both types of studies, one can begin to develop a clearer understanding of the complex and evolving MHSA treatment system. Through this knowledge, one can begin to formulate strategies for improving the quality and access of care.