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

An estimated 28 to 30 percent of the adult U.S. population will suffer from a mental or substance use disorder during the course of a year. In any given year, about five to seven percent of adults have a serious mental illness (Kessler et al., 2001). A similar percentage of children—about five to nine percent—has a serious emotional disturbance (Friedman et al., 1996). Of the ten leading causes of disability worldwide in 2000 among individuals age 15 to 44, five were psychiatric disorders including alcohol abuse (WHO, 2004). Given the prevalence of morbidity and mortality related to mental and substance use disorders and their wider societal impacts, it is important to know how much the United States is investing in treatment of mental and substance use disorders. Moreover, because of the rapid changes occurring in treatment technologies, philosophy, organization, and financing, the extent and character of this investment should be tracked over time.

The report addresses the following key questions:

• How much was spent in the United States in 2001 to provide mental health services and substance abuse treatment (MHSA) and its component parts—mental health (MH) and substance abuse (SA)?
• How are the expenditures for each component distributed by payer and provider type?
• How has spending changed from 1991 to 2001?
• How do MHSA expenditures compare with those for all U.S. health care?

These MHSA spending estimates use data and methods that are used by the Centers for Medicare and Medicaid Services (CMS) to estimate national health expenditures, also called the National Health Accounts (NHA). This work is based primarily on nationally representative databases with multiple years of data, which generally cover the period of 1991 to 2001. The estimates are presented for mental health (MH), substance abuse (SA), and MHSA combined, and are compared with all health care expenditures.

Because the estimates focus on expenditures for treatment and not disease burden, figures include only expenditures for the direct treatment of MHSA disorders. The estimates exclude the other substantial comorbid health costs that can result from MHSA (for example, trauma and cirrhosis of the liver) and other direct costs of caring for these clients (for example, job training and subsidized housing). Other indirect costs, such as lost wages and productivity, also are excluded from these MHSA expenditure estimates.

• Total national expenditures for the treatment of MHSA disorders were $104 billion in 2001, up from $60 billion in 1991, an average annual growth of 5.6 percent. This compared with all health care spending annual growth of 6.5 percent. As a result, MHSA spending was down to 7.6 percent of the $1,373 billion spent on all health services in 2001, compared with 8.2 percent in 1991.

• Mental health (MH) spending totaled $85 billion in 2001, representing 6.2 percent of all health care spending.



• Public financing grew to be a more important source of financing for MH treatment over the decade. Public payers comprised 57 percent of total MH spending in 1991, increasing to 63 percent in 2001. Medicaid, in particular, grew in importance.



• One of the fastest growing components of MH spending was drugs prescribed to treat mental disorders. MH prescription drug expenditures grew by 17 percent annually between 1991 and 2001. Prescription medicines, which represented 1 of each 14 dollars spent on MH in 1991, jumped to 1 of 5 by the end of the ten-year period.



• Inpatient expenditures as a percent of total MH expenditures declined during the ten-year period, particularly within specialty hospitals. In 1991, 38 percent of MH expenditures were for inpatient care, compared with 22 percent in 2001.

• In 2001, an estimated $18 billion was devoted to treatment of substance use disorders. This amount constituted 1.3 percent of all health care spending.



• Public payers support the majority of SA expenditures. They increased from 62 percent of SA expenditures in 1991 to 76 percent in 2001.



• State and local governments manage the majority of spending on SA treatment. Counting all Medicaid, other State, local, and block grant spending, States managed over 57 percent of SA spending in 2001.



• Private insurance payments on SA treatment fell by an average rate of 1.1 percent annually, compared with the private insurance payment growth rate for all health care of 6.9 percent.



• Specialty substance abuse treatment centers accounted for 51 percent of the increase in SA expenditures. These centers are the largest single provider of SA services.