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

This chapter reports on expenditures combined for mental health services and substance abuse treatment (MHSA). Subsequent chapters report separately on mental health services (MH) and substance abuse treatment (SA) expenditures so that differing MH and SA trends can be discerned.

The U.S. spent $104 billion on MHSA treatment in 2001. To put this number in perspective, it is useful to compare it to national spending on health care for all types of conditions. Total national health services and supplies expenditures were $1,373 billion in 2001, of which MHSA spending made up 7.6 percent (Figure 2.1).

Of total MHSA spending, $85 billion (82 percent) was directed toward MH and $18 billion (18 percent) was for SA in 2001. Of total national health care spending, MH comprised 6.2 percent of such spending in 2001; while SA constituted 1.3 percent (Table A.1, Appendix A).

MHSA expenditures grew from $60 billion in 1991 (Table A.5, Appendix A) to $104 billion in 2001 (Table A.1, Appendix A). The nominal MHSA growth rate from 1991 to 2001 was 5.6 percent annually, compared with the growth rate of 6.5 percent for all health care spending (Figure 2.2 and Table A.3, Appendix A). The inflation-adjusted MHSA growth was 3.5 percent, as compared to 4.4 percent for all health care spending (not shown in Figures). Inflation-adjusted growth rates are calculated using a GDP deflator that removes the effect of general price inflation.

From 1991 to 1996, MHSA lagged behind all health care growth rates by 1.7 percentage points (4.8 percent for MHSA versus 6.5 percent for all health) (Figure 2.2). From 1996 to 2001, MHSA growth rates were close to that of all health (6.3 percent for MHSA versus 6.4 percent for all health). Because MHSA grew below all health, MHSA expenditures as a proportion of all health declined from 8.2 percent of total national health care expenditures in 1991 to 7.6 percent in 2001 (calculated from Tables A.1 and A.5, Appendix A).

Private payers covered 35 percent and public payers covered 65 percent of total MHSA spending in 2001. For private payers, out-of-pocket payment constituted 12 percent of total MHSA expenditures, private insurance made up 20 percent, and other private payment, such as charity care, accounted for three percent. For public payers, Medicare constituted seven percent, Medicaid comprised 26 percent, other Federal government payers, such as block grants and Veterans Affairs, comprised six percent, and other State and local governments comprised 26 percent of MHSA expenditures (Figure 2.3).

All Federal spending, including the Federal portion of Medicaid, was 28 percent of total MHSA spending. All State government spending, including the State portion of Medicaid, accounted for 37 percent of total MHSA expenditures (Table A.2, Appendix A).

Public payers are a much more important source of funding for MHSA treatment than for all health. Public payers made up 65 percent of MHSA care spending but only 45 percent of all health care spending (Table A.2, Appendix A).

The distribution of expenditures across all providers by type of care was 24 percent in inpatient settings, 33 percent in outpatient settings excluding prescription drugs, 17 percent on retail prescription drugs, and 20 percent in residential settings. The remaining six percent for insurance administration does not relate to a health care setting (Table A.1, Appendix A).

Hospitals accounted for over one-quarter (28 percent) of expenditures on MHSA (Figure 2.4 and Table A.1, Appendix A). General hospitals accounted for more spending on MHSA care than specialty hospitals. More specifically, general non-specialty hospitals made up 17 percent, and specialty psychiatric and substance abuse hospitals made up 11 percent. Within general hospitals, about 51 percent of expenditures were in specialty units of general hospitals and the remaining 49 percent were in other types of medical care units - that is, in "scatter beds" distributed among other hospital beds in non-psychiatric or non-chemical-dependency units (calculated from Table A.1, Appendix A).

Multi-service mental health organizations, such as mental health clinics, received about 16 percent of all expenditures on MHSA treatment. Specialty substance abuse centers received about seven percent.

Retail prescription drugs accounted for 17 percent of total MHSA expenditures. Physicians made up 12 percent and other professionals billing independently, such as psychologists, counselors, and social workers, constituted eight percent. Free-standing nursing homes made up six percent, and home health expenditures were only one percent (Table A.1).

Over the ten-year period from 1991 to 2001, MHSA expenditures grew from $60 billion to $104 billion. However, the proportion of all health care spending attributable to MHSA expenses declined, from 8.2 percent of all health care spending in 1991 to 7.6 percent in 2001. Public payers made up the majority of MHSA treatment. Public payers are a greater proportion of MHSA than public payers are for all health. The largest proportion of MHSA expenditures went to hospital-based services (which includes inpatient, outpatient, and residential care provided by hospitals) (28 percent), followed by physicians and other professionals (20 percent), retail drugs (17 percent), and multi-service mental health organizations (16 percent).