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

This chapter presents estimates of how much was spent on treating mental illness in the United States in 2001. Treatment for mental illness was identified if providers diagnosed individuals as having a mental disorder. This section also presents information about the types of financing of treatment for mental disorders and where the care was provided. Subsequent chapters present information on treatment of substance use disorders.

A broad array of services and treatments exist to help people with mental disorders suffer less emotional pain and disability and live healthier, longer, and more productive lives. Mental disorders are treated by a variety of caregivers who work in diverse, relatively independent, and loosely coordinated facilities. Some facilities, such as State and county mental hospitals and clinics, are owned by governments. Others are privately owned, either as nonprofit or for-profit entities. Some facilities and providers focus primarily on treating people with mental disorders, while others are general health care facilities that serve people with a range of diseases and disabilities, including mental disorders. A variety of funding streams from government grants to private insurance support facilities.

In 2001, an estimated $85 billion was spent on the treatment of mental disorders in the United States. MH treatment accounted for 6.2 percent of all health care spending in 2001 (Figure 3.1). MH spending is the predominant component of MHSA expenditures, making up 82 percent of total MHSA spending.

People with mental disorders rely on public sources of financing to a greater extent than people with other diseases. Sixty-three percent (63 percent) of total MH spending came from public sources, while only 45 percent of all health care spending was from public sources (Figure 3.2).

Among public payers, Medicaid was the largest source of funding, accounting for 27 percent of total MH and 44 percent of all public MH funding (Figure 3.3). The next largest category was other State and local government funding, which made up 23 percent of total MH and 37 percent of total MH public funding. Medicare made up 12 percent of total MH public expenditures. Other Federal government spending, which includes MH Block Grants and programs offered through the Department of Veterans Affairs, constitutes seven percent of total MH public spending.

States manage a large proportion of the funds devoted to MH services from both State and Federal budgets. States manage the 27 percent of MH spending that represents Medicaid, the 23 percent that comprises other State and local funding, and part of the five percent of other Federal spending - that part allocated through block grants to the States. Thus, over half of total MH dollars are managed by States overall. (While this is a nation-wide estimate, the estimate for individual States may vary considerably.) Other State and local funding includes dollars from

State and local government budgets allocated to community health centers, psychiatric hospitals, and other types of mental health services.

Private insurance comprised 22 percent of all MH expenditures. This compares to an all health care proportion of 36 percent. Out-of-pocket spending was 13 percent of MH expenditures, as compared with 15 percent for all health. The lower out-of-pocket percentage for MH as compared with all health is likely rooted in the greater role of public programs in financing MH treatment.

The proportion that each payer devotes to MH care is widely divergent (Figure 3.4). MH made up 22 percent of other State and local funding for all health care and 10 percent of funding for Medicaid. For Medicare the percentage was only three percent (calculations based on Table A.2, Appendix A). MH comprised four percent of all health spending covered by private insurance.

More than half of mental health expenditures went for prescription drugs and outpatient care. Across all providers by site of care, MH expenditures were: 31 percent outpatient, 22 percent inpatient, 21 percent retail drugs, and 19 percent in residential settings (Figure 3.5). The remainder, six percent, was directed toward insurance administration.

Although the role of hospitals in MH care has been declining, spending on hospital care (including hospital-provided outpatient and residential care) still accounted for 27 percent of total MH expenditures in 2001 (Figure 3.6). More than half of MH hospital spending went to general hospitals (58 percent) and the remainder went to specialty psychiatric hospitals (42 percent). Within general hospitals, 44 percent of expenditures were in specialty psychiatric units and 56 percent were in non-specialty units (calculated from Table A.1, Appendix A). Hospitals can provide inpatient, outpatient, or residential care. Within general hospitals, 74 percent of expenditures were for inpatient care, 20 percent went to outpatient care, and six percent went to residential care. Within psychiatric hospitals, 92 percent were for inpatient care, five percent were for outpatient care, and three percent were for residential treatment.

A large portion of MH expenditures (18 percent) was for care in multi-service mental health organizations such as community mental health centers (Figure 3.6). In 2001, more than one out of every five dollars spent on MH services was spent on prescription medications. The role of medications in mental health care is much greater than that for all health care, in terms of the proportion of spending going to drug therapy. For all health expenditures, only one in every ten dollars spent for health care was for prescription medications.

Physicians and other professionals (psychologists, counselors, and social workers) comprised 21 percent of total MH expenditures in 2001. Physicians made up 13 percent of expenditures and other professionals made up eight percent (Table A.1, Appendix A). Among physicians, 72 percent of spending went to psychiatrists and the remainder went to other types of physicians, such as general practitioners (Table A.1).

In 2001, MH expenditures totaled $85 billion, which was 6.2 percent of all health care spending. Public sources provided most of these funds (63 percent). This is a greater percentage than for all health. Of the total $85 billion, Medicaid funding was the largest at 27 percent, while other State and local funding represented a substantial portion at 23 percent. This means that, along with Federal Block Grant funding which is allocated to MH providers by the States, States managed over half of the dollars spent on MH services. Private insurance made up slightly more than one-fifth of MH expenditures and out-of-pocket payments made up a bit more than one-tenth. MH expenditures as a proportion of all health expenditures varied by payer. For private insurance, MH was only four percent, while for Medicaid it was 10 percent.

About one-fifth of expenditures in 2001 were in inpatient settings. Specialty and general hospitals - which offer inpatient, outpatient, and residential care - made up 27 percent of total MH expenditures, retail prescription drugs comprised 21 percent, physicians and other professionals made up 21 percent, and multi-service mental health organizations accounted for 18 percent.