Projections that mental health care spending, including that for substance
use, will increase as part of cost increases in overall health care have
raised concerns among some leaders in psychiatry that eventual cost-cutting
could target mental health.
Their concern is that ongoing increases in overall health care spending are
increasing the pressure on government and private-sector leaders to cut costs,
which may disproportionately impact mental health and addiction services.
Steven Sharfstein, M.D., president and CEO of Sheppard Pratt Health System
in Baltimore and a former APA president, said that recent research added to
his concern that the long-term trend of continued growth in health care
spending remains far beyond the national inflation rate. When health care
spending as a portion of gross domestic product begins to reach 25 percent to
30 percent, he said, something has to give. The seemingly inevitable
cost-cutting that will be needed to curtail that future growth will hit mental
health and substance use at least as hard as the rest of health care.
"Let's hope that mental health and substance abuse funding does not
face a disproportionate burden of cost cutting," Sharfstein said."
History tells us, however, that we will be hit hard."
His concerns came in response to recent findings that spending on mental
health and substance abuse treatment is expected to double to $239 billion
annually from 2003 to 2014, while overall health cost growth, including mental
health care, is expected to rise from $2 trillion to $3.5 trillion annually in
the same time frame. The estimates came from federal research published online
in Health Affairs in October.
The researchers, including Jeffrey Buck of the Center for Mental Health
Services at the Substance Abuse and Mental Health Services Administration
(SAMHSA), concluded that the projected growth in mental health and substance
use treatment spending would likely fall from 7.3 percent to 6.9 percent of
all health care spending because of the expected ballooning of the cost of
health care overall.
"Unlike most of the health care sector, [mental health and substance
use] treatment does not rely extensively on high-priced, rapidly evolving
technology (other than prescription medications), which drives overall health
cost increases," wrote Buck and colleagues, about the reason mental
health spending is likely to fall as a percentage of overall health care
The findings were based on population-growth and inflation projections and
earlier SAMHSA data on the extent of spending on each category of care.
The research likely underestimates future spending on mental health and
addiction care services, according to some critics. That projection of future
psychiatric illness spending also underestimates its role as a future
Sharfstein said the research predated the recent passage of the federal
mental health parity legislation in October (see Parity Law's Next Hurdle:
Working Out Fine Print) and a reduction in the Medicare copay for outpatient
mental health services to the level required for all other types of care. Both
changes are likely to boost use of mental health and substance use care, which
would increase the amount spent on those services.
Enactment of the parity law could lead to more private insurance funding
for treatment of mental illness, including substance abuse, Sharfstein said
(Psychiatric News, October 17).
Laurence Miller, M.D., chair of APA's Committee on Public Funding for
Psychiatric Services, agreed that both the insurance parity law and the copay
change to Medicare—enacted in July—would likely increase use of
these services (Psychiatric News, August 1).
"With parity, there will be a little less stigma, so people will be
more willing to use" mental health services, Miller told Psychiatric
The recent sharp downturn in the nation's economy also could affect demand
and spending on these services, because laid-off workers facing multiple,
unexpected crises in their lives may develop mental illnesses or substance use
problems in higher numbers than when the nation's economy was thriving.
The economic downturn "could also lead to more, not less, public
financing," Sharfstein said.
Most state Medicaid programs are expected to face budget shortfalls next
year, as the nation's economy stalls and demand for public health care
assistance continues to rise, according to an annual survey of state program
directors. To counteract this, congressional Democrats have been planning a
post-election lame-duck session to try to pass a temporary boost to states for
Medicaid programs as part of a second economic stimulus package to fend off
further economic erosion. Congress approved a $20 billion state Medicaid
program assistance package during the 2002 recession in the form of an
increased Medicaid match and general grants to states.
The possibility of curtailing overall health care spending growth on the
backs of mental health and substance use budgets may be reduced by the
increasing need that the general public sees for such
One development that could increase utilization of mental health services
is the increasing numbers of veterans seeking care for combat-related mental
illness. The issue could directly impact Medicaid and private insurers as many
returning veterans are either members of the National Guard and ineligible for
care from the Department of Veterans Affairs or they are trying to hide their
conditions by seeking care outside the military, said Miller.
Increasing demand for mental health care among the general population may
run into the problem of shrinking access, as psychiatrists opt out of
underpaying health care programs.
A growing number of psychiatrists no longer accept Medicare, Medicaid, or
even private insurance, so the increasing number of patients seeking care as
the stigma of mental illness declines could meet a lack of clinicians to
provide that treatment, according to Miller.
A survey of psychiatrists published in the April 2005 Psychiatric
Services found that although a substantial proportion of psychiatrists
(77 percent) accepted patients who used "self-pay," less than half
(44 percent) accepted patients whose care was paid by Medicaid. Additionally,
only 63 percent of psychiatrists said they accepted new Medicare patients, a
significantly higher percentage than those who accepted patients in either
private managed insurance plans or Medicaid, according to the survey based on
a national sample of 2,323 U.S. psychiatrists.
The report "Future Spending for Mental Health and Substance
Abuse: Increasing Burdens for the Public Sector" is posted at<http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w513>.▪