Where Does the Money Come From? And Where Does It Go?

As many of you know, throughout my career I have been very interested in the economics of psychiatry. My research and writing over three decades have focused on the utilization and cost of psychiatric care either under private insurance or the government. Through this work, I have helped suggest ways in which treatment can be financed so that access to quality care can be expanded to more individuals.

Recently the Substance Abuse and Mental Health Services Administration (SAMHSA) published the report “National Health Expenditures for Mental Health Services and Substance Abuse Treatment, 1991-2001” (Psychiatric News, May 20). While scientifically this decade was the Decade of the Brain, in terms of access to care for mental illness and substance abuse, it was the Decade of Managed Care. How access was impacted during this critical decade is of concern to all of us in the mental health field.

Epidemiologic studies have shown that nearly 30 percent of the adult U.S. population suffer from a mental or substance use disorder over the course of a year, and 5 percent to 7 percent of these individuals have a serious and persistent mental illness. The percentages are similar for children. Since the World Health Organization estimated that of the 10 leading causes of disabilities worldwide in 2000, five were psychiatric disorders, including alcohol abuse. Such high prevalence of mental and substance use disorders carries a huge cost in terms of individual disability and impact on society.

The SAMHSA study showed that although national expenditures for treatment of these disorders totaled $104 billion in 2001 (up from $60 billion in 1991), the average growth rate in annual spending was 5.6 percent, compared with 6.5 percent for all types of health care. As a result, expenditures on treatment for mental health and substance use disorders as a percentage of total health expenditures decreased from 8.2 percent in 1991 to 7.6 percent in 2001.

A significant finding of the SAMHSA study was that the public sector has become a more important payment source than the private sector. Public payers accounted for 57 percent of total mental health spending in 1991, which increased to 63 percent in 2001.

Medicaid, in particular, has grown in importance and is now the most important funder of treatment for mentally ill individuals. Further, the fastest growing component of mental health spending was retail prescription drugs, which increased from 6 percent of total mental health spending in 1991 to 17 percent in 2001. Or looked at another way, in 1991, $1 of every $14 spent on mental health care was for prescription medications; by 2001, the amount was $1 of every $5.

During the same decade, inpatient expenditures as a percentage of total mental health expenditures declined from 38 percent in 1991 to 22 percent in 2001.

For substance use disorders, private insurance payment during this decade fell by an average of 1.1 percent, while private insurance payment for health care in general increased by 6.9 percent.

It is quite clear from the SAMHSA report that private insurance has cut back dramatically on paying for the treatment of our patients as the carveout behavioral health care companies have been successful in reducing costs. More and more patients have become uninsured and/or qualified for care under public programs, especially Medicaid.

APA is working on many fronts to reverse this trend so that the responsibility for payment of care shifts back to the private sector. Among these efforts are APA's Business Relations Initiative, whose representatives met most recently in Baltimore with representatives of private employers and public agencies to discuss the benefits of providing better mental health coverage to employees (Psychiatric News, June 17). Lobbying for the passage of true parity legislation at both the state and federal levels also aims to force more resources from the private sector at a time when public funding is severely strained.

The decade of the 1990s is just the latest chapter in the saga of cost shifting of psychiatric care since the 19th century, when states assumed responsibility for the care of the insane. The shift from private insurance funding to Medicaid funding represents the successful effort of the private sector—through the utilization of managed care—to shift the risks of psychiatrically ill individuals from itself to the public sector. With Medicaid cuts projected at $10 billion over the next five years, people with mental illness are more at risk than ever.

The SAMHSA report on national-expenditure analysis provides a snapshot of the extent to which our society values mental health services and substance use treatment. What the decade of 2001-2011 will bring depends, in part, on the effectiveness of our advocacy to work toward the pooling of private and public resources to increase access to mental health treatment, as more and more individuals realize that treatment works and seek to obtain it.▪