Spending on mental health and substance abuse treatment, 1987-1997.

Abstract

This paper is the result of an ongoing effort to track spending on mental health and substance abuse (MH/SA) treatment nationwide. Spending for MH/SA treatment was $85.3 billion in 1997: $73.4 billion for mental illness and $11.9 billion for substance abuse. MH/SA spending growth averaged 6.8 percent a year between 1987 and 1997, while national health expenditures grew by 8.2 percent.

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At the Intersection of Health, Health Care and Policy
doi: 10.1377/hlthaff.19.4.108

, 19, no.4 (2000):108-120Health Affairs
1987-1997
Spending on mental health and substance abuse treatment,
J Dilonardo and J A Buck
T L Mark, R M Coffey, E King, H Harwood, D McKusick, J Genuardi,
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Spending On Mental
Health And Substance
Abuse Treatment,
1987–1997
Public payers picked up a growing share of the mental health/
substance abuse treatment bill during 1987–1997.
by Tami L. Mark, Rosanna M. Coffey, Edward King, Henrick
Harwood, David McKusick, Jim Genuardi, Joan Dilonardo, and
Jeffrey A. Buck
ABSTRACT: This paper is the result of an ongoing effort to track spending on
mental health and substance abuse (MH/SA) treatment nationwide. Spending
for MH/SA treatment was $85.3 billion in 1997: $73.4 billion for mental illness
and $11.9 billion for substance abuse. MH/SA spending growth averaged 6.8
percent a year between 1987 and 1997, while national health expenditures
grew by 8.2 percent.
A
ofdisabilityworldwidein1990,fivewereMH/SAconditions.2Given
the prevalenceofMH/SA-relatedillnessanddeath,itisimportantto
know how much the United States invests in treatment. Moreover,
the rapid advances in treatment technologies and dramatic changes
in the organization and financing of the MH/SA treatment system
require that this investment be tracked over time.
ThispaperpresentsestimatesofnationalMH/SAspendingin1987
and 1997, by payer and type of service, using the most recently avail-
abledata.Weadjusttheestimatestoenabledirectcomparisonswith
totalnationalhealthcarespending.Thesefiguresreplaceandsupple-
ment prior spending estimates for 1986–1996 produced by this team
because they are based on more recentdataand improved methods.3
pproximately 28 percent of the U.S. adult population
suffers from a mental health or substance abuse (MH/SA)
disorderduringthecourseofayear.1Ofthetenleadingcauses
Tami Mark and Rosanna Coffey are with the MEDSTAT Group in Washington, D.C.
Edward King,David McKusick,and Jim Genuardiare with the Actuarial Research Cor-
poration,inColumbia,Maryland,andAnnandale,Virginia.Henrick Harwoodis withthe
Lewin Group in Falls Church, Virginia. Joan Dilonardo and Jeffrey Buck are with the
Substance Abuse and Mental Health Services Administration (SAMHSA) in Rockville,
Maryland.
108MH/SA
SPENDING
H E A L T HA F F A I R S
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Study Methods
We used two basic methods to estimate spending on MH/SA treat-
ment depending on provider or service type. The first method relied
on the Substance Abuse and Mental Health Services Administra-
tion’s (SAMHSA’s) national surveys of specialty MH/SA organiza-
tions. These surveys, the Inventory of Mental Health Organizations
(IMHO) and the Uniform Facility Data Set (UFDS), report total
revenuesbyprovider,payersource,and diagnosis.Services captured
on both surveys were unduplicated. The most important data gap
was the lack of data about MH specialty facility care for 1995–1997.4
Missing revenue data and outliers were imputed or extrapolated.5
The second basic method carved out spending on MH/SA treat-
ment from the Health Care Financing Administration’s (HCFA’s)
National Health Accounts (NHA). The NHA captured several serv-
ices and providers that the UFDS or IMHO did not, including
spending for general hospital nonspecialty units, physicians, other
professionals, retail prescription drugs, nursing homes, and home
health agencies. Estimates for these services are based on HCFA’s
estimates of total spending by provider and payer. A proportion of
that total spending was allocated to MH/SA using numerous data
sets, mainly public-use, nationally representative, provider-based
survey data such as the National Hospital Discharge Survey and the
Healthcare Cost and Utilization Project, Nationwide Inpatient
Sample. Allocations to MH/SA typically involved first determining
the proportion oftotalservice use (forexample,inpatientdays) that
was for MH/SA disorders, then adjusting for differences in average
charges, cost sharing, and discounts between MH/SA and all other
diagnoses.
We integrated the two methods by adding up spending amounts
by provider and payer after accounting for duplication across data
sources. Although the NHA captures spending for care provided in
schools, our estimates could not fully capture these costs. Also, we
did not include spending on research and facility construction.
To define MH/SA disorders, we relied on diagnostic codes classi-
fied in the InternationalClassificationof Diseases, Ninth Revision, Clini-
cal Modification (ICD-9-CM) as “mental disorders” (codes in sec-
tions 290 through 319). These codes exclude cerebral degenerations
(such as Alzheimer’s disease, ICD-9 331.0). After consulting with a
panel of MH/SA experts, we also excluded several other codes re-
lated to dementia as well as developmental delays and tobacco
abuse.6TwoadditionaldiagnosticcodesrelatedtoMH/SAdisorders
during pregnancy were added (648.3 and 648.4).Finally, afew ICD-
9-CM V codes were included. V codes indicate that the coded prob-
lem is not the current problem being treated but is influencing the
MH/SA
POLICY
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treatment of another disorder.7The allocation to MH/SA was based
on primary diagnoses. Clearly, the spending estimates would be
higher if secondary diagnoses were alsocaptured;however,thiswas
outside the scope of our study.
The diagnostic categories selected generally reflect what payers
consider to be MH/SA conditions. They exclude costs not directly
related to treatment, such as those stemming from lower productiv-
ity and drug-related crimes. They also exclude spending on non-
MH/SA conditions that are caused by MH/SA problems, such as
livercirrhosis. Theexclusion ofdementiadiffersfrom some previous
spending estimates by other researchers; however, since those prior
estimates were made, a separate specialty care system for dementia
has evolved. In addition, dementia is not typically singled out for
reduced insurance coverage as are other MH/SA disorders.8
Retail prescription drugs is the only service that was not allo-
cated to MH/SA based on primary diagnoses. Because national data
on prescriptions do not include the diagnosis that led to the pre-
scription,expenditureswereconsideredforMH/SAtreatmentifthe
medication’s primary indication was an MH/SA disorder.9
Study Results
n Spending in 1997. In 1997, $85.3 billion was spent on MH/SA
treatment in the United States. The largest share of this ($73.4 bil-
lion) went to treating mental illness, and the remaining $11.9 billion
was for substance abuse (Exhibit 1). Clearly, MH/SA spending is a
major category of health spending. A recent study of spending by
disease category found that MH/SA spending is exceeded only by
spending on diseases of the circulatory system ($127.8 billion) and
on digestive system diseases ($86.7 billion).10
Nearly 60 percent of MH/SA spending was for hospitals and
independentpractitioners(Exhibit1).More than halfofthe funding
for MH/SA treatment in 1997 came from public-sector payers (Ex-
hibit 2). If one allocates 60 percent of Medicaid spending to the
federal government and the remaining 40 percenttostate/local gov-
ernment, federal spending and state/local MH/SA spending were
about equally divided.
Because 86 percent of expenditures on MH/SA were for mental
health treatment, the patterns of spending on MH/SA are driven by
mental health spending (Exhibit 1). Almost three-fourths of sub-
stance abuse spending was for care in hospitals or specialty sub-
stance abuse centers. The other provider categories each accounted
for less than 12 percent of total substance abuse spending; psychia-
trists, only 2.4 percent.
Substance abuse expenditures were more heavily weighted to-
110MH/SA
SPENDING
H E A L T HA F F A I R S
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ward public payers than mental health expenditures were. Nearly
62 percent of expenditures on substance abuse treatment were
funded by the public sector, compared with 55.2 percent for mental
health. The federal government paid a larger share of the publicly
funded substance abuse treatment (56.2 percent) in comparison
with mentalhealth treatment (50.9 percent).
n MH/SA as a share of total health spending. MH/SA expen-
dituresmade up7.8percentoftotalpersonalhealthcare andgovern-
mentpublichealthspendingin1997(Exhibit3).11Aboutoneofevery
fourteen dollars spent on health care in U.S. hospitals went to treat
MH/SA disorders. The amount for retailprescription drugs was one
of every nine dollars; for physicians, only one of every eighteen dol-
lars. The proportion of personal health and government public
health spending going to substance abuse was relatively small (data
not shown). Only 1.3 percent of hospital expenditures went for
EXHIBIT 1
Estimated Mental Health And Substance Abuse (MH/SA) Spending, By Type Of
Provider And Diagnosis, Millions Of Dollars, 1987 And 1997
Hospitals
Psych/SA specialty hospitals
Psych/SA specialty units of general
hospitalsa
Nonspecialty care in general hospitals
$18,766
10,088
5,812
2,866
$26,448
10,746
13,371
2,331
$15,047
8,869
4,133
2,045
$21,714
9,761
10,758
1,195
$3,719
1,218
1,697
821
$ 4,734
985
2,613
1,136
Independent practitioners
Psychiatrists
Nonpsychiatric physicians
Other professionalsb
Muitiservice mental health organizationsc
Retail prescription drugs
Nursing homes
Specialty SA centersd
Residential treatment centers for children
Home health
Insurance administration
Specialty sectorf
Nonspecialty sectorf
9,144
2,996
2,252
3,895
22,260
7,396
4,718
10,147
8,464
2,873
1,782
3,809
20,945
7,115
3,973
9,856
680
123
470
86
1,315
280
745
290
4,378
2,776
4,590
12,135
9,076
4,722
3,944
2,771
4,461
11,066
9,038
4,546
435
6
129
1,069
38
176
1,746
1,092
59
1,625
3,974
2,807
428
3,468
–e
1,068
59
1,329
–e
2,718
414
2,986
1,746
25
1
296
3,974
89
14
482
30,007
12,543
60,576
21,275
24,696
11,118
51,274
19,166
5,312
1,427
9,300
2,109
Total MH/SA spending44,17785,31737,140 73,4277,03611,890
SOURCE: CSAT/CMHS Spending Estimates Project, Substance Abuse and Mental Health Services Administration.
aIncludes Veterans Affairs (VA) hospitals.
bIncludes psychologists, social workers, counselors, and nurse practitioners.
cComprises a variety of providers including community mental health centers, residential treatment facilities for the mentally ill,
and partial care facilities. Some providers treat persons with SA problems.
dIncludes methadone maintenance clinics and facilities that primarily serve persons with SA problems. Also includes facilities
with units that offer specialized staff and treatment for SA problems. Assumes that all services provided are primarily for
treatment of SA disorders.
eNot applicable.
fThe specialty sector was defined as including psychiatric and substance abuse hospitals; psychiatric and substance abuse
specialty units of general hospitals; psychiatrists; other MH/SA professionals; multiservice mental health organizations; specialty
substance abuse centers; and residential treatment centers for children. The nonspecialty sector was defined as comprising
nonspecialty units of general hospitals; nonpsychiatric physicians; nursing homes; home health agencies; and prescription drugs.
H E A L T HA F F A I R S
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