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Is behavioral health spending shrinking?

February 3, 2011
by News release
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Spending on psychiatric drugs grew by 5.6 percent from 2004 to 2005, down from the 27.3 percent growth from 1999 to 2000 according to a study published in the February issue of Health Affairs. The study conducted by the Substance Abuse and Mental Health Services Administration analyzed healthcare costs from 1986 to 2005 to determine patterns in expenditures for behavioral health services.

SAMHSA is publishing the full report entitled National Expenditures for Mental Health Services and Substance Abuse Treatment, 1986 – 2005 that can be found at the SAMHSA website.


In 2005, the latest year comparable data is available, behavioral health spending accounted for 7.3 percent ($135 billion) of the $1.85 trillion spent on all health care services in the U.S. During the 20-year study period, both mental health and substance abuse spending grew more slowly than all other health spending: 4.8 percent annually for substance abuse, 6.9 percent annually for mental health, and 7.9 percent annually for all health care services.


The same pattern held in the most recent 2002-2005 period, in which spending for substance abuse grew slowest (5.0 percent), followed by mental health (6.4 percent), and all health (7.3 percent).


SAMHSA Administrator Pamela S. Hyde commented, “Behavioral health services are critical to health systems and community strategies that improve health status and they lower costs for individuals, families, businesses, and governments. The value of behavioral health services is well documented. Studies have shown that every dollar invested in evidence-based treatments yields $2 to $10 in savings in health costs, criminal & juvenile justice costs, educational costs, and lost productivity. Yet, too many people don’t get needed help for substance abuse or mental health problems and health care costs continue to skyrocket.”


The study found that private insurance spends about 5 percent on behavioral health treatment. Spending on behavioral health treatment (mental health and substance abuse) comprised 4.8 percent of private health insurance expenditures in 2005 and grew by 7 percent from 2004 to 2005. This estimate provides an important baseline for evaluating the impact of the Mental Health Parity and Addictions Equity Act and Affordable Care Act.


In contrast, Medicaid behavioral health was responsible for 11.5 percent of total spending by Medicaid. Thus the study indicates that the level of public spending on behavioral health issues may be related to lack of private insurance benefit for many with mental health needs and that these problems may be addressed with parity.


The study’s key findings included:

  • Unlike overall health spending, the vast majority of behavioral health services is publicly funded. In 2005, public payers accounted for the 79 percent of spending on substance abuse treatment services and 58 percent of spending on mental health services. In contrast, public payers accounted for less than half (46 percent) of all-health spending.

  • Psychiatric drug spending growth is declining. In the past psychiatric drugs were a major driver of overall mental health spending — contributing almost half of the increase in mental health spending between 1998 and 2002. However, because of the wider use of less-expensive generic drugs and reduced numbers of new people using psychiatric medications, the growth rate in spending for these drugs actually slowed from 27.3 percent from 1999 to 2000 to only 5.6 percent from 2004 to 2005.

  • Spending on addiction medications is increasing but still remains relatively small. As a result of the introduction of new medications to treat substance dependence, spending on addiction medications has grown rapidly — from $10 million in 1992 to $141 million in 2005. More recent data from IMS Health shows continued rapid increases up to $780 million in 2009. However, it remains only a small fraction of the entire amount spent on substance abuse treatment (0.6 percent of $22 billion in 2005).

  • Private insurance spends about 5 percent on behavioral health treatment. Spending on behavioral health treatment (mental health and substance abuse) comprised 4.8 percent of private health insurance expenditures in 2005 and grew by 7 percent from 2004 to 2005. This estimate provides an important baseline for evaluating the impact of the Mental Health Parity and Addictions Equity Act and Affordable Care Act. In contrast, Medicaid behavioral health was responsible for 11.5 percent of total spending by Medicaid in 2005.

For those seeking the Health Affairs summary article, the citation is Mark TL, Levit KR, Vandivort-Warren R, Buck JA, Coffey RM. Changes in U.S .Spending on Mental Health and Substance Abuse Treatment, 1986 – 2005, And Implications for Policy. Health Affairs 30, No 2. (2011) (abstract available at: http://content.healthaffairs.org/content/30/2/284).

The full report is available at the SAMHSA Website under financing in the health care reform section.

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