Research Review

Spending on Behavioral Health Is Shrinking

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

In 2005, the latest year comparable data is available, behavioral health spending accounted for 7.3% ($135 billion) of the $1.85 trillion spent on all healthcare services in the United States. During the 20-year study period, both mental health and substance abuse spending grew more slowly than all other health spending: 4.8% annually for substance abuse, 6.9% annually for mental health, and 7.9% annually for all healthcare services. The same pattern held in the most recent 2002-2005 period, in which spending for substance abuse grew slowest (5%), followed by mental health (6.4%), and all health (7.3%).

The study found that private insurance spends about 5% on behavioral health treatment. Spending on behavioral health treatment (mental health and substance abuse) comprised 4.8% of private health insurance expenditures in 2005 and grew by 7% 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% 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% of spending on substance abuse treatment services and 58% of spending on mental health services. In contrast, public payers accounted for 46% 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 one 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% from 1999 to 2000 to only 5.6% 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% of $22 billion in 2005).

• Private insurance spends about 5% on behavioral health treatment. Spending on behavioral health treatment (mental health and substance abuse) comprised 4.8% of private health insurance expenditures in 2005 and grew by 7% 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% of total spending by Medicaid in 2005.

— Source: Substance Abuse and Mental Health Administration