NCPA - National Center for Policy Analysis


May 23, 2005

The United States' appetite for prescription drugs has been even more powerful in the mental health field than it is for health care in general. A new federal estimate of mental health expenditures, published in Health Affairs, shows a growth of 17.1 percent a year between 1991 and 2001, compared to just 12 percent for all prescription drugs.

The first estimate of national mental health and substance abuse spending trends published in five years shows that mental health patients increasingly were managed through medication rather than through hospitalization during the decade ending in 2001.

With the introduction of new psychotropic drugs, the closure of psychiatric hospitals and the cost pressures of managed care, the share of mental health spending for inpatient services decreased, while the share of spending on mental health retail prescription drugs increased. Other findings:

  • Inpatient services declined by twelve percentage points to 28 percent in 2001 while mental health retail prescription drugs grew eleven percentage points to 17 percent in 2001.
  • By comparison, inpatient services constituted 33 percent of spending in the health care sector as a whole in 2001 while retail prescription drugs represented 10 percent of spending.

The spending growth rate for mental health services lags behind the health care sector and public programs have taken on an increasing share of the costs of mental health services, according to the Substance Abuse and Mental Health Services Administration.

The annual spending growth rate for mental health services was 5.6 percent over the period studied, compared to the 6.5 percent for all health care services. Spending by public programs was 6.8 percent, while private payers had a 3.7 percent growth.

Source: Tami L. Mark et al., "Prescription Drugs Replace Inpatient Mental Health Treatment With The Introduction Of New Medications and Cost Pressures," Health Affairs, March 29, 2005.

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