The
Economic
Dorothy
P. Rice,
Sander
Sc.D.(Hon.)
Kelman,
Leonard
Burden
Ph.D.
S. Miller,
Ph.D.
Mental illness imposes a substantial burden on individuals and society. Using data from national surveys and a newly developed methodology for cakulating costs, the authors estimate that in 1985 the total economic costs of mental illness were $103.7 billion. Of this total, direct treatment and support costs were $42.5 billion, or 11.5 percent oftotalpersonalhealtb care spending for all illnesses. Morbidity costs-the value of reduced or lost productivity-amounted to $47.4 billion. Mortality costs-the lost value ofproductivity due to premature death resulting from mental illnesswere estimated to be $9.3 billion, or 5.1 percent of total productivity losses for all deaths. Other related costs, including the cost of caregiver services, amounted to $4.5 billion. Mental illness is costly to the nation in medical resources used for care, treatment, and rehabilitation; neduced or lost productivity; and pain and suffering of patients and their families and friends. Recent surveys have documented the high prevalence ofmental illness in the general
Dr. Rice is professor in the School of Nursing (N631Y), University of California, San Francisco, San Francisco, California 94143. Dr. Kelman
with Medical Services professor
Welfare fornia,
Hospital
is a research
the
New
economist
Jersey
Division
Assistance
and
in Trenton. in the
at the University Berkeley.
and
Community
population: 1 2.6 percent of the population 18 years of age and older reported mental disorders during a one-month period, 14.8 percent during a six-month period, and 22.1 percent during their lifetime (1). Mental illness imposes a substantial burden on individuals as well as society. It is important to translate this burden into economic terms to better understand its magnitude in relation to the burdens imposed by other major chronic illnesses and to facilitate formulating policies about the use of resources. This paper is based on a larger study, The Economic Costs of Alcohol and Drug Abuse and Mental Illness: 1985 (2), conducted for the Alcohol, Drug Abuse, and Mental Health Administration. The methods and sources of data used to estimate the direct and indirect costs of mental illness are summarized, and the results are presented. Methods and data sources The costs of illness are typically divided into two major categories: cone costs resulting directly from the illness, and related costs resulting from the nonhealth effects of the illness. Within each category are direct costs, those for which payments are made, and indirect costs, those for which resources are lost. Indirect costs consist ofmorbidity costs, or the value oflost productivity by persons unable topenform their usual activities or to perform them at a level offtill eff#{232}ctivenessdue to the illness; and mortality costs, or the value oflost productivity due to premature death resulting from the illness.
Health
Dr. Miller
School
of
of Mental
is
of Social
of Call-
Psychiatry
The estimation models For purposes of this study diagnoses ofmental illness from the International Classification of Diseases, Ninth
December
1992
VoL 43
No.
12
Illness
Revision, Clinical Mod:fication (lCD9-CM) (3), were used for estimation of direct and mortality costs. These included psychoses, neuroses, schizophrenia, organic brain syndrome, personality disorders, depression, and others. People who commit suicide were classified as having a mental disorder. Alcohol and drug abuse and related psychoses were excluded. For morbidity costs, DSM-III-R diagnoses were used. Included were schizophrenic, affective, and anxiety disorders, somatization, antisocial personality disorder, and cognitive impairment. Estimation of the economic costs of mental illness is complex, involving a variety of methods and sources of data described in considerable detail in the full report (2). Models for estimating the costs ofmental illness for 1 98 5 are summarized here by type of cost. Direct costs. In general, direct costs (medical expenditures) were estimated as the product of two components: number ofservices and unit prices or charges. For example, the number of days of cane in short-stay hospitals was obtained from the 1984-1986 National Hospital Discharge Survey (NHDS) public-use tapes. For persons hospitalized with a primary diagnosis ofmental illness, the total days of care in 1 985 were used. Patients with diagnoses of mental illness secondary to or comorbid with diagnoses ofphysical illness had longer stays than physically ill patients with no mental illness. In this case, only the additional days of care were used in the cost estimates. Expenses pen patient day, which were obtained from the American Hospital Association (4), were used in conjunction with the total days ofcare to
1227
or secondary mental disorder at admission by the annual mean charge for all residents as reported in the 1985 National Nursing Home Survey (5). Costs ofoutpatient care by office-based physicians were based on visit data from the 1985 National Ambulatory Care Survey (6); charges by psychiatrists and other physicians were obtained from the American Medical Association (7). The costs of other office-based professional 5crvices were limited to psychologists and social workers and were based on personal communications with the American Psychological Association and the American Council of Social Workers. Expenditures for care in mental specialty institutions were estimated from a variety of sources, including personal communications with the Department of Veterans Affairs, the Department of Defense, and the In-
dian Health Service and from data neported by the National Institute of Mental Health (8). Expenditures for psychotropic prescription drugs included total amounts spent for minor tranquilizers, antidepressants, antipsychotics, and combination drugs and were based on estimates of outpatient prescription sales from the National Prescription Survey conducted by Pharmaceutical Data Services. Support costs related to the treatment of mental disorders included federal expenditures for medical and health services research, training costs for physicians and nurses, program administration costs, and the net cost ofprivate health insurance. Sources for these estimates included the budget ofthe U.S. government (9), financial data from medical and nunsing schools (10,1 1), and the Health Care Financing Administration (12). Other related direct costs of mental illness included those of the public and private criminal justice system: police protection, legal and
judicial services, jails and prisons, and social welfare administration. Costs of mental illness in the justice system were estimated by using the offense-specific methodology developed by Cruze and associates (13) and Harwood and associates (14), in which the proportion of offenses on arrests considered to be due to mental illness are applied to the number of known offenses and then multiplied by the costs per offense. These data were obtained from the U.S. Dcpartment ofJustice (1 5-17) and the U.S. Bureau ofthe Census (18). Administrative costs for mental illness were estimated as a proportion of total administrative costs for public social welfare programs in 1985 (19). The benefits paid under these programs were not counted as costs of illness because the funds are transferred from one payer to anothen. The net cost to society resulting from this transaction in terms of resources used is zero, except for costs incurred in operating the system that effects the transfer. Indirect costs: Morbidity. Estimates ofmorbidity costs for the noninstitutionalized population-that is, the value of reduced or lost productivity due to mental illnesswere based on the size of the noninstitutionalized population, prevalence rates of mental illness, impairment rates or percent income loss per person with a mental disorder, and average income the person would have earned ifnot affected by the disorder. Data for the four measures were disaggregated by age group and gender; mental illness prevalence rates were also disaggregated by type of disorder. Multiplying the four measures for each population subgroup identified by age, gender, and type of disorder and summing the results provided an estimate of the aggregate loss ofincome due to mental illness for the entire noninstitutionalized U.S. population. A timing model using regression analysis was developed to estimate impairment rates. This model measured the lifetime effect on current income of individuals with mental disorders, taking into account the timing and duration ofthe disorders. Timing and duration were based on measures of time of onset and of last
1228
December
Hospital
Table
1
Economic
costs
ofmental
illness
in
1985,
by
type of cost Amount (millions
Type
ofcost
$ 99,188
Corecosts1 Direct costs Alcohol,
drug,
specialty
institutions
physicians
professional
Nursing
services
homes
Indirect costs Morbidity
Noninstitutionalized Institutionalized
population population
costs
Direct costs Crime welfare
Total
30.2
8.5
20.7
2,151
2.1
5.1
3,466
3.3
8.1
costs resulting
obtain total short-stay hospital Nursing home costs for were estimated by multiplying of residents
-
100.0
10.2
with
costs. 1985 the
a primary
directly
24.9
3.4 7.6 100.0
1.4
56,660
3. 1 54.6
47,395
45.7
44,087
42.5
83.6 77.8 5.8
3,308
3.2
9,265
8.9
16.4
4,503
4.3
100.0
1,678 1,301
1.6 1.2
37.3 28.9
.4
8.4
2,825 325
2.7
62.7
2,500
2.4
.3
$103,691
Includes direct and indirect Discounted at 6 percent
number
12.4
8,805
377
Familycaregiving
I
1 2,831
administration
Indirectcosts Incarceration
2
95.7 41.0
1,453 3,239
costs
Mortality2 Other related
42,528
10,583
Drugs Support
bution
psychiatric
federal
hospitals
Office-based
Other
and
and
Short-stay
Social
Distri-
%
ofdollars)
7.2 55.5
100.0
-
from the illness
1992
Vol.
43
No.
12
and
Community
Psychiatry
Table
2
Deaths due to mental gender and age1
illness,
person-years
lost, and productivity
losses
in 1985,
Productivity
by
losses
Person-years
lost
N (thou-
N pen
sands)
death
(millions ofdollars)2
Per death
71.9
$
Amount Gender
and
age
N deaths
Men and women Underagel5 15to24 25to44 45to64 65andover
4,577 9,813 6,794
95 246 408 158
17,205
142
1,319
305 2,275 4,961
$231,007 496,993 505,551
23.3 8.2
1,524 201
224,363 11,655
26.4
$9,265
$233,337
$
$264,227
Total Men Underagel5
39,707 669
45
67.6
15to24 25to44
3,783 7,619
199 308
52.5 40.5
45to64
4,961
109 68
21.9 8.2
729
28.7
$7,543
515,476 541,906 238,464 12,461 $297,253
650 794 2,194 1,833
50 47 100 50
76.3
$
$196,773
59.4
325
408,924
45.5 27.0
832 341
379,284 186,194
8,862 14,332
74 320
8.3 22.3
97 $1,722
$120,174
65andover Total
1,049
53.7 41.6
8,343 25,375
177 1,950 4,129 1,183 104
Women Underagel5 15to24 25to44 45to64
65 and over Total I Numbers 2
Discounted
not add to totals at 6 percent
may
128
10,896
due to rounding.
symptom relative to the time of interview reported in the Epidemiologic Catchment Area surveys. Morbidity costs for the institutionalized population were based on the number of residents in state and
orders in nursing homes. The numben of institutionalized persons was adjusted by labor force participation rates and then multiplied by the estimated mean earnings-adjusted for wage supplements on fringe benefits-for each age group and gender. indirect costs: mortality. Ifan individual does not die prematurely from mental disorders, he or she continues to be productive for a number of years. The estimated mortality costs were the product ofthe number ofdeaths due to mental illness and the expected value of a person’s future earnings. The method of denivation considered life expectancy for diffrent age groups and for men and women, the changing pattern of
earnings by age, varying labor force participation rates, an imputed value for housekeeping services, and the appropriate discount rate to convert a stream of earnings into their pnesent worth. Cross-sectional profiles of mean earnings by age and gender as reported by the U.S. Bureau ofCensus (20) were used based on the assumption that future earnings of an average person will rise with age and expeniencc in accordance with cross-sectional data for that year. Marketplace earnings underestimate productivity losses because many persons are not in the labor force. Many of these persons, as well as those in the labor force, perform household services. The value of household work, therefore, must be added to earnings. For this study, estimates of hours spent on household labor were developed, using negnession analysis to control for socioeconomic and demographic factors (2 1). The hours were then valued on
Hospital
December
county number
mental ofresidents
hospitals with
and Community
and mental
the dis-
Psychiatry
1992
Vol.
43
No.
12
the basis of 1985 wage rates. Other related indirect costs. Two types of other related indirect costs were estimated: productivity losses for persons incarcerated in prisons as a result of a mental-illness-related crime and the value of time spent to care for family members. The first costs were based on the number of persons incarcerated (22-24) multiplied by the 1985 year-round, fulltime mean earnings adjusted for supplements and fringe benefits. The value oftime spent by family members providing care to mentally ill relatives was estimated by Franks in an unpublished study conducted for the National Institute of Mental Health in 1987. Included in the estimate was time spent in caregiving; time lost from work; time with lawyens, clergy, and professionals; recreation time; and time spent in other activities based on a survey of the membership of the Massachusetts Alliance for the Mentally Ill (25). Results Mental illness comprises a wide range of mental disorders, and the prevalence of mental illness is high, resulting in high use of medical care services and considerable costs to society in productivity losses as summarized below. Totaleconomicimpact. As shown in Table 1 mental illness imposed a $103.7 billion burden on the U.S. economy in 1985. Based on a variety ofeconomic and health factors, the total economic cost of mental illness was estimated at $129.3 billion in 1988. Direct treatment and support costs constituted 41 percent of the 1985 total; morbidity costs (the value of reduced or lost productivity), 46 percent; mortality costs, 9 percent, based on a 6 percent discount nate of the value of productivity forgone in future years as a restilt ofprcmaturc mortality in 1985; and other related costs, including the cost ofcancgivers’ services, 4 percent. Direct costs. Direct costs for persons suffering from mental disorders totaled $42.5 billion in 1985, or 1 1 .5 percent of total personal health care spending for all illnesses in that year. About 30 percent of the direct costs, on $12.8 billion, were expenditures for care in specialty institutions ,
1229
Table 3 Core costs1
Gender
ofmental
illness
in 1985,
by gender
and age
Amount (millions ofdollars)
and age
illness morbidity costs, or the value of reduced or lost productivity, amounted to $47.4 billion, more than four-fifths of the total indirect costs of mental illness. Morbidity costs for the noninstitutionalized population were $44. 1 billion; they were based on an estimated prevalence of27.7 million persons with aSfective disorders, 25.3 million with anxiety disorders, 8.8 million with antisocial personality disorder, 2.6 million with schizophrenic disorders, 489,000 with cognitive impairments, and 281 ,000 suffering from somatization. Morbidity costs for the institutionalized population were also estimated; the population included 104,000 persons in mental hospitals and 605,700 in nursing homes. For this population, morbidity costs amounted to $3.3 billion, on 6 pencent oftotal indirect costs. indirect costs: mortality. As illustrated in Table 2, a total of 39,707 deaths due to mental disorders occunred in 1985, ofwhich 74 percent were by suicide. Of the 29,453 suicide deaths, 3,828, or 1 3 percent, were classified as alcohol related. The 39,707 deaths related to mental illness represented more than 1 million person-years lost, on 26.4 years per death, and a loss of$9.3 billion to the economy at a 6 percent discount rate, or $233,337 pen death.
%
Distribution
Men and women
45to64
$ 2,102 49,754 30,053
65andover Total
17,276 $99,188
Underagel52 15 to
44
2.1
2.1
50.2
50.2
30.3 17.4 100.0
30.3 17.4 -
Men $ 1,295
Underagel52 15to44
1.3
32,467
45to64 65andover Total Women Under age 152
17,658 5,651 $57,071 $
15to44 45to64
807
Includes
direct
2
In this age group,
and
indirect costs
costs
for several
resulting
categories,
directly
41.1 29.4 27.6
42.5
100.0
the illness
from
including
using a mean length of stay of 13.3 days. The remaining $ 1 .8 billion was the estimated comorbidity cost for 1 .4 million patients with a secondary diagnosis ofmental illness. These patients stayed a mean of 3.5 days longer than those without a diagnosis of mental illness. Other treatment costs in 1985 included $2.2 billion for office-based physicians and $3.5 billion for other professional services, including those of psychologists and social workers. Nursing home expenditures for the mentally ill amounted to $10.6 billion, 25 percent ofdirect costs. The costs of prescription drugs were estimated at $ 1 5 billion, 3 percent of the direct costs of mental illness.
1.9
17.4 12.5 11.7
specialty
for 15- to 17-year-old persons; thus costs for the under-iS for the 14-to-44 age group are understated.
(state, county, and psychiatric hospitals, residential treatment centers for emotionally disturbed children, freestanding mental health centers, and correctional facilities) and care in federal institutions. More than one-fifth of the 1985 direct costs, or $8.8 billion, were for short-stay hospital care, ofwhich $7 billion was the cost of care for 1.1 million patients discharged with a primary diagnosis of mental illness,
9.9 100.0
.8
11,625 $42,116
I
30.9
5.7 57.5
17,287 12,395
65andover Total
2.3 56.9
32.7 17.8
and
age group
federal
institutions,
are overstated,
are
and
costs
Support costs, including expenditunes for research, training costs of physicians and nurses, expenditures for program administration, and the net cost ofpnivate health insurance, amounted to $3.2 billion, constituting 8 percent ofdirect costs. indirect costs: morbidity. Mental
Table
4
Direct source
costs (millions of payment
Treatment
of mental
setting
Alcohol,
drug,
specialty
and
Federal
of dollars)
and psychiatric federal institutions
providers and county
State hospitals
Office-based
in 1985
,
by treatment
Total
Federal
State,
$12,831 1 ,433
$
$ 7,964
3,097
1 ,433
local
-
setting
and
Private1
$ 1,770 -
psychiatric
Private psychiatric hospitals Other specialty institutions Other treatment costs Short-stay
illness
hospitals physicians
Other professional Nursing homes Prescription drugs Support costs
5,355
777
4,337
1 ,786 4,257
270 617
26,458 8,805 2,15 1
6,940 3,575 151 243
179 3,448 3,902 1 ,43 1 54
services
3,466 1 ,453 3,239 $42,528
Total
86
2,900
10,583
2,254
71 1 ,027 $11,064
77 249 $12,115
241
1,337 192 15,616
3,799 1,946 3,137 5,429
1,305 1,963 $19,349
.
1230
1
Includes
December
private
1992
health
insurance,
VoL 43
direct
No.
payments
12
by patients,
Hospital
and
and
philanthropy
Community
Psychiatry
Table
5
Findings
ofprevious
cost
studies
ofmental
illness Indirect
Total
costs
Direct
Amount
Dis-
Study period
(millions
(millions
(millions
count
ofdollars)
ofdollars)
ofdollars)
rate (%)
Direct
Indirect
Fein(28)
1954
$
Rice (26) Conley and Conwell LevineandLevine(30) CooperandRice(31)
1963 1968 1971
$ 1,723 2,402
$ 1,926 4,875
4 4
20,000
4,000
16,000
na
47.2 33.0 20.0
52.8 67.0 80.0
25,237
5 4
56.2
13,917
14,179 6,932
43.8
1972
11,058 6,985
50.2
1974 1975 1977
36,786 18,201 40,287
16,973 9,411 18,745
19,813 8,790 21,542
5 2.5
46.1 51.7
49.8 53.9
1980
54,236
25,288
28,948
6 6
46.5 46.6
Authors
and reference
(29)
LevineandWillner(32) PaningerandBerk(33)
Cruzeetal.(13) Harwoodetal.(14) Paringer and Berk Riceetal.(27)
(33),
Frank
(34)
and Kamlet
3,649 7,277
costs
costs
53.5 53.4
30,685
19,824
10,861
4
64.6
35.4
1980
na
19,230
na
-
-
-
6 6
48.8 42.6
57.4
1983
72,775
35,501
37,274
Riceetal.
1985
103,691
44,206
59,485
Death attributed to mental illness constituted 1.9 percent ofthe 2.1 million deaths in the United States in 1985, 3.2 percent ofthc total penson-years lost, and 5 percent of the total productivity losses. Deaths among men accounted for 64 percent ofthe total number ofdeaths, 69 percent ofthe person-years lost, and 81 percent of the productivity losses. More than two-fifths of the deaths due to mental illness occurred among persons aged 65 years and over. Due to the short life expectancy and low earnings of this age group, person-years lost amounted to 14 percent of total person-years lost, and mortality costs constituted only 2 percent ofthe total mortality costs. In contrast, 36 percent of the deaths due to mental illness were among persons between the ages of 1 5 and 44, accounting for 62 percent of the person-years lost and 78 percent of the total productivity losses. Costs by gender and age. Only the core costs were calculated by gender and age. The core costs$99.2 billion-included cxpenditunes directly related to the treatment and support of persons with mental disorders and morbidity and mortality indirect costs associated with these disorders. As shown in Table 3 adults between the ages of 15 and 44 accounted for halfthe total core costs. About 30 percent of the
costs were for people between the ages of45 and 64, and 17 percent of the costs were for those 65 and olden. Mental illness costs for men were more than one-third higher than for women-$57. 1 billion compared with $42. 1 billion, respectively. The higher costs for men reflect the larger number ofdeaths due to mental disorders among men, the higher labor force participation rates of men, and their higher earnings. Source ofpayment. Table 4 shows the direct costs of mental illness by source ofpayment and treatment setting. Private sources accounted for 45 percent of the total direct expenditures for treatment ofpersons with mental disorders in 1985. The remaining 5 5 percent were almost equally divided between federal and state and local sources. The source of payment varied considerably by treatment setting. Federal funds covered all expenditures in federal treatment settings, including Veterans Affairs, Army, Navy, Air Force, and Indian Affairs facilities. More than four-fifths of the state and county psychiatric hospitals and other institutions, including residential treatment centers for emotionally disturbed children, freestanding facilities, multiservice mental health organizations, and correctional facilities, were supported by state and local funds.
Hospital
December
,
and Community
48.3
1980
Harwoodetal.(14) (2)
distribution
Psychiatry
1992
Vol. 43
No.
12
51.2
Three-fourths ofcare in private psychiatric hospitals was paid for by pnivate sources. Of expenditures for short-stay hospital care ofpatients with mental disorders, 4 1 percent came from federal sources, 16 percent from state and local funds, and the remaining 43 percent from private sources. Almost half(49 percent) of the expenditures for nursing home care of patients with mental disorders came from public sources, with 28 percent from federal funds and 2 1 percent from state and local funds. For office-based physicians, other professional services, and prescription drugs, private funds covered 90 percent oftotal expenditures.
Discussion and conclusions As shown in Table 5 a variety of studies of the costs of mental illness have been conducted during the past three decades. As expected, total costs have risen over the years. More important, however, is the considerable variation among the studies in the distribution of direct and indirect costs and in the level ofcosts in studies conducted for the same years. These variations are due to the use of different methodologies, estimating procedures, sources of data, and discount rates. In addition, direct and indirect costs of mental illness have been changing over time, with a ,
1231
dramatic increase in direct costs rcative to indirect costs. Rice (26) estimated that the indirect costs of mental illness in 1963 were twice the direct costs. Using the same methodology, direct costs were shown to have increased so rapidly by 1980 that the relationship between the two types ofcosts was reversed, with direct costs almost twice the indirect costs. This change reflected the high rate of inflation in medical care costs and lower rates of increase in wages over the 1 7-year period (27). The cost estimates presented in this study were based on the most current and reliable data available and new methodology developed specifically for this study. Nonetheless, several qualifications are in order. Several known costs, such as pain and suffering, were excluded because data were unavailable. No estimates were made for income loss due to mental illness in the homeless and military populations, resulting in underestimation of costs. Some of the cost estimates are likely to be low due to data limitations. For example, hospital discharge and ambulatory data records may not list mental illness diagnoses because of the stigma associated with this disorder. Estimates of income loss among the civilian noninstitutionalized population were calculated only for persons between the ages of 18 and 64. To the degree that those under age 18 and over 64 suffer earnings losses due to mental illness, the costs
cost of mental illness. As better become available, the approach be refined and improved.
data can
NC,
paper
ducted
for
is based
the
on
research
Alcohol,
Drug
con-
acknowledge Sarah statistical
the research assistance of Dunmeyer and the computer and assistance ofScott Hood.
General
Psychiatry
45:977-986,
17.
101384. Justice Justice
18.
ton, DC, Bureau o(JusticeStatistics, Census of Service Industries.
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4.
Hospital American
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are understated. Productivity losses were based on personal income rather than earnings. Personal income, which includes receipt of transfer payments, may be less sensitive to the effects of mental illness than earnings, resulting in possible undcrstatement of costs. A 6 percent discount rate was used to estimate the present value of future earnings lost because a rate of 6 percent is consistent with rates used in earlier studies. Use ofa 4 percent discount rate would yield mortality costs of $12 billion, or $2.7 billion higher than the costs based on a 6 percent discount rate. For these reasons, the cost estimates presented in this study can be interpreted as lower limits of the true
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