OM: BH Spending to $214b, 13.4% Hike Since 2011

October 6, 2016 | Athena Mandros

Behavioral health spending reached $213.6 billion last year – an increase of $25.2 billion, or 13.4%, since 2011. The majority of that spending was for mental health services, which accounted for 84%, or $195.6 billion, in spending. The other 16%, or $36 billion, was for addiction treatment services.

The numbers themselves are not meaningful, but there are some interesting implications within them. For organizations that provide (or manage) mental health and addiction treatment services, there are important strategic questions:

1. Is growth in behavioral health spending exceeding total health spending growth?
2. Is behavioral health spending increasing or decreasing as a percentage of total health spending?
3. How has parity affected spending during this time period? Will parity cause spending to increase?

First, is growth in behavioral health spending exceeding total health spending growth?From 2008 to present, both mental health and addiction treatment spending growth have exceeded total health spending growth and the health care inflation rate. Addiction treatment spending is growing at a higher rate than mental health spending – an average of 6.3% per year from 2011 to 2014, compared to an average of 5.1% for mental health. Total health spending grew at a rate of 4.6% and the health care inflation rate grew at a rate of 2.9% during the same period.

Second, is behavioral health spending increasing or decreasing as a percentage of total health spending?Although behavioral health spending is growing at a faster rate than total health spending, behavioral health has stayed fairly steady as a percentage of total health spending. In 2015, behavioral health spending accounted for 7.5% (6.4% mental health, 1.2% addiction treatment) of total health spending. Similarly in 2008, behavioral health spending accounted for 7.2% (6.4% mental health, 0.8% addiction treatment) of total health spending.

Finally, how has parity affected spending during this time period? Will parity cause spending to increase?At this time, the answer to that question is largely unknown due to the staggered implementation of parity. While mental health parity for commercial plans went into effect in 2010, parity for health insurance marketplace plans did not go into effect until 2015, and Medicaid parity is to go into effect on October 2, 2017 (seeCMS Final Medicaid Parity Rule Released: All Plan Types IncludedandAnalysis Finds Over Half of States’ 2017 EHB Benchmark Plans In Violation Of PPACA & Parity Requirements). But studies have found that the initial effect of parity on commercial health plans has not changed utilization for consumers with serious mental illness (seeMental Health Parity Had Limited Impact On Utilization By Commercial Health Plan Beneficiaries With An SMI).

Although commercial parity may not appear to have an effect on behavioral health spending, there are two other major considerations when thinking about behavioral health spending and the effect of parity. The first is the use of managed care and the second is new integrated care delivery models. In 2016, 68.8% of the Medicaid population was enrolled in managed care compared to 49% in 2010 (see68.8% Is The National Number – What Is Your State Number?). The increase in managed care generally means that more behavioral health services would be delivered in community-based settings, with a decrease in inpatient and residential treatment levels of care. This would depress spending even if utilization increased.

The field has also seen an increase in the number of consumers receiving care via integrated care delivery models –models that would treat behavioral health conditions in primary care settings and decrease the reported utilization and cost of services (seeThe Messy, Necessary Evolution Of Primary Care,Reinventing Primary Care – A Challenge For All Health Care Executives,The Biggest Challenge To Integration? The Answer May Surprise You).

For more information on behavioral health spending, see our two new market intelligence reports:The Addiction Treatment Market: $36 Billion In 2015andThe Mental Health Market: $195.6 Billion In 2015. Both reports look at spending trends over the past two decades, per capita spending, and spending by care setting and payer type over time.