Integrating People with Mental
Illness into Health Insurance
and Social Services
RICHARD G. FRANK AND THOMAS G. MCGUIRE
Mental disorders are prevalent, impair functioning, and impose a large economic burden on American society and the global community. Careers are cut short, investments in education and training are erased, and families are torn apart. Affected individuals are routinely victimized, and jails and prisons are increasingly filled with people whose conduct is a direct result of their mental illnesses (Harwood et al. 1999).
Medical science has advanced the understanding of mental illnesses and led to improved treatments. Mental Health: A Report of the Surgeon General—which summarized much of what is known about mental illness and its treatment—emphasized that mental disorders are a complex mix of biological and psychosocial features, blurring distinctions between mental and physical illness (U.S. DHHS 1999).
Running parallel to the science that, according to the report, “mends the destructive split between 'mental' and 'physical' health” is an evolving health care delivery system (U.S. DHHS 1999). Public provision, directed by state mental health agencies, dominated mental health care in the 1950s and 1960s. In 1956, for example, the budgets of state and local psychiatric hospitals and specialty mental health clinics accounted for 84 percent of spending on mental health care (Fein 1958). Individual households accounted for the remaining 16 percent, which largely paid for psychotherapy and care in private psychiatric hospitals. Aside from a small sector serving a high-income clientele, governments planned and paid for mental health delivery, markets played a small role in allocating resources, and a small set of specialized providers supplied the care.
Recent analyses of spending on mental health care show how things have changed. Coffey et al. (2000) report that in 1997 government played a significant role in financing mental health care, accounting for about 59 percent of spending, but most of that spending occurred through public insurance programs such as Medicare and Medicaid. Less than 15 percent of total spending went directly from government to state and local public mental hospitals. Now a diverse set of private providers and professionals deliver mental health care, including general