Cost-Benefit Analysis of Psychological Therapy

By Layard, R.; Clark, D. et al. | National Institute Economic Review, October 2007 | Go to article overview

Cost-Benefit Analysis of Psychological Therapy


Layard, R., Clark, D., Knapp, M., Mayraz, G., National Institute Economic Review


At present six million people are suffering from clinical depression or anxiety disorders, but only a quarter of them are in treatment. NICE Guidelines prescribe the offer of evidence-based psychological therapy, but they are not implemented, due to lack of therapists within the NHS. We therefore estimate the economic costs and benefits of providing psychological therapy to people not now in treatment. The cost to the government would be fully covered by the savings in incapacity benefits and extra taxes that result from more people being able to work. On our estimates, the cost could be recovered within two years--and certainly within five. And the benefits to the whole economy are greater still. This is not because we expect the extra therapy to be targeted especially at people with problems about work. It is because the cost of the therapy is so small (750 [pounds sterling] in total), the recovery rates are so high (50 per cent) and the cost of a person on IB is so large (750 [pounds sterling] per month). These findings strongly reinforce the humanitarian case for implementing the NICE Guidelines. Current proposals for doing this would require some 8,000 extra psychological therapists within the NHS over the next six years.

Keywords: Depression; anxiety; cost-benefit analysis; cognitive behavioural therapy; psychological therapists

JEL Classifications: H5, II

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Mental illness causes as much of the misery in Britain today as poverty does (see Appendix 1). It is our great hidden problem--little discussed because of the shame which surrounds it. Some 16 per cent of all adults have a diagnosable condition of clinical depression or anxiety disorder. (1) Yet only a quarter of these are in treatment.

This is a huge problem involving massive suffering and major economic cost. So why is there so much untreated illness? The main reason is simple. The majority of patients with these problems who present in GP surgeries are only offered medication and it is what the majority of patients in treatment are receiving. (2) But the majority of those who go to the doctor with these problems would prefer psychological therapy. This emerges clearly from every survey of patient preferences. (3) The evidence also shows that the majority of those who prefer psychological therapy choose not to get treated at all rather than go on medication. So we have massive under-treatment due to the poor availability of psychological therapy.

This would not matter much if psychological treatment was an inferior treatment. But hundreds of clinical trials for depression and anxiety disorders show that modern evidence-based treatments, especially cognitive behavioural therapy (CBT), are as effective as drugs in the short run, and more effective at preventing relapse (unless drugs continue to be taken indefinitely). For these reasons National Institute for Health and Clinical Excellence (NICE) Guidelines say that, unless their condition is very recent or very mild, all these patients should be offered the choice of CBT. (4) CBT is a talking therapy in which patients are given tools to control their feelings, including the ability to challenge negative thoughts and beliefs, and to cultivate positive thinking and action. Normally treatment does not involve more than sixteen sessions. In some cases NICE also recommend other therapies.

But unfortunately the Guidelines are simply not implemented, due to lack of therapists within the NHS. This is the clearest breach of any of the NICE Guidelines for any illness affecting large numbers of people. It also represents the greatest gap between best practice and actual practice anywhere in the NHS and it affects millions.

That it continues is wrong in medical terms. But it is also a major economic issue--which is what this article is about. Depression and anxiety make it much more difficult for a person to work. There is thus a substantial loss of output. …

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