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The economics of mental health

Published on 08/10/18 at 11:01am

Louis Goss examines mental health from a health economics and outcomes research (HEOR) perspective and asks what might be done to improve the way in which we treat medical as well as societal problems related to these conditions.

Mental health issues have been estimated to cost the world economy $2.5 trillion each year. To put that into perspective, the United Kingdom’s gross domestic product (GDP) was $2.6 trillion in 2017, while the world’s economy was estimated to be worth $78.28 trillion in 2014.

In the UK alone, mental health problems are estimated to cost between £70-100 billion each year, accounting for around 4.5% of the country’s GDP.

In broader terms, mental health issues are a larger source of economic burden to the world economy than all other health matters, including cardiovascular diseases, chronic respiratory diseases and cancer.

There are also strong links between physical and mental health. According to a report published by the King’s Fund, 30% of people with a long-term physical health problem also had mental health issues, while 46% of those with a mental health condition also suffered from long-term physical health issues.

It is thus somewhat disheartening that despite the huge costs associated with mental health, we seem to be moving in the wrong direction, as direct and indirect costs associated with mental health issues are expected to increase two-fold by 2030.

Thus, considering more than half of people living in middle- and high-income countries will suffer from at least one mental health issue at some point in their lives, it is undoubtedly important that we tackle mental health problems effectively and efficiently.

As such, the question we must then ask is, ‘what is the best course of action, considering the finite resources that are available?’ This is the fundamental question of health economics.

An economist’s perspective

Martin Knapp, an economist and Professor of Social Policy at the London School of Economics (LSE), said that, above all, mental health economics should focus on improving people’s lives. He was clear in stating that “although economists tend to be associated with the resource side of decision making, money and costs and so on, those resources are only relevant if they’re doing something to help the situation. So I think the most important issue is the health and well-being of individuals.”

However economic factors must also be taken into account. As said by Knapp: "I think outcomes are the primary concern, but then on the resource side we need to think about the economic implications.”

Knapp continued in suggesting that “there are some sub-questions and sub-issues that come up from an economist’s perspective, which ask: what are the costs of prevention programmes or treatment interventions? What are the consequences of not treating, or preventing mental health problems in terms of lost productivity, or lost life chances, that can have economic consequences?"

As such, it might be useful to explore the ways in which mental health issues end up costing so much money. When considering the ‘cost’ of mental health issues, the ‘direct costs’, such as the economic burden associated with the cost of medication, hospitalisation and other costs associated with diagnosis and treatment, might be the first things that come to mind.

However, data from 2010 suggests that in fact the indirect costs, such as those associated with lost productivity, social security and the criminal justice system, represent by far the larger proportion of the economic burden of mental illness. Thus, while the direct costs associated with treating mental illness come to a total of $0.8 trillion, the indirect costs come to a sum that is more than twice that amount, totalling an estimated $1.7 trillion. There is thus a significant economic incentive to effectively treat mental health problems in a quick and efficient manner.

Prevention and early intervention

Preventative measures and early interventions are particularly effective strategies in reducing the economic burden of mental health issues. As stated by Lucy Schonegevel, Head of Health Influencing at the English mental health charity, Rethink Mental Illness: “Prevention should be the number one priority; not just preventing mental health problems in the first place, but also preventing the escalation of illnesses to crisis point. Severe mental illnesses are typically more expensive to treat as they require more intensive support in order for treatment to be successful. The ability to provide care to people when they exhibit the early symptoms of mental illness is a good way of preventing these higher costs.”

It is important to note that preventative measures have been shown to work in practice. As said by Schonegevel: “The Early Intervention in Psychosis programme (EIP) has demonstrated how effective preventative measures can be at saving money whilst helping to stop people’s conditions becoming worse. Recent NHS data has found that the short- and longer-term economic benefits of EIP services are significant, with estimated net cost savings of £7,972 per person after the first four years, and £6,780 per person in the next four to 10 years if full EIP provisions are provided. Over a 10-year period this would result in £15 of costs saved for every £1 invested in EIP services.”

The importance of prevention and early intervention is particularly striking when considering the issue of suicide. In England, the average cost of a single suicide of someone of working age is estimated to be around £1.7 million, when factors such as loss of output and police and funeral costs are factored in. To make thuings worse, the vast majority of suicides are entirely preventable.

It is also important to remember that early interventions can significantly improve an individual’s quality of life. As noted by Professor Knapp: “Mental illness is one of the strongest drivers of poor mental wellbeing, and so it could be said that generally mentally ill people are not very happy.”

Schonegevel explained: “Getting people the right treatment at the right time is vital. It is the difference between someone with bipolar disorder being correctly diagnosed in their teens, resulting in them successfully managing their symptoms, and them remaining undiagnosed for years, struggling with symptoms that they don’t fully understand. Getting the right support early on can stop this deterioration, and saves the NHS money in the long run.”

Knapp agreed as he emphasised the importance of adequately funding prevention and early intervention initiatives, even when there are limited resources available. “One thing to do is to put more resources into the prevention side. Of course, I fully understand how difficult that is when frontline services might feel that they haven’t got enough resources to cope with the bombardment they’re receiving, so diverting some of those resources, as they might see it, away from treatment and into prevention, might not be easy to do.”

He continued in saying: “Politicians, decision makers and commissioners don’t want the next mental health scandal in their patch and they don’t want it to happen where they have responsibility. So doing things to prevent untoward incidents and terrible distress is obviously a priority but we need to find some way of getting resources into prevention programmes; and it’s not just NHS resources – it’s resources in schools, workplaces, communities and the justice system.”

In the working world

In the United Kingdom, a large proportion of the economic burden associated with mental illness relates to lost productivity and lack of employment. Research carried out by the economic analysis firm Oxford Economics suggests that an estimated 181,600 British people are unable to enter the workforce due to mental health problems. Equally, it is estimated that 17.6 million works days, or 12.7% of all sick days, are taken due to issues related to mental health. Furthermore, research suggests that the UK’s GDP could have seen an additional £25 billion in 2015 alone, had it not been for the costs associated with mental illness. This in turn could increase tax revenues which could help to fund the NHS.  

Professor Knapp noted that many unemployed people who are living with mental health problems are enthusiastic about transitioning into work. “We mustn’t ever forget that it is also possible to live with a mental illness, with active symptoms of mental illness, and to still enjoy a very good quality of life, if the appropriate structures are in place. So it’s incredibly important to make sure that if somebody is still experiencing often quite distressing symptoms of mental illness, they can nevertheless get a job, have a relationship and be respected in their community.” He added that although someone may have “a mental health problem, which might mean there may be periods where they are not very productive or can’t come into work” that shouldn’t “deny them the opportunity to get a paid job,” Knapp said

Knapp recounted that: “I’ve heard many times from people with psychosis that they hear voices and that hearing voices is distressing, but people often learn to cope with hearing voices. What they can’t cope with is being rejected when they apply for a job.”

However, it is not just those with mental health problems who might be affected. In 2015, an estimated 93,100 people were unable to work due to the fact that they were caring for someone with a mental health problem. Equally, a further 27,800 were working reduced hours in order to care for someone with mental health issues. As such, mental health problems place a significant burden on the friends and families of those who suffer from poor mental health.

Overall, one in four of all carers in the UK looks after someone with a mental health problem. Furthermore, caring for someone often in turn has a detrimental effect on the carer’s own mental health. While 45% of young adult carers reported that they had suffered from mental health problems, nearly 70% of older carers reported that being a carer had had an adverse effect on their mental health.

Thus, improving the rates at which people with mental health issues are employed would not only be good for the economy, but again may also improve the quality of life of both those suffering from poor mental health, and the friends and families of those people who care for them.

From an economic perspective employers too would also benefit greatly from effective management of mental health issues. As said by Knapp: “If employers recognise the tremendous economic benefits of [treating mental health issues], they ought to just do it themselves, as there are enormous payoffs for employers, whether they’re private or public sector, in addressing mental health needs.” 

Treating mental illness

Professor Knapp was plainspoken in suggesting that: “I always say – and I think this is correct – that there is no cure for a mental health problem. We don’t cure mental health problems. We find ways to alleviate the symptoms in what are often long-term illnesses, and those symptoms might re-emerge […] so what we have to do is to support people and their families and communities in living with those bad experiences that they have.”

There are however various ways in which mental health issues can be ‘treated’ – or rather, there are various ways through which the symptoms of mental health problems can be alleviated and those patients can be supported in their daily lives.

Research from 2016 suggests that patients with mental health problems are most commonly treated with medication. This includes antidepressants, antipsychotics and mood stabilisers, among other forms of prescription medication. Talking therapies are the second most common form of treatments. However, statistics also suggest that talking therapies such as Cognitive Behavioural Therapy (CBT) are used much less frequently than prescription medicines in treating mental health issues, at about a third of the rate.

Due to the multifaceted nature of many mental health problems, a combination of treatments is often the most effective course of action. Professor Knapp commented: “we should see these things, CBT and medication, as probably more effective in combination, rather than setting them up as one against the other. To some extent it’s down to personal preference, but what I can see, is that when you put these things together, along with a wider plan to support the individual […] there are clear outcome benefits and cost effectiveness gains.”

However, the economic issues become particularly apprent when looking at the discrepancy between the rates at which medications are prescribed in comparison to talking therapies. For example, research suggests that only one in ten of those who could benefit from CBT are able to access the therapy. 

As expanded upon by Professor Knapp: “The difficulty of course is whether you have the supply of those things. With medications it’s not so much of an issue – they’re affordable – but the problem is, with some of the interventions that might go with medication such as psychological therapy, even if it’s delivered electronically, you still have a capacity issue.”

Either way, the economic benefits of properly treating mental health problems are clear. Both Knapp and Schonegevel were direct in stating the importance of adequately funding mental health services. Schonegevel said it most clearly in stating: “There has been historic underinvestment in mental healthcare, particularly into therapies and support for people severely impacted by mental illness... A past lack of investment has resulted in a lack of research into mental health care. It has led to us playing catch up, and there’s a lot of work left to do. Happily, our understanding of mental illness is improving all of the time, but we need to continue co-producing research and developing new treatments in line with the experiences of those with mental illness.”

Knapp was in agreement in suggesting that: “It’s a resource issue, and as resource constraints become even more obvious, this becomes more of a challenge for us. It goes back partly to a stigma issue; I don’t think mental health has been necessarily prioritised sufficiently.”

Schonegevel agreed: “Whilst we have seen greater investment in the last few years, this has been directed at specialist services, such as perinatal mental health and talking therapies for people with anxiety and depression. This must continue, however it cannot be at the expense of critical core support and therapies for people severely impacted by mental illness.”

Changing society

Adverse socio-economic conditions are strongly correlated with poor mental health. Those from poorer backgrounds, those living in cities and those who encounter adversity and discrimination, are particularly at risk of suffering from mental health problems. Thus, while it is important to ensure that funding is directed towards efforts to ‘treat’ mental health problems, it is just as important, even from a purely economic standpoint, to ensure that society itself is not creating an unmanageable mental health epidemic.

Schonegevel offered insight: “We need a public health approach that considers the social factors that contribute to the deterioration of someone’s mental wellbeing, like appropriate housing... Supported housing services have been essential for reducing out-of-area placements, inpatient admissions, and delayed transfers of care (DTOC), which routinely cost the NHS tens of thousands of pounds.”

Knapp continued in suggesting that “tackling loneliness; tackling unmanageable debts; being aware of the mental health needs of people with physical health problems – these are areas where we can prevent mental health problems or substantially reduce the risk of them.”

In many ways these issues are ignored, in part due to the fact that there is no quick fix. However, Knapp was optimistic in stating: “The loneliness issue has really taken off in the UK. It’s really taken off in terms of recognition of the extent of it, the consequences of it, and to some extent there’s a limited amount of evidence on how you might address it. Some of it seems obvious: finding ways [to increase connection] in an increasingly fragmented society where people spend more time on their phones than they do talking to humans […] so I think there’s a lot of issues we need to address, but I think it’s important to recognise this as a big societal challenge.”

Knapp suggested that in tackling loneliness there are in fact a number of potential solutions, from choir singing to Tai Chi. However “I can’t see the great British public getting into Tai Chi particularly rapidly,” Knapp said. He did however note: “I do think what you are seeing is quite a good example of just recognising the psychological benefits of group activity and singing itself. There’s recognition that there are things that work.” However he conceded that: “it’s not so much finding things that work that’s the challenge, but rather finding ways to get people engaged in those things.”

In the same line of thinking, Knapp also acknowledged the importance of changing attitudes as he emphasised the importance of “tackling the stigma issue.” While “maybe you can’t do anything about the underlying symptoms or the clinical experience of the illness […] you can do something about how society in general and particular parts of society – employers, police, schoolteachers, friends – view that mental illness. So changing those negative perspectives can make a big difference in the lives of individuals.”

Moving forwards

To end on a positive note, particularly for those living in England, both Schonegevel and Knapp suggested that the country leads the way in supporting those with mental health problems.

As said by Schonegevel: “England has led the way in some areas of treating mental illness. The Improving Access to Psychological Therapies programme (IAPT) began in 2008, and now sees over 900,000 people per year access treatments for anxiety and depression. Both Canada and Norway have launched IAPT-style programmes since its launch in England.”

She did however note: “What remains important is that programmes like this remain well funded to ensure that they can continue providing care to those in need.” Professor Knapp agreed in suggesting that “many people look to the UK” when considering places in which problems related to mental health are treated competently and effectively.

There is however significant room for improvement and there is still much that could be done. These improvements would both save money and enhance quality of life. However, in achieving these aims it is important to take a broad and comprehensive approach.

Thus, Professor Knapp felt it important to add that: “As a last message, mental illness is not just a health issue. It’s defined by medics, and categorised, labelled and treated by people in the healthcare system, but I think the roots of mental illness lie outside the healthcare system, and a lot can be done to tackle those other roots. Then, when people do develop mental health problems, a lot can be done by people outside the health sector in supporting those people to get jobs, complete their education, and be respected in their communities and so on.”

Thus somewhat paradoxically, the message of mental health economics might be that while it would undoubtedly be economically wise to improve the ways in which we treat mental health problems, in the end mental health is not solely a health issue after all. However mental health is an economic issue and thus significantly improving the way in which we treat mental health issues is not only the humane course of action but also an economic necessity.


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Thanks for sharing this wonderful post.

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