May 11, 2021

Making mental well-being a priority can lower healthcare costs

Making mental well-being a priority can lower healthcare costs

IZA World of Labor author Richard Layard has consulted the evidence and found that since mental illness is especially a disease of people of working age, it causes not only massive suffering but also great economic waste. According to statistics, in a typical country, one in five people suffers from a mental illness.

“For each dollar or pound spent [on psychological therapy], roughly an equal amount is saved on welfare benefits and an equal amount on physical health care. Thus, with savings per person treated that are at least as high as the cost of treatment—likely higher—treating people suffering from a mental illness imposes no net cost on taxpayers,” Layard writes in his article. "Yet health care commissioners and insurers in the UK, the US, and elsewhere regularly see psychological therapy as an easy area to cut. They need to know that every time they do this, it costs rather than saves money.”

In a new study Ziggi Ivan Santini, David McDaid, Sarah Stewart-Brown, and Vibeke Jenny Koushede have also explored the link between mental well-being and government expenditure. They discovered that whilst it’s important for governments to treat and prevent the disease, such strategies won’t increase overall levels of mental well-being. They also found that every time a population experienced an increase in mental well-being, the social and healthcare costs were lower the following year. In other words, governments made the greatest savings when everyone’s mental well-being was maximized.

The authors of the study argue that since traditional economic assessments have thus far focused on the costs of mental illness, they have overlooked the significant savings that mental well-being can generate. In 2016 they assessed the mental well-being of 3,508 Danish participants, and looked at two types of Danish government expenditure: healthcare expenditure per person and sickness benefit transfers per person. The found that “mental wellbeing in 2016 predicted both expenditure outcomes in 2017. Each point increase in mental wellbeing for each person was associated with $43 (£30) less in healthcare costs, and $23 less in sickness benefit transfers.”

These savings might seem small but if in a town with a population of 50,000 people each person experienced a single-point increase in mental well-being, the collective improvement in mental well-being of the town would mean about “$2m less in healthcare costs, and about $1m less in sickness benefit transfers over the following year.” The authors of the study recommend that in order to improve mental well-being for everyone, governments will need to work with community organizations and municipalities in order to create environments and foster the kind of behavior that can protect mental health and enhance well-being.

Read Richard Layard’s article The economics of mental health.