Will COVID-19 Lead to a Bigger National Spending Budget for Mental Health Needs?


From time to time, our team likes to ask questions about the future of the mental health industry that are of interest to more people than just our team. This question, "Will COVID-19 lead to a bigger spending budget for mental health needs?" is one such question that we believe will be one that you will likely be interested as states begin to open back up and COVID-19 becomes a recent memory. We also believe that the future of mental health and the funding for mental health services will likely change in a post-pandemic world.


To better understand how our team is thinking about this question, it is important to add context to the current reality of mental health spending in the United States and then we can postulate what we think might determine the future of mental health spending in the United States.


First, we must add context around the current reality of mental health spending in the United States. Here are some quick facts for you about the current mental health spending habits in the United States:


  1. 2019 U.S. mental health spending topped $225 Billion

  2. $225 Billion represents only 5.5% of the total health care spending habits in the United States

  3. In 2019, public payers accounted for the majority (62.7%) of mental health spending at $149.5 billion

  4. Private payers accounted for the remaining $88.9 billion (37.3%)

  5. In 2009, public payers accounted for the majority (60%) at $88 billion

  6. Private payers accounted for the remaining $59 billion (40%)

  7. Mental health spending increased by 52% from 2009 to 2019 while the population only grew 7%

  8. Per capita spending on mental health ranges from $37.00 to $375.00


Now that we have the numbers out in the open, we can talk about what those numbers mean in relation to the current demand signal for mental health services. It should not be any surprise to you that the mental health needs pre-COVID and during the pandemic have increased. From an internal perspective, we have seen a tremendous increase in need and demand. In fact, none of the practices that we work with suffered financially through the pandemic, but instead, we saw a 20% increase in practice growth from 2019 to 2020.


Other organizations have done more formal research around the demand for mental health services based on the apparent need that has increased. For your reading pleasure, here are some stats around the increased mental health need throughout the country:


  1. Young adults have experienced a number of pandemic-related consequences, such as closures of universities and loss of income, that may contribute to poor mental health. During the pandemic, a larger than average share of young adults (ages 18-24) report symptoms of anxiety and/or depressive disorder (56%). Compared to all adults, young adults are more likely to report substance use (25% vs. 13%) and suicidal thoughts (26% vs. 11%). Prior to the pandemic, young adults were already at high risk of poor mental health and substance use disorder, though many did not receive treatment.

  2. A KFF Health Tracking Poll from July 2020 also found that many adults are reporting specific negative impacts on their mental health and well-being, such as difficulty sleeping (36%) or eating (32%), increases in alcohol consumption or substance use (12%), and worsening chronic conditions (12%), due to worry and stress over the coronavirus.

  3. Adults reporting anxiety related symptoms went from 11.0% in 2019 to 41% in 2020

  4. People with lower incomes suffered proportionately more through the pandemic than those with higher incomes.


The research and empirical data validate what the anecdotal evidence suggests, which is that the mental health need has increased and spending for mental health needs has increased over time.


However, does the increased need for mental health services directly impact mental health spending in the future?


There are some variables to consider when trying to predict the future of mental health spending.


First, there could be an unlimited amount of money dedicated to mental health spending but if there are limited providers in the market, money becomes irrelevant. In other words, demand for mental health services is skyrocketing but the supply to meet the demand is not growing at the same rate. This is concerning because the rate of increase in demand is outpacing supply, funding will likely be determined along both of these variables.


Insurance companies have long had an agenda to increase access to care (BCBS of MA has long been a leader in increasing access to mental healthcare), but they can't do anything to control the supply variable of services. It is our prediction that funding will be altered as soon as two things become true: 1) there are more providers on panels providing mental health services and 2) those providers adopt measurement-based health care services.

The second variable to consider is the role that teletherapy plays in controlling fee schedules. We wrote and published a blog recently that talked about the long-range impact of telehealth as a mainstay in private practice in the future. The discussion around fee schedules can become quite complicated, but for the sake of keeping things simple, we will break it down in layman's terms.


Fee schedules are actually calculated using a formula. That formula takes the following into consideration:

  1. The expense that it takes to run a practice represented as (PE - RVU)

  2. The liability insurance for a practice represented as (PLI - RVU)

  3. The value of the work performed by a provider represented as (Work - RVU)

Historically speaking, the value of the work performed by the provider has been weighted at around 52% of the equation, the expense that it takes to run a practice is weighted around 44%, and the liability insurance for an organization has been weighted at 4%.


However, each insurance company has a conversion factor that they multiply the figures by to arrive at a final number. A conversion factor is a proprietary number that is not common knowledge and is the reason why your fee schedule is private.


By the way, the variables mentioned above are common knowledge and can be found on the CMS website.


The factor that will likely influence spending on mental health is the expense that it takes to run a practice if telehealth is a long-term feature of private practice. Telehealth has reduced expenses for practices and insurance companies will notice and adjust fee schedules across the country. If telehealth reduces the cost that it takes to run a practice, then there would not be a reason to increase spending since providers are not spending more to run their practices.


To bring our discussion to a close, we would (tentatively) conclude that even though the need for mental health services has increased, the lack of proportionate growth in providers and the decrease of practice expense will likely lead to a plateau of mental health spending or a slight increase in mental health spending to accommodate inflation. However, there will likely not be an increase in mental health spending to meet the increasing demand for mental health services.


We would hope for greater mental health spending from both private and public payers to help support the growing mental health demand, but that does mean that there are not actions that you can take to help bring more attention to mental health spending. Here are some actions that we would recommend taking to help encourage insurance companies to focus more funds on mental health spending:


  1. Adopt technology that helps demonstrate empirical results. Technology like bluprint-health.com is cutting-edge technologies that help demonstrate empirical results. You can use this data to show that your treatment is effective and might be used to advocate for higher fee schedules based on the value of your work

  2. Ask for rate increases. Mental health clinicians need to value the cost of their services and the value they provide in the market. Asking for rate increases shows a continued progression in accurately valuing the work that clinicians provide.

  3. Encourage younger people to go into the counseling field. One of the ways to increase mental health funding is to match the supply with the demand. If you know someone that is considering a career in the field, help them and encourage them in their journey.

We hope our prediction is wrong and that payers, public and private, acknowledge the hard work that you have provided to the country over the past year with a big pay increase and we are for the work that you are doing! Please reach out if you have any questions or concerns as you approach billing or credentialing. We would be happy to help!


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