Mental illnesses cost $282 billion a year, according to NBER Macroeconomics of Mental Health report

Mental illness is not only a widespread problem in the U.S. (one in five adults experiences it each year, according to the nonprofit National Alliance on Mental Illness) but it is also costly, costing the economy 282 billion dollars a year. This, according to a new study by economists at Yale and Columbia universities and the University of Wisconsin-Madison.

The research, published in April as a working paper by the nonpartisan National Bureau of Economic Research, reveals that the estimate is equivalent to an average economic recession, or 1.7% of the country’s aggregate consumption. The $282 billion price tag is also 30% higher than costs estimated in previous epidemiological studies, which researchers said focused on the cost of treatment and loss of income due to mental illness.

“In this paper, we develop the first integrated model of macroeconomics and mental health based on classical and modern psychiatric theories,” co-author Aleh Tsyvinski, PhD, professor in the Yale Department of Economics, said in a press release. “We show that mental illness alters people’s consumption, savings, and portfolio choices, as well as the country’s labor supply, generating enormous annual costs for our economy.”

People with mental illness may consume less, opt for less demanding jobs and avoid investing in risky assets like a house or stocks, Tsyvinski said. His team’s data showed that people with mild or severe mental illness consumed 3% to 7% less goods and services and worked 13% to 23% less than healthy people.

“We wanted to better understand mental illness and quantify its economic costs,” co-author Job Boerma, PhD, an assistant professor in the UW-Madison Department of Economics, said in another news release. “Mental illness is something that 20% of the population experiences at any given time. The fact that the costs of mental illness represent as large as 1.7% of the aggregate consumption of the American population is enormous.”

Increasing access to mental health care would boost the economy

Boerma and Tsyvinski, along with Boaz Abramson, PhD, assistant professor in the Division of Finance at Columbia Business School, applied their research to three policy proposals backed by the Biden administration:

As of April 1, more than 122 million Americans lived in areas with a shortage of mental health professionals, according to the nonprofit KFF. In these places, only 27% of mental health care needs are met. Eliminating this deficit would not only reduce mental illness by 3.1%, but would also generate social benefits equivalent to 1.1% of aggregate consumption, or $118 billion, according to the study.

Providing care to all people aged 16 to 25 who suffer from mental illness would be even more beneficial, resulting in estimated gains of 1.7% of aggregate consumption.

However, the researchers found that reducing the costs of mental health care would result in minimal economic impact. The problem, according to Boerma, is that many people with mental illnesses do not seek treatment, whether due to a shortage of available services, the stigma associated with mental illness or the belief that treatment would be ineffective. Cheaper services are unlikely to overcome the challenges.

“If those other factors are not affected, reducing the cost of care itself will not increase people’s propensity to accept treatment,” Boerma said.

Next, Boerma plans to raise awareness among policymakers about his team’s findings, saying in a UW–Madison news release that he hopes the continued combination of economic and psychiatric research will drive science-backed policymaking.

“Very interesting ideas always arise at the boundaries or overlaps of different fields,” Boerma said. “It will be good for the countryside if we do this more.”

If you need immediate mental health support, please contact the 988 Suicide and lifesaving crisis.

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