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Treating America’s Mental Health Epidemic

Treating America’s Mental Health Epidemic

Community Healthcare System plunked down nearly $5 million to build onto its psychiatric unit last year. In Sonoma County, California, a sprawling $2.6 million, 14,066-square-foot mental health facility is in the works. The initiatives indicate a burgeoning mental health sector: Thanks to new regulations entitling millions of Americans to mental health care, spending is rising rapidly.

Generational change is also pushing the nation’s mental health bill to new heights. Accompanying today’s enormous floodtide of Boomers into their mature years is a flood of substance abuse and mental health problems acquired from a lifetime of risky behavior. Growing numbers of Millennials, meanwhile, are not afraid to seek care for the behavioral issues that beset them.

National spending on mental health care is surging. According to the Substance Abuse and Mental Health Services Administration (SAMHSA), America’s mental health tab doubled to roughly $239 billion from 2003 to 2014. Over that period, the sector expan­ded more than six times faster than GDP. To be sure, mental health is growing at a slightly slower clip than health care at large (6.4 percent annually, versus 7.2 percent for health care). But that’s primarily because behavioral treatment, unlike somatic medicine, is still what it’s always been—therapy plus pharma­ceuticals—and yet it’s still growing much faster than GDP.

Driven by dollar signs, investors have set their sights on mental health operators. Investment firm Trinity Hunt Partners has acquired three behavioral health companies since 2008. Acadia Healthcare, which boasts the largest (and growing) network of inpa­tient and out­patient treatment centers, was recently named one of Kiplinger analyst Daren Fonda’s hottest stocks to own in 2016. (Its stocks are trading at 24 times the company’s projected 2016 earnings.) Acadia’s main competitor is Universal Health Services (UHS), the nation’s largest facility-based behavioral health provider, whose stock price has nearly tripled in the past three years.

Highly profitable inpatient facili­ties are attracting particular attention. Ray Tamasi, president and CEO of addic­tion treatment provider Gosnold, says that the substance abuse rehab mar­ket is white-hot: “I’ve done more [presentations at equity firms] in the past year than I’ve done in my entire [40-year] career.” It’s little wonder: Addiction and substance abuse treatment centers can generate profit margins in the 20 percent range, because their patients primarily pay out of pocket or have private insurance. Similarly, the number of eating disorder facilities has more than tripled in the past decade. There’s plenty of profit to go around, according to the father of one Eating Recovery Center patient who plunked down $30,000 monthly for his daughter’s care.

This spending and investment boom has been enabled, in part, by regu­lations that entitle all Americans to qual­ity mental health care. In 2008, Congress passed the Mental Health Parity and Addiction Equity Act, which requires health insurers to guarantee that the financial requirements attached to mental health benefits—such as out-of-pocket maximums—are no more restrictive than those associated with traditional medical benefits. Then in 2014, a provision of the Affordable Care Act forced all small group and individual market plans to cover mental health and substance abuse disorders at the same rates of reimbursement as medical or surgical benefits.

Regulatory changes have also opened the floodgates wider on Medicaid spending. According to SAMHSA, Medicaid was already the single biggest source of mental health spending in 2009, accounting for 27 percent of these funds. This share is projected to grow rapidly: The Department of Health and Human Services anticipates that as many as 32 million new patients will gain access to behavioral health care by 2020, thanks to an ACA provision requiring Medicaid plans to include mental health. The exploding number of DI beneficiaries who “retire early” with emotional problems means that Medicare too is spending more on mental health.

Some large facility operators have capitalized on this wider flow of federal dollars. UHS, for example, generates a whopping 40 percent of its $8 billion in annual revenue from Medicaid and Medicare reimbursements.

Perhaps the single strongest driver sending the nation’s mental health care bill skyward has been generational change. Boomers have created enormous behavioral health care demand. The CDC estimates that between 15 and 20 percent of adults ages 65 and older have been affected by depression. Last year, Gallup reported that 14 percent of the (mostly Boomer) 52- to 70-year-old cohort currently suffers from depression—the highest rate of any age group.

The large size of this generation alone translates into a rapid rise in demand. What’s more, research has found that, over time, successively younger age cohorts born since World War II are showing higher rates of depression at earlier ages, meaning that Amer­icans today moving past age 65 are presenting with more mental health problems than previous generations of elders did.

Boomers in particular are notorious for embarking on riskier lifestyles that leave them, as they age, prone to higher rates of depression, substance abuse, and suicide. Boom­ers’ unhealthy lifestyle choices have left them riddled with chronic diseases that have made them more susceptible to depression (see: “Boomer Malaise”). Today, roughly 17 percent of adults over age 60 struggle with substance abuse. This share will grow rapidly as lower-SES Boomers carry their higher rates of addiction (most recently, to opioids) into their later years.

Millennials, meanwhile, are seeking care for their own mental health problems at an unprecedented rate. A 2014 paper found that the average high school student from 2010 to 2012 was twice as likely to see a professional for mental health issues as a student from 1982 to 1984. On college campuses, fully 89 percent of university counseling directors note increases in anxiety disorders since 2009.

To be sure, some of this increase may be due to a higher incidence of certain types of mental illness among Millennials, particularly conditions that arise from high stress levels. (See: “The Young and the Anxious.”) But overall, Millennials seem less troubled by mental health issues than earlier generations of youth. Millennials have brought down virtually all indicators commonly associated with mental illness, from suicide ideation to unintentional injury to fear of crime. What’s really at play is that institution-trusting Millen­nials are simply much more inclined to seek help from a counselor or therapist than their parents were in young adulthood.

A long-term attitudinal shift surrounding mental health presents a great business opportunity. In the mid-1950s, more than 500,000 people were held in state psychiatric wards. Nobody wanted to talk about their mental health for fear of being institutionalized. Today, mental health is seen as a disease that can be treated rather than a permanent con­dition that warrants being locked away. Back in the early postwar era, the G.I. and Silent Generations who ran America carefully avoided any mention of their emotional problems. Today’s Boomers and Xers go on Oprah to talk endlessly about them. As Millennials move up the age ladder, this inclusionary, treatment-driven mindset will only become more common.


  • Bet big on mental health services. Over the past decade, mental health care revenue has doubled. Not surprisingly, new investment dollars are flowing to large mental health operators and inpatient treatment centers. This boom is largely the result of regulations that entitle all Americans to adequate health care. A closer look, how­ever, reveals that generational change is per­haps the strongest driver creating new demand for beha­vioral health services. While Boomers’ sheer demogra­phic size is boosting demand, this gener­ation is also bringing higher rates of mental illness into older age brackets. Meanwhile, Millennials are more open to seek­ing treat­ment than earlier gener­ations—an attitu­dinal shift that is good news for the mental health business.
  • Go easy on policymakers who have a hard time balancing adequacy and affordability. The demand for inexpensive and convenient mental health services is virtually unlimited: Making it freely available to all takers, however, would be more than taxpayers could ever afford. (Health economists call this the “woodwork effect.”) HHS reports that 55 percent of U.S. counties do not have a single psychologist, psychiatrist, or social worker—which means that we currently limit mental health spending simply by making it unavailable. The Institutes for Mental Disease exclusion, which caps Medicaid funding for large mental health institutions, is one (controversial) way that officials have attempted to draw the line and ease the federal financial burden.
  • Recognize that violent tragedies are fueling a push toward effective mental health treatment. As we’ve written before (see: “Violence and Mental Illness”), the American public has become increasingly aware of the link between mental illness and mass murders. Tragedies like Sandy Hook and Aurora, perpetrated by the seriously mentally ill, have opened a public discourse on mental health care. Serious diseases like schizophre­nia and bipolar disorder, which are more highly correla­ted to violence than other mental illnesses, continue to go largely untreated. Along with gun control propo­sals, wider access to mental health care is now spot­lighted as a part of the solution.
  • Look ahead to new frontiers of behavioral health treatment. A growing body of research indicates that mental health treatments, from behavioral cognitive therapy to antidepressants, may barely work better than a placebo. Instead, more experts are turning to neuroscience, using “biomarkers” found in blood tests, brain images, and saliva samples to identify and treat mentally ill patients. Using electrode-laden caps, psy­chiatrists can map brain activity, and can then cross-check the result against a digital database of healthy brains. Once a problem region is identified, neurofeed­back can be used to “train” the brain into prop­erly functioning, often producing results in a matter of days.


Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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