Competition and the Mental Health System

Abstract

In the 1970s, mental health services were largely both publicly funded and publicly provided, but today service provision has shifted toward the private sector (1). As a result, the mental health care system increasingly relies on competition to allocate health care resources. In 2003, mental health services constituted 6.2% of all U.S. health spending or $100 billion (2). Competition for consumers—whether among insurers, hospitals, physicians, or others—largely determines which mental health services are produced, how they are produced, and at what prices they are produced. Below we discuss three notable features of the competitive mental health care market and their policy implications.