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Economics and Mental Health

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  • Richard G. Frank
  • Thomas G. McGuire

Abstract

This paper is concerned with the economics of mental health. We argue that mental health economics is like health economics only more so: uncertainty and variation in treatments are greater; the assumption of patient self-interested behavior is more dubious; response to financial incentives such as insurance is exacerbated; the social consequences and external costs of illness are formidable. We elaborate on these statements and consider their implications throughout the chapter. Special characteristics' of mental illness and persons with mental illness are identified and related to observations on institutions paying for and providing mental health services. We show that adverse selection and moral hazard appear to hit mental health markets with special force. We discuss the emergence of new institutions within managed care that address long-standing problems in the sector. Finally, we trace the shifting role of government in this sector of the health economy.

Suggested Citation

  • Richard G. Frank & Thomas G. McGuire, 1999. "Economics and Mental Health," NBER Working Papers 7052, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7052
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    File URL: http://www.nber.org/papers/w7052.pdf
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    References listed on IDEAS

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    1. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March.
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    Cited by:

    1. Krieg, Randall G., 2002. "The need for policy direction in the provision of care to the mentally ill: an interdisciplinary view," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 31(2), pages 105-113.
    2. Bachman, Sara S. & Walter, Angela W. & Kuilan, Nellie & Lundgren, Lena M., 2008. "Implications of Medicaid coverage in a program for Latino substance users," Evaluation and Program Planning, Elsevier, vol. 31(1), pages 74-82, February.

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    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General

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