Mental Health Service Costs Offset By Savings in Other Public Sectors

March 23, 2005

(University Park, Pa) — Penn State researchers have found that reduced expenditures for inpatient hospitalization, the juvenile justice system, the child welfare system and the special education system offset the costs of the improved mental health services delivered to youth through the “system of care” approach now being tried in communities in every state in the U.S.

Mental health services for youth delivered via system of care have been criticized as too expensive compared to communities that don't adopt the approach. However, the Penn State study — the first of its type — shows that including spending in other service sectors in the analysis reduced the between-community cost difference from 81 percent to only 18 percent for system of care.

“Mental health services that keep youth out of the juvenile justice system, for example, not only save tax dollars that would have to be spent on that sector but also reduce the suffering of the youth and their families,” says Dr. E. Michael Foster, associate professor of health policy and administration and head of the study. “In addition, by not having a juvenile justice record, youth improve their chances of finishing high school and making a successful transition to adulthood and becoming future taxpayers.”

The study is detailed in a paper, “Public Costs of Better Mental Health Services for Children and Adolescents,” in the January/February issue of Psychiatric Services, the journal of the American Psychiatric Association. Fosterís co-author is Tim Connor of ORC Macro, Inc. in Atlanta.

Foster explains that system of care is a philosophy rather than a specific plan. Communities that adopt system of care make an effort at cross-agency cooperation for all child- and family-serving agencies to support children with complex needs in an integrated manner. Since communities have different needs, the system of care varies from location to location.

Nearly 100 communities have received support to adopt the system of care approach through a federal initiative funded by the U.S. Department of Health and Human Servicesí Substance Abuse and Mental Health Services Administration (SAMHSA). The Penn State study focused on one of these communities in Stark County, Ohio, and compared it with a non-system-of-care community in Mahoning County, Ohio.

The researchers found that expenditures for juvenile justice, the child welfare system and inpatient mental health systems were all higher in the non-system-of-care community. Core mental health systems and special education costs were higher in the system-of-care community.

“Although we have captured services that represent the largest expenditures, in each sector there is resource use that was not included in our analyses,” the authors note in their paper.“For example, our analyses of costs for the juvenile justice system included detention but not court costs or probation and aftercare services. Similarly, we have not captured general administrative costs.”

“In the case of child welfare, for example, these costs could be quite large. If, as seems likely, these omitted costs are proportional to the costs we analyzed, their inclusion would narrow the between-site gap still further.”

In a recent interview, Foster noted that system-of-care approach communities may be spending roughly the same amount of tax dollars as non-system-of care communities but getting more out of them.

Foster is continuing his analysis of the 67 system of care communities selected for evaluation and expects to have additional results in about a year. The studies are supported by a SAMHSA grant.

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Editors: Dr. Foster can be reached at (814) 865-1923 or For additional information, please contact Barbara Hale, Penn State science and research information officer, at (814) 865-9481 or .