Medicare's mental health benefits: coverage, use, and expenditures

Estimates of the proportion of persons aged 65 and older with diagnosable mental disorders, residing both in the community and in institutions, range from 13.5% to 22%. Mental health services, both inpatient and outpatient, short and long term, are necessary for the well-being of these older Americans. Mental health benefits are covered under Medicare. However, less than 3% of the $90.5 billion Medicare budget in 1988 was spent on mental health services. Of that 3%, $2.2 billion was used for Part A (hospital insurance) and $300 million for Part B (medical insurance). In contrast, in the same year, payments for mental health services represented 20% to 30% of total health expenditures made by private insurers. Differences in payments abound when comparing freestanding psychiatric facilities with both exempt and nonexempt psychiatric units in general hospitals. This article describes these differences and how they influence the use of mental health services by Medicare beneficiaries.