National mental health report 2007

Indirect costs to government of mental disorders

Page last updated: 2007

The figures presented in the preceding sections only count the cost of providing specialist mental health services and do not reflect the total costs to government arising from mental health problems in the Australian community. However, people with mental disorders often require access to a complex array of other health and community services such as income support, housing and accommodation services, community and domiciliary care and employment and training opportunities. The costs associated with all these services represent an important part of total government outlays that are attributable to mental disorders.

Previous National Mental Health Reports have estimated these 'indirect' costs to be significant, and likely to outweigh the cost of providing specialised mental health care. However, routinely collected information has not been available previously to quantify the claims.

Analysis of spending by Australian Government departments adds part of the information that is needed. Prepared to inform the 2005 Senate Inquiry into the Provision of Mental Health Services in Australia, the analysis estimated the 2001-02 cost of providing income, housing, aged care, employment and other services for people with mental disorders to be $3.64 billion (table 3).15

More up-to-date data are not available for the current report, although there are reasonable grounds to assume that the spending patterns have been maintained. When scaled to 2005 prices, the Australian Government support costs rises to $4.33 billion, compared with the total of $3.76 billion spent by all governments on providing specialised mental health services (figure 13).

These estimates are conservative, using only available information that allowed reasonable attribution of costs to mental illness. Comparable information on state and territory government outlays is not available, further emphasising that this figure is likely to be a significant underestimate.

The analysis confirms that government outlays for mainstream support services accessed by people with mental illness do in fact exceed the funds allocated for specialist mental health treatment and care. For the Australian Government, the implication is more significant. For every dollar allocated to mental health services in the specialised sector, an additional $3.10 is spent on providing support services to people who require such assistance due to their mental illness.

Table 3: Cost to the Australian Government of support services for people with mental illness, 2001-02

Cost by service (in $ millions):
  • Income and support payments - 1,968.3
  • Aged care programs - 1,258.5
  • War veteran's disability compensation - 180.0
  • Housing and accommodation programs - 108.9
  • Workforce participation programs - 70.5
  • Disability services - 42.6
  • Home and community care - 10.0
  • Total - 3,638.8

Source: Australian Government submission to Senate Inquiry into the Provision of Mental Health Services in Australia. See footnote 15.

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Figure 13: Comparing direct and estimated 'indirect' government costs of mental disorders, 2004-05

Refer to the following text for a text equivalent of figure 13: comparing direct and estimated 'indirect' government costs of mental disorders, 2004-05

Text version of figure 13

Cost in $ millions (current prices):
  • State and territory mental health costs - 2,376
  • Australian Govt mental health-specific costs - 1,381
  • Other Australian Govt support costs - 4,327

  1. Estimate of 'Other Australian Government support costs' for 2004-05 is based on the direct to indirect expenditure ratio reported for 2001-02.
  2. Information on state and territory 'other government support costs' is not available but known to be substantial. It includes contributions from a number of human services, including housing, disability support, juvenile justice, child protection, police and corrective services.

15 Australian Government (2005) The Contribution of the Australian Government to Mental Health in Australia. Submission to Senate Inquiry into the Provision of Mental Health Services in Australia.