New report identifies $4-$8 billion waste and excess profits in mental health system

September 28, 2015

“Fraud, Waste and Excess Profits: The Fate of Money Intended to Treat People with Serious Mental Illness,” a new report by Dr. E. Fuller Torrey and Mental Illness Policy Org, for which I serve as executive director, calculates $4-8 billion in mental health funds are lost annually to fraud waste and excess profits in managed care companies. According to lead author, Dr. E. Fuller Torrey, that could provide

  • 3 months of state hospitalization for 112,000 individuals
  • 1 year of Assertive Community Treatment for 267,000 individuals
  • 1 year of Assisted Outpatient Treatment for 800,000 individuals
  • 1 year of a clubhouse rehabilitation program for 364,000 individuals
  • 1 year of supported housing for 333,000 individuals
  • 1 year of standard antipsychotic medication for 6.7 million individuals
  • 1 year of clozapine treatment for 667,000 individuals

Mental health advocates tend to blame the deterioration of services on reductions in funding, but as the authors note in this report, comparing 2012 to 1981 the “amount of money [for mental health] in constant dollars has increased by 36 percent.” The problem is that less of it goes to the seriously ill. Fraud identified in the report includes

  • a nurse in Iowa submitting more than 6,000 false claims;
  • a social worker in North Carolina submitting claims for 64 hours of therapy in a single day;
  • a mental health center in Louisiana submitting $258 million in false Medicare claims.

Other examples include waste in California’s Mental Health Services Act. The authors note, “The tax produces over $1 billion each year. However, some of the funds have been wasted by being diverted to activities such as yoga, line-dancing, therapeutic drumming, and community gardens.” The report also identifies managed care companies generating their revenue through fraud and siphoning off 20-50% of receipts for profits instead of care.

The report makes several suggestions for reform to ensure more of the nation’s mental health dollars reach people who have serious mental illness. The 58 page report is available here.