Revisiting Offsets of Psychotherapy Coverage


70 Pages Posted: 1 Apr 2021

See all articles by Benjamin Ly Serena

Benjamin Ly Serena

University of Copenhagen - Department of Economics

Date Written: February 2021


Mental illness is a leading cause of disability worldwide with vast costs to society. Yet, insurance coverage for effective treatments remains limited. This paper revisits the Offset Hypothesis, which claims insurance coverage for psychotherapy is self-financing through reductions in the use of other health care services and improved labor market outcomes. I study a 2008 reform of the Danish public health care system that introduced 60 percent coverage of the cost of psychotherapy for depression and anxiety patients below age 38. Using Regression Discontinuity and Difference-in-Difference designs, I show that psychotherapy coverage reduces the use of other mental health services, physical health care and suicide attempts, but does not impact employment, sick leave or disability pension receipt. Still, the reduction in health care costs is sufficiently large to finance the policy. This suggests mental health coverage is both welfare improving and cost reducing.

Funding Statement: This research was supported by Novo Nordisk Foundation Grant NNF17OC0026542.

Declaration of Interests: The author reports no conflicts of interest.

Keywords: mental health, health insurance, health care, offset, labor market

JEL Classification: I13, I18, I38, H51, H55

Suggested Citation

Serena, Benjamin Ly, Revisiting Offsets of Psychotherapy Coverage (February 2021). CEBI WORKING PAPER SERIES, Working Paper 05/21, Available at SSRN: or

Benjamin Ly Serena (Contact Author)

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5, Bygn 26
Copenhagen, 1353

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