Revisiting Offsets of Psychotherapy Coverage
CEBI WORKING PAPER SERIES, Working Paper 05/21
70 Pages Posted: 1 Apr 2021
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: Suggested Citation