Regional variation in mental healthcare utilisation: Evidence from movers

Author: Karinna Saxby¹ Thomas Buchmueller² Sonja C. de New^1,3,4 Dennis Petrie¹

1. Centre for Health Economics, Monash Business School, Monash University, Australia.
2. Ross School of Business, University of Michigan Ann Arbor, United States.
3. Institute for the Study of Labor (IZA Bonn).
4. RWI Research Network, Essen, Germany.

A new study has found that regional variation in mental healthcare services in Australia is primarily driven by place factors, such as the supply of mental healthcare providers, rather than patient factors, like underlying mental health and preferences. They found the opposite was true for mental health scripts such as antidepressants and anxiolytics, and altogether, higher place-based expenditure on mental healthcare (services and scripts) was associated with better mental health outcomes. There is substantial scope to reduce variation in mental healthcare services via supply-side policies; however, greater expenditure across the board is justified.

In any given year, one in five Australians experience a mental health disorder. Despite high rates of poor mental health, uptake of effective treatment – such as antidepressants or psychotherapy services – varies substantially across regions. While some of this variation is anticipated due to underlying differences in people’s needs and preferences for mental healthcare, some of it may be unwarranted. The unwarranted variation could be due to differences in the availability of mental health providers or inefficient use of services, whereby excessive care doesn’t translate to improvements in mental health, i.e. ‘over-supply.’ Understanding the key drivers of variation are important to promote equitable access and efficient supply.

Using longitudinal administrative data from the 2011 Census population, researchers have analysed how utilisation (government expenditure) patterns change when people move to new regions to identify the relative importance of ‘place’. Controlling for fixed patient factors, such as the patient’s underlying mental health and preference for mental healthcare, their approach identifies a relative ‘place effect.’ They also explored whether the higher place-based expenditure was associated with improved mental health outcomes.

The researchers found that place factors account for approximately 70% and 18% of the regional variation in the utilisation of mental healthcare services and mental health scripts, respectively, with the rest reflecting patient demand. Higher place-based utilisation for mental healthcare services and mental health scripts was also associated with improved mental health outcomes. Specifically, they found that increasing annual government expenditure towards mental health services by around $2.00 per person in a region was associated with an 8% reduction in mental health-related ED presentations, a 12% reduction in the rate of self-harm hospitalisations, and a 10% reduction in the suicide rate. They also demonstrate that these associations exhibit no ceiling effects, which is likely symptomatic of inadequate, rather than inefficient, mental healthcare supply.

Altogether, this suggests that place-based policies, such as increasing the number of mental healthcare professionals offering services in low-supply areas, will likely reduce the variation in mental healthcare service utilisation.  But rather than focusing on equivalising utilisation, there should be greater government expenditure on mental healthcare across the board. Given that higher place-based utilisation was associated with improved mental health outcomes, including self-reported mental health, reduced self-harm hospitalisations, and suicides, increasing mental health expenditure across Australia will likely yield significant improvements in mental health outcomes.