Money Can&t Buy Happiness . . .

May 20, 2004

. . . and depression can cost a fortune. The economic burden of depression is larger than you think.


Money Can't Buy Happiness . . .

Jump to:Choose article section...1990: Most depression goes untreated2000: More treatment, but gaps persistThen and now: How costs compareA closer look at the costsSo who's responsible?

. . . and depression can cost a fortune. The economic burden of depression is larger than you think.

By Paul E. Greenberg, MS, MA, Managing Principal, Ronald C. Kessler, PhD, Howard G. Birnbaum, PhD

Depression is a widespread chronic illness that affects people especially in their prime working years. Its underlying symptoms include reduced concentration, moodiness, fatigue, debilitating pain and an inability to become motivated to carry out even the most routine tasks. Besides contributing to work absence and impaired job performance, depression hits a company where it really counts: the bottom line.

The economic burden of depression is driven by a number of factors including prevalence rate, treatment rate and its debilitating nature. In 1990, the economic burden of depression in the U.S. was estimated at $43.7 billion in three major components: direct treatment costs, lost earnings due to depression-related suicides, and indirect workplace costs. A subsequent study revised this 1990 estimate upward to $52.9 billion, with over 60 percent of the reported costs resulting from depression-related absenteeism and presenteeism (reduced productivity at work).

In this report, we provide a 10-year update by estimating the economic burden of depressive disorders as of 2000. Surprisingly, while the treatment rate of depression climbed by more than 50 percent, the economic burden — adjusting for inflation — rose just 7 percent. The new cost? Roughly $83 billion.

There are encouraging trends, as well as some warning signs for employers, as we review the progress made and the challenges ahead.

1990: Most depression goes untreated

The adult prevalence rate of depressive disorders in 1990 was estimated at 10.1 percent. Much of this illness went untreated: In 1990, only 27.9 percent of depression sufferers received treatment for any emotional problem during the prior 12 months. The low treatment rate was likely due to several factors, including:

  • The stigmatization of mental illness

  • A lack of realization among sufferers that they needed care

  • A belief that treatment would not be effective

  • Impatience with slow-acting antidepressants and their side effects

  • Improper dosing of medications by general practice physicians

When sufferers did receive treatment for depression, it often failed to meet minimum standards of care.

In the early 1990s, inpatient care for depression was the norm, with about two thirds of direct costs borne in the hospital. Only nine percent of direct costs were spent on antidepressants. The approach to treatment changed dramatically throughout the '90s. There was a marked shift away from relatively expensive inpatient and specialty care to less expensive types of treatment encounters, including outpatient and office visits, more frequent reliance on primary care physicians, and greater use of prescription drugs. Despite this greater outreach to depressed people, fewer than 1 in 4 sufferers received adequate care.

2000: More treatment, but gaps persist

The prevalence rate of depression in 2000 was estimated at 8.7 percent, a decline of 1.4 percentage points since 1990. This is due in part to the fact that epidemiologic surveys switched to a somewhat more restrictive set of diagnostic criteria. In contrast, the 12-month treatment rate for all psychiatric problems among depressed individuals rose dramatically, from 27.9 percent in 1990 to 43.6 percent in 2000. Thus, while the total number of depressed people in the population remained relatively stable (17.5 million in 1990 versus 18.1 million in 2000), the number of treated depression sufferers grew substantially, from 4.9 million in 1990 to 7.9 million in 2000. To the extent that treatment of depression is associated with reduced episode severity and duration in general, this dramatic change over time conferred substantial benefits on society from both an economic and quality-of-life perspective.

Treatment rates varied enormously by employment status. Depressed people who were employed had a 40.2 percent treatment rate, while only 32.9 percent of the unemployed depressed were treated, underscoring the relative difficulty the unemployed experiences in accessing health care. Paradoxically, depressed people who were out of the labor force had the highest treatment rate of all, 54.1 percent. It is possible that a self-selection mechanism makes it more likely for depressed individuals who have spousal health insurance coverage to withdraw entirely from the labor force. These treatment rate differentials highlight the extent to which help-seeking behavior is conditioned by employment status among depressed people and the health coverage that often is dependent upon that status.

Then and now: How costs compare

The economic burden of depression in 1990 and 2000 can be summarized as follows:

Economic burden of depression (in billions)




Direct treatment costs



Suicide-related costs



Workplace costs







The increased depression treatment rate, with a less than proportional rise in total treatment costs, was most likely related to changes in the health care environment. With the widespread penetration of managed care during the 1990s, treatment for depression shifted toward greater utilization of relatively less expensive outpatient, office-based and pharmaceutical care, and away from relatively more expensive inpatient care. In addition, the ease of administering and managing patients receiving new types of antidepressant medications made it possible for primary care physicians to provide drug treatment, leading to a cost shifting from the salaries of mental health care specialists to the costs of prescription drugs.

One recent study of outpatient care for depression reported that 87 percent of patients received their care from a primary care physician in 1997, up from just 69 percent in 1987. Similarly, the percentage of patients who received treatment from a psychologist dropped from 30 percent in 1987 to 19 percent in 1997.Another study reported that, between 1985 and 1995, office-based psychiatry visits became shorter, included less psychotherapy, and resulted in more prescription medications. These fundamental changes in the mix and quality of medical services help to explain how the overall cost of illness could remain stable even as so many more depressed individuals were treated in some way.

A closer look at the costs

While the number of people suffering from depressive disorders in the U.S. remained relatively stable between 1990 and 2000, their overall treatment rate increased by over 50 percent. As a result of successful outreach and a shift toward less costly forms of treatment, the annual direct cost per treated patient decreased substantially, from approximately $4,100 in 1990 to $3,300 in 2000.

Lower direct costs per treated case seems to imply greater value obtained for only slightly more expenditures. However, in an effort to realize cost savings for a much larger number of treated patients, it's likely that the overall quality of care suffered. At the same time, since appropriate care for depression has been shown to improve clinical, quality-of-life and economic outcomes substantially, there is an opportunity to realize a favorable return on continued investment in the quality of care.

A higher rate of depression treatment likely contributed to the very stable suicide-related and workplace costs associated with this illness. Patients treated for depression were 4.8 times more likely to receive an antidepressant in the late 1990s compared with a decade earlier. In addition, selective serotonin reuptake inhibitors (SSRIs) — first introduced in the U.S. in 1988 — were prescribed to more than half of the patients receiving outpatient treatment for depression by 1997. The widespread increase in the use of substantially less toxic antidepressants (SSRIs vs. tricyclic antidepressants) likely resulted in a lower rate of overdosing, potentially reducing the number of depression-related suicides.

With the improvement in economic conditions — lower unemployment rate, larger labor force —many more depressed people were employed in 2000 compared with a decade earlier. This likely had beneficial impacts on both suicide-related costs and workplace costs. However, even as treatment for depression was available to an increased number of workers, tending to lower workplace costs, the robust economy drew into the labor force many more individuals dealing with this psychiatric disorder, which tended to raise workplace costs. Unbundling these counteracting effects shows that an increased treatment rate resulted in a 7 percent decrease in workplace costs (from $51.9 billion to $48.2 billion), while a higher employment rate for depressed people increased workplace costs by 6 percent (from $48.2 billion to $51.5 billion). Although these effects tended to offset one another, the large increase in the number of depressed workers saw a 10.1 percent decrease in overall workplace costs per depressed employee from approximately $5,000 (1990) to $4,500 (2000).

So who's responsible?

While the aggregate economic burden of depression changed only moderately in real terms between 1990 and 2000, the treatment rate increased substantially. Thus, increased awareness and recognition of the disease, as well as more frequent utilization of lower cost forms of care, fundamentally changed the economic landscape. Indirect workplace costs may have been the largest single burden of illness, but an increasing share of total depression-related costs was spent on direct treatment. This represents a more effective use of societal resources because this is a cost category that tends to be actively monitored and managed with depression sufferers explicitly in mind.

However, the quality of care in this context is often inadequate, as evidenced by the enormous gap between what may be possible under ideal treatment conditions (a treatment adequacy rate of at least 80 percent, according to the National Institute of Mental Health) and what is in fact realized in the health care sector (a 42 percent rate reported in national surveys of major depression patients). Only 20 percent of people with depression are receiving appropriate care. Patients who respond only partially to treatment, frequently experience lingering symptoms, such as persistent unexplained pain, putting them at a higher risk for relapse or reoccurrence. Thus, there remains substantial opportunity for further improvement in the mix of total expenditures in attempting to close the gap.

Our findings highlight a tension between societal interests on the one hand and employers on the other. Society is better off when depressed workers are drawn into employment situations, as the cost of their lost productive capacity is at least partially recaptured through their newfound activity in the labor market. However, individual employers tend to incur added private costs — in both absenteeism and presenteeism — as the employment rate of depressed people rises. This inherent tension raises a continual challenge during the best of economic conditions. The issue we'll need to resolve: Who should incur the added economic burden associated with the improved employment status of depressed people?

This article is based on the original manuscript "The Economic Burden of Depression in the United States: How Did It Change Between 1990 and 2000?," published in the December 2003 edition of the Journal of Clinical Psychiatry. Published with permission.

Paul E. Greenberg, MA, MBA, is Managing Principal of Analysis Group, Inc., an economic, financial, and strategy consulting firm, and is co-director, with Vice President Howard Birnbaum, Ph.D., of its health care economics practice. Dr. Ronald C. Kessler is a professor with the Department of Health Care Policy of the Harvard Medical School.

More Business & Health Articles About This Topic:

Targeting Depression: An Employer's Approach (May 15, 2003)

Depression, Stress and Anxiety Climb the Corporate Ladder (Oct. 3, 2002)

Working With Depression, Part I: The Business Case for Quality Mental Health Services (Aug. 1, 2002)

Working With Depression, Part II: Finding and Funding Effective Treatment (Aug. 1, 2002)

Resource Links:

National Health Mental Association

American Psychiatric Association

National Institute of Mental Health


Paul Greenberg, Ronald Kessler, Howard Birnbaum. Money Can’t Buy Happiness . . ..

Business and Health

May 20, 2004;22.