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This paper is the result of an ongoing effort to track spending on mental health and substance abuse (MH/SA) treatment nationwide. Spending for MH/SA treatment was $85.3 billion in 1997: $73.4 billion for mental illness and $11.9 billion for substance abuse. MH/SA spending growth averaged 6.8 percent a year between 1987 and 1997, while national health expenditures grew by 8.2 percent.

The most comprehensive studies of such spending suggest that between 9.3 and 13 percent of all Medicaid dollars are spent on behavioral health services. The most comprehensive estimates came from claims-based studies or studies based on the National Health Accounts. Studies based on provider or consumer surveys missed large portions of Medicaid spending. Policy makers need to ensure that they use the most accurate data to track mental health and substance abuse spending, an important part of total Medicaid expenditures.