The role of public and private transfers in the cost‐benefit analysis of mental health programs

Abstract

This paper revisits the issue of whether to include maintenance costs in an economic evaluation in mental health. The source of these maintenance costs may be public or private transfers. The issue is discussed in terms of a formal cost-benefit criterion. It is shown that, when transfers have productivity effects, income distribution is important, and one recognizes that public transfers have tax implications, transfers can have real resource effects and cannot be ignored. The criterion is then applied to an evaluation of three case management programs in California that sought to reduce the intensive hospitalization of the severely mentally ill.