understanding Mental Health Policy & Economics

important insight into our ability to access quality mental health services, particularly those from vulnerable populations. Below are easily digestible topics, including key legislation and the financing structures behind these services. All sources from the info provided are located in the Breakdowns Sources section of the Resources tab. Click on a question to learn more!

What is the legislative history on u.s. mental health policy?


how is the US health & human services agency organized?


Deputy Secretary

Chief of Staff



Office of

Health Reform

Assistant Secretary for Administration

Assistant Secretary for Financial Resources

Assistant Secretary for Legislation

Administration for Children & Families

Assistant Secretary for Planning & Evaluation

Assistant Secretary for Preparedness & Response

 Assistant Secretary for Public Affairs

Civil Rights

General Counsel

Inspector General

Global Affairs

Medicare Hearings & Appeals

Nat'l Coordinator for Health Information Technology

Departmental Appeals Board

Assistant Secretary for Health

Administration for Community Living

Agency for Healthcare Research & Quality

Agency for Toxic Substances & Quality

Centers for Disease Control & Prevention

Centers for Medicare & Medicaid Services

Food & Drug Administration

Health Resources & Services Administration

Indian Health Service

National Institutes of Health

Substance Abuse & Mental Health Services Administration

Office Of:
operating divisions:

Have a look at this organizational chart of the federal HHS Agency re-created straight from the HHS website. By far, the largest division in terms of operating budgets is the Centers for Medicare & Medicaid (approx $970.5 billion FY 2016). The Administration for Children & Families (approx $58 billion FY 2016) and National Institutes of Health (approx $30 billion FY 2016) follow. Find out more info on budgets, legislation & policy in the sections below.  

Office of Intergovernmental

& External Affairs

President Harry Truman signs the National Mental Health Act, which established the National Institute of Mental Health, the first time there was federal funding for research and education in this field. 

This was the first time there was federal funding to create community mental health centers, which would ideally move people out of asylums and into the community. However, this policy has largely been seen as a failure, as these individuals generally did not receive the treatment they needed.

This act established a National Institute on Drug Abuse within NIMH. In 1974, P.L. 93-282 authorized the establishment of the Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA), of which NIMH became a part. 

The Mental Health Systems Act was passed based on recommendations of President Carter’s  Commission on Mental Health. It was designed to improve services for persons with mental disorders, and it provided grants to community mental health centers.  

This repealed the Mental Health Systems Act and consolidated ADAMHA's programs into a single block grant. This gave states and localities more capacity to administer their own mental health services, while the federal role in services to the mentally ill become one of more technical and financial assistance.  

This law prevents health insurance issuers that provide mental health or substance use disorder  benefits from imposing less favorable limitations on those benefits than on medical/surgical benefits. MHPAEA originally applied to group health plans and group health insurance coverage and was amended by the Patient Protection and Affordable Care Act to also apply to individual health insurance coverage.

Affordable Care Act (ACA) takes MPHAEA and expands it so that behavioral health benefit protections apply to individual insurance plans as well. Mental health & substance abuse services are also one of the Essential Health Benefits that private insurers are required to provide to some extent. See more on current policy & the ACA below.

Centers Act

how does the federal gov't finance mental health services?




Federal funding towards mental health services largely comes from Medicaid and block grants from the Substance Abuse & Mental Health Services Agency, which both fall under the Health & Human Services Agency. To get a bigger picture of the HHS and "where the money goes", check out this pie graph recreated from the HHS.gov website. Out of the $1.093 trillion HHS budget for FY 2016, roughly $579 billion goes to Medicare and $350 billion to Medicaid. While this covers many other services besides mental health, it's helpful to be able to trace back the funding sources for these services. 


Medicaid has been the single largest provider and payer for mental health services in the United States and continues to be. It accounted for 26% of all behavioral health services in 2009, and one in five Medicaid enrollees had a diagnosable behavioral health condition in 2011. Remember, Medicaid programs are designed and administered by state, so each program varies greatly. The amount of federal funding that each state receives for Medicaid (all expenditures, not only behavioral health) depends on state spending based on FMAP (Federal Medicaid Assistance Percentage). Each state's percentage differs; the percentage is typically higher for states with higher poverty, such as Mississippi (usually around 75%). California's FMAP is 50% for most expenditures. 


In the context of behavioral health, almost half of all Medicaid expenditures-roughly $131 billion-- were on services for enrollees with a behavioral health condition (these include all medical services, not just specific to behavioral health services).


substance Abuse & Mental Health Services Administration Block Grants:

SAMHSA is a federal agency with the Health & Human Services Agency which was established in 1992 by Congress to make substance use and mental disorder information and services more available. The block grants provided by SAMHSA go to states and local government, which give them discretion in how they administer behavioral health services. 

​SAMHSA 2016 Total Budget: $3.78 billion 

SAMHSA 2016 Community Mental Health Block Grants: $532 million 

SAMHSA 2016 Substance Abuse Block Grant:  Roughly $1.86 billion 

  • What are block grants? Taken straight from the Grants.gov website: Block grants refer to "grant programs that provide federal assistance for broadly defined functions, such as community development or social services. Block grants allow the grant recipient more discretion than other grants in determining how to use the funds to meet a broader program goal." (see Breakdowns Sources for direct URL)



how does the affordable care act affect current policy?


While it was a significant piece of legislation, the MHPAEA (Wellstone-Domenico law) did not not mandate coverage for mental and substance use disorder services. It only required that financial requirements and treatment limitations are no more restrictive conditional on behavioral health services being covered. It also only addressed larger employer group insurance arrangements (those with 51 employees of more). This however, changed with the Affordable Care Act, which extended the Wellstone-Domenico law. Private insurance companies must provide mental health and substance abuse coverage as part of the Essential Health Benefits  (below) in all plans, including individual and small group plans, as well as in the Medicaid expansion coverage. 


The Essential Health Benefit (EHB) requirements govern the basic level of coverage. The ACA defines 10 components of coverage under the EHB that in effect define the mandated components of private insurance coverage. They include ambulatory services, emergency, hospitalization, maternity/newborn care, pediatric care, prescription drugs, preventive/wellness, rehabilitative/habilitative and mental health and substance abuse care.