Implicitly estimating the cost of mental illness in Australia: a standard-of-living approach

Implicitly estimating the cost of mental illness in Australia: a standard-of-living approach

Background
Estimating the costs of mental illness provides useful policy and managerial information to improve the quality of life of people living with a mental illness and their families.

Objective
This paper estimates the costs of mental health in Australia using the standard-of-living approach.

Methods
The cost of mental illness was estimated implicitly using a standard of living approach. We analyse data from 16 waves of the Household, Income and Labour Dynamics in Australia Survey (HILDA) using 209,871 observations. Unobserved heterogeneity was mitigated using an extended random-effects estimator.

Results
The equivalised disposable income of people with mental illness, measured by a self-reported mental health condition, needs to be 50% higher to achieve a similar living standard as those without a mental illness. The cost estimates vary considerably with measures of mental illness and standard of living. An alternative measure of mental illness using the first quintile of the SF-36 mental health score distribution resulted in an increase of estimated costs to 80% equivalised disposable income.

Conclusion
People with mental illness need to increase equivalised disposable income, which includes existing financial supports, by 50%-80% to achieve a similar level of financial satisfaction as those without a mental illness. The cost estimate can be substantially higher if the overall life satisfaction is used to proxy for standard of living.

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