Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258949 
Year of Publication: 
2021
Series/Report no.: 
CEBI Working Paper Series No. 05/21
Publisher: 
University of Copenhagen, Department of Economics, Center for Economic Behavior and Inequality (CEBI), Copenhagen
Abstract: 
Mental illness is a leading cause of disability worldwide with vast costs to society. Yet, insurance coverage for effective treatments remains limited. This paper revisits the Offset Hypothesis, which claims insurance coverage for psychotherapy is self-financing through reductions in the use of other health care services and improved labor market outcomes. I study a 2008 reform of the Danish public health care system that introduced 60 percent coverage of the cost of psychotherapy for depression and anxiety patients below age 38. Using Regression Discontinuity and Difference-in-Difference designs, I show that psychotherapy coverage reduces the use of other mental health services, physical health care and suicide attempts, but does not impact employment, sick leave or disability pension receipt. Still, the reduction in health care costs is sufficiently large to finance the policy. This suggests mental health coverage is both welfare improving and cost reducing.
Subjects: 
mental health
health insurance
health care
offset
labor market
JEL: 
I13
I18
I38
H51
H55
Document Type: 
Working Paper

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