Research Brief

Depression is among the most common of chronic health problems. It is also associated with higher societal costs than many other chronic diseases, especially in terms of patients' severe limitations in daily functioning and well-being.

RAND has conducted many studies on depression, focusing both on the impact of depression on daily functioning and on the quality of care patients receive. These studies have found that despite the existence of medical practice guidelines (which specify the most efficacious therapies for major depressive disorder) patient care varies widely and many patients do not receive appropriate care.

In a series of recent studies, Kenneth B. Wells (a RAND senior scientist and professor of psychiatry and biobehavioral sciences at the UCLA Neuropsychiatric Institute) and Roland Sturm (a RAND econometrician) examined the quality and cost-effectiveness of care for severely depressed patients treated under different payment systems by general medical clinicians and mental health care professionals (psychiatrists, psychologists and master's-level therapists), and they also summarized prior RAND research on depression.

Their conclusion: Overall quality of care for depression is less than optimal, and the cost-effectiveness of care as currently delivered is low. Among seriously depressed patients, many do not receive appropriate care—even in the mental health specialty sector—but instead receive care for some problem other than depression or receive treatments that are ineffective for depression. Such mistakes are wasteful of resources: The health care system could get far higher returns for the money it spends treating depressed patients by spending a little more to improve the quality of care—that is, by appropriately treating more of the depressed patients who are already receiving some care anyway. Spending the additional 20–30 percent it takes for care following practice guidelines could quadruple the cost-effectiveness of mental health care, or the return on each dollar spent on care, in terms of improving patients' ability to function on the job and around the house. This potential for improving cost-effectiveness of care is especially great for depressed patients who visit general medical providers such as internists or family doctors.

In today's cost-conscious environment, suggestions for improving quality of care are not favorably received because improving quality generally means higher total health care costs. Sturm and Wells argue, however, that value of care, or cost-effectiveness, should be an equally important consideration. If, for example, an employee can function much more effectively on the job for a slightly higher investment in treatment dollars, then the benefits accruing to the employer in terms of increased productivity, or to patients in terms of increased income and quality of life, would seem to justify the expenditure. But health plans have little incentive to pick up the tab for increased treatment costs, because plans realize none of these benefits directly, but instead are under pressure from employers to keep treatment costs down. This research points to the irony of this dilemma and suggests that cost-effectiveness has an important place in the debate.

Comparing Quality of Care

In comparing quality of care across payment and specialty groups, the RAND studies looked at four clinical processes: detection, medication, counseling, and continuity of care. Detection by the provider is the first and necessary step before treatment, and there were large differences by specialty, with general medical clinicians aware of a serious depression in only one-half of their patients, compared to almost all patients for mental health specialists. Further, among general medical practices, there were modest differences in detection (about a 20% reduction) by payment system, with patients in prepaid care less likely to be detected than patients in fee-for-service care.

Of course, it is effective treatment, not detection per se, that improves depression. The most commonly used effective treatments for depressed outpatients are antidepressant medications and counseling or psychotherapy. Because serious depression is often a chronic illness, continuity of care, in terms of continuing effective medication over time and continuing visits to the doctor for reassessment and treatment modification, is also important. In these critical treatment areas, the RAND studies also found important differences by both specialty and payment system.

Differences by Specialty. Depressed patients visiting general medical clinicians or psychologists or master's-level therapists were only about half as likely as patients of psychiatrists to use appropriate antidepressant medications, and counseling for depression was received more than twice as often by patients of mental health specialists than those visiting general medical providers such as an internist. In each specialty sector, including psychiatry, patients were more likely to use regular minor tranquilizers (sleeping pills, anti-anxiety medications), which are not effective in treating depression, than to use appropriate antidepressant medications. While the combination of antidepressant medications and counseling clearly improved functioning outcomes of seriously depressed patients, regular use of minor tranquilizers led to increased costs without benefiting depressed patients.

Differences by Payment. There were also important differences among patients of general medical clinicians and psychiatrists in terms of quality of treatment by payment system. Among patients of general medical clinicians, prepaid patients, relative to fee-for-service, were more likely to use ineffective minor tranquilizers and had lower rates of counseling for depression. Among patients of psychiatrists, prepaid patients had higher rates of switching doctors, using ineffective minor tranquilizers, and stopping their use of appropriate antidepressant medication over time. In parallel with these findings, the prepaid psychiatric patients, relative to fee-for-service, also had poorer two-year functioning outcomes.

These differences by payment system, however, are largely eclipsed by the more salient discovery of common problems in quality of care across the board, involving all specialty sectors and both types of payment. Given the rapid growth of managed care and prepayment, and these findings of only moderately effective quality of care, the researchers examined what would happen to costs, patient outcomes, and cost-effectiveness of care if care for severely depressed patients in prepaid managed care followed clinical practice guidelines.

Making Treatment More Cost-Effective

Sturm and Wells simulated the consequences of improving quality of care for depression for treatment costs, patient functioning outcomes, and value of care, or cost-effectiveness. Measurement of all three effects is needed to determine whether a given level of care can be afforded (cost), whether patients benefit (functioning), and whether health care dollars are being used efficiently (cost-effectiveness). Cost-effective care does not necessarily mean cheap care but, rather, high-value care. Improving the quality of care for depression may be cost-effective even if it increases direct treatment costs.

Improving Quality Raises Treatment Costs but Gives High Returns in Health Improvement for Each Dollar Spent

As shown in the figure, the current system spends more than $5000 to remove one functioning limitation (the average cost-effectiveness of treatment).[1] More-appropriate care (use of effective antidepressant medication, counseling for depression, and reducing use of minor tranquilizers) increases the value of each dollar spent in terms of improved patient functioning. For example, increasing the use of antidepressant medication raises average treatment costs from $2250 to $2490, but decreases the average cost of removing one functional limitation from $5360 to a range of $4020–$4610. Furthermore, the marginal cost of removing an additional functioning limitation under conditions of improved quality of care is around $1000 to $2000, which is one-quarter of the average cost of the same outcome improvement under care as usual.

This simulation exercise also permitted the researchers to study how the current trend of shifting depressed patients away from specialty providers to primary care clinicians is affecting treatment costs, patient outcomes, and cost-effectiveness of care. Treatment costs, as expected, were lower with less reliance on specialists, but patient outcomes were also worse (mental health specialists tend to have better outcomes). The important point here is that cost-effectiveness was similar between the mental health specialists and primary care clinicians, because both costs and outcomes shifted downward in the latter case. Further, because patient outcomes worsened, this strategy is not socially desirable.

These results illustrate why it is important to examine the profile of treatment costs, patient outcomes, and cost-effectiveness, and not just one or two of these factors.

Policy Implications

This research suggests that improving the quality of care for depression is necessary to raise the value of care and enhance the benefit of treatment dollars. Reducing just one functional limitation through improved care, at an incremental cost of $1000–$2000, increases a patient's annual earned family income by $2000–$3000.

From a patient perspective, quality improvement leads to better patient functioning, and this benefit could increase patient satisfaction, which could be meaningful to plans competing with other plans for enrollment.

In addition, providing high-quality care that leads to better functioning outcomes creates benefits for many other parties not involved in health care. For instance, benefits accrue to the employers of better-treated patients through reduced absenteeism and higher productivity, to family members and friends through lower burdens of care for sick people, and to government agencies through fewer transfer payments (welfare, unemployment, and disability). A health plan, however, has no obvious way to capture all of these indirect benefits and yet would be the entity that would have to shoulder the increased treatment costs of higher-quality care—a situation that diminishes its financial incentives to improve quality.

The consideration of who benefits from improved quality of care implies, however, that patients and employers would be able to attribute the benefits they accrue from better care to that care, or would otherwise have the necessary information to determine whether a plan or practice that claims to provide higher-quality care actually does so and is worth the additional expense. Unfortunately, this is currently not the case, and better measures of quality and accountability are needed. The measures used in the RAND studies represent one useful approach for obtaining such information.

The policy implications are twofold: First, from a market perspective, it is necessary to establish and place in the public domain standard quality-of-care measures that will enable health plans and employers to identify those providers that offer the best outcomes and value of care. Second, there must be incentives for higher-quality care (ideally, reimbursement that permits plans to capture their social contribution).

More-extensive research is needed to provide reliable data for these larger policy issues. This research has been a first step: It identifies cases in which quality problems are common and highlights the importance of considering health and cost issues simultaneously. Future studies need an even stronger integration of economic and clinical health services research to address the larger policy perspective. RAND is now conducting a new series of studies on depression care, based on these principles, which seeks to demonstrate directly how quality improvement for depression in primary care affects treatment costs, patient outcomes, and value of care.


  • [1] The serious functioning limitations studied included not being able to work at a paying job or to do housework, or being limited in either strenuous activity such as mowing the lawn or in moderate activity such as climbing a flight of stairs.

This report is part of the RAND Corporation research brief series. RAND research briefs present policy-oriented summaries of individual published, peer-reviewed documents or of a body of published work.

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