This paper is now forthcoming in the Journal of Political Economy.
Mental health disorders are a leading cause of disability worldwide. Many mental health disorders start in adolescence and appropriate treatment at the outset may improve trajectories. We use a large national data base of insurance claims to examine the impact of initial mental health treatment on the outcomes of adolescent children over the next two years. We find that receiving follow up mental health treatment in the first three months after an initial mental health claim increases the total cost of care over the next 24 months. These higher costs are entirely accounted for by children who receive treatment that is not consistent with practice guidelines. Our estimates imply that, within 24 months, children who initially received a red-flag drug have 205% higher costs than those of the average treated child and are 131% more likely to have used an emergency room or experienced a hospitalization. These results show that large numbers of U.S. children are receiving mental health care that falls outside of accepted guidelines and poses risks to their health. In doing so, they provide support for the guidelines themselves, and demonstrate that analyses of large-scale claims data can provide a useful complement to clinical research studies in identifying best practices.