This report was produced in response to a request by the Senate Committee on Appropriations that the National Advisory Mental Health Council prepare and submit a report on the cost of insurance coverage of medical treatment for severe mental illness commensurate with the coverage of other illnesses and an assessment of the efficacy of treatment of severe mental disorders. About 5 million Americans (2.8% of the adult population) experience severe mental disorders in a 1-year period. Treating these disorders now costs the nation an estimated $20 billion a year (with an additional $7 billion a year in nursing home costs). These costs represent 4% of total U.S. direct health care costs. When the social costs are also included, severe mental disorders exact an annual financial toll of $74 billion. This total accounts for the dollar costs of shortened lives and lost productivity, as well as the costs incurred in the criminal justice and social service systems. However, it cannot begin to account in human terms for the enormous emotional cost and pain borne by Americans with severe mental illness and by their families. Many myths and misunderstandings contribute to the stigmatization of persons with mental illness and to their often limited access to needed services. For example, millions of Americans and many policy makers are unaware that the efficacy of an extensive array of treatments for specific mental disorders has been systematically tested in controlled clinical trials; these studies demonstrate that mental disorders can now be diagnosed and treated as precisely and effectively as are other disorders in medicine. The existence of effective treatments is only relevant to those who can obtain them. Far too many Americans with severe mental illness and their families find that appropriate treatment is inaccessible because they lack any insurance coverage or the coverage they have for mental illness is inequitable and inadequate. For example, private health insurance coverage for mental disorders is often limited to 30-60 inpatient days per year, compared with 120 days or unlimited days for physical illnesses. Similarly, the Medicare program requires 50% copayment for outpatient care of mental disorders, compared with 20% copayment for other medical outpatient treatment. These inequities in both the public and private sectors can and should be overcome.(ABSTRACT TRUNCATED AT 400 WORDS)