The mental health system may be making us sicker

Australia has a mental health crisis, but not the one we think. Despite decades of soaring expenditure, our national mental health hasn’t improved. Suicide rates remain stubbornly high. Psychiatric drug use is at record levels. And each year, more Australians are diagnosed as mentally ill than the year before.

We’re spending more, but outcomes keep getting worse. That paradox should trouble us.

The problem isn’t a lack of compassion or commitment. It’s that we’ve built a system that produces patients rather than health. By medicalising distress, tying support to medical diagnoses, and rewarding ongoing treatment over recovery, we’ve created what amounts to a diagnostic-industrial-government complex—a self-reinforcing system in which everyone benefits from more diagnoses except the patients.

Consider the incentives. Clinicians need billable diagnoses to claim Medicare rebates. Schools access additional funding when students have psychiatric labels. Universities grant exam accommodations based on diagnostic status. Pharmaceutical companies expand markets. Advocacy groups grow membership. Well-meaning governments want to be responsive. And distressed individuals learn that the gateway to help requires accepting a medical identity.

The result? ADHD prescriptions have exploded from 1.2 million to 4.5 million in less than a decade. Autism diagnoses increased by 350 per cent around the same time. One in five Australians now meets the criteria for a mental disorder in any given year. Among young people aged 16–24, it’s approaching 40 per cent.

Just think, the next time you are on a plane; at least one person in every row has a mental disorder.

Yet for all this diagnostic expansion and increased spending, population well-being hasn’t improved. The proportion of adults reporting high psychological distress has increased. Something is badly wrong.

Are we simply becoming better at identifying previously hidden suffering? That’s the conventional explanation, but the evidence doesn’t support it. If awareness and reduced stigma were the main drivers, we would see proportional increases across all conditions. Instead, psychoses, the most stigmatised disorders, show stable prevalence, while autism, ADHD and anxiety surge dramatically.

The mechanism is straightforward: diagnostic boundaries progressively widen. Autism illustrates this clearly. In the 1960s, it was narrowly defined, requiring severe cognitive impairment with onset before age three, affecting roughly one in 2,500 children. Since then, diagnostic criteria have been repeatedly expanded to include increasing numbers of children.

Allen Frances, the psychiatrist who led the adoption of the autism spectrum disorder, now acknowledges that the criteria have become ‘exceedingly broad’, capturing children whose behaviour would once have been described as shy or quirky. Children who cannot speak or live independently share resources with someone likely to attend university and live independently.

As the Lancet Commission on Autism observed, when all autism is treated as equivalent, resources are spread thinly and ‘those with the most severe impairments’ go without adequate support. The Commission proposed distinguishing profound autism from milder presentations ‘not to stigmatise but to ensure equity’. Australia’s system does the opposite.

Diagnostic expansion is concentrated precisely where criteria are ambiguous and institutional incentives are strongest. The youngest children in each school year, for instance, are diagnosed with ADHD at twice the rate of their older classmates. That does not sound like a neurological ailment. It is developmental immaturity transformed into pathology because we set arbitrary school entry dates and expect all children to meet the same behavioural standards regardless of age.

Meanwhile, people with severe conditions are being overlooked. According to the Productivity Commission, about half of all Medicare-subsidised mental health services go to people with mild or moderate symptoms, while those with severe, life-threatening psychiatric illnesses receive fragmented care or none at all. This is not an argument against helping people with mild distress. It’s an argument for triage when resources are limited. Currently, a person with schizophrenia and a stressed university student compete for resources from the same pool. This is compassion without proportion.

The recently announced Thriving Kids program, a multi-billion-dollar early-intervention initiative, represents a critical test. It could support children without diagnostic labelling, expect developmental catch-up, and measure success by how many children avoid long-term dependency. Or it could become another pipeline channelling children into permanent therapeutic identities. How we design it will reveal whether Australia is ready for genuine reform.

Real reform requires two fundamental shifts. First, eligibility should be based on functional assessment, what people can do in daily life, rather than on whether they meet diagnostic thresholds. Second, providers should be rewarded for recovery and helping people return to ordinary life, not for enrolling and retaining them in treatment.

Alongside these changes, Australia must rethink how care is sequenced and targeted, address social and institutional causes of distress before medicalising them, and measure success by recovery rather than activity and expenditure.

None of this means abandoning people who are suffering. Severe psychiatric conditions require intensive, often lifelong support, and those affected should receive it without question. But drawing millions into treatment pathways dilutes resources, creates dependency, and teaches people that normal distress is pathological.

A humane system sharpens compassion by distinguishing those who truly need lifelong care from those who need understanding, structure, and opportunity to recover. It celebrates discharge as achievement, not abandonment.

If the twentieth century was the age of diagnosis, the twenty-first must become the age of recovery—measured not by how many Australians we enrol in the mental health system, but by how many no longer need it.