The report, published yesterday by the Mental Health Commission, found that the healthcare system accounts for less than one-quarter of the costs involved.
The main costs were in the labour market and were caused by lost employment, absenteeism, lost productivity and premature retirement.
There are also costs imposed on the prison service, social services dealing with homelessness and informal care costs, as well as lost output and productivity.
Human and social costs associated with mental health problems, including pain, suffering, stigma, reduction in quality of life and suicide are not included in the baseline estimates.
The report found that people would be willing to make significant tax contributions to new community-based services for people with mental health problems.
It also found, however, that people tended to prefer spending on cancer and ageing programmes more than mental care.
The Economics of Mental Health Care in Ireland was prepared by Eamon O’Shea and Brendan Kennelly of the Irish Centre for Social Gerontology and Department of Economics at National University of Ireland Galway.
The report points out that the share of total public health expenditure on mental health services has fallen in the past 20 years from just 14% in 1984 to 7.76% in 2007.
In absolute terms, however, there has been a four-fold increase in per capita spending over this period and it has roughly doubled in the past decade.
Last year the Government spent €1.042bn on mental health services out of a total non-capital health spend of €13.432bn.
“We have not yet made the connection between increased public spending on mental health care and individual and societal gains,” said Irish Mental Commission chairman, Dr Edmond O’Dea.
He said making mental health a national health priority in Ireland would be an important first step in realising the potential gains associated with increased spending on mental health.
“As part of that prioritisation, we should set a target of 10% for mental health care expenditure as a proportion of overall health expenditure to be realised over a five year period,” said Dr O’Dea.