Financial incentives playa huge role not only in how many children get diagnosed in the first place, but in what they are diagnosed with. There are one a few different ways that money bends the mental health industry direction or the other:

1. Insurance

Insurance companies will only reimburse for conditions listed in the DSM. And because doctors and psychiatrists need to make a living too, the only way to get paid is to be able to code each and every person who walks through the door with a DSM-based condition.

On the one hand, there’s nothing outright nefarious in this. If a person needs help a person needs help, and so psychiatrists have merely tried to set up a system whereby they can offer people the help they need and have their insurance reimburse them for it. They’re merely responding to a bureaucracy to try to help their patients. But on the other hand, this focus on placing people into a diagnostic category in order to get reimbursed can have many negative side effects in real-world situations. It means that many people (and especially children) are walking out the door with a dubious label that has the potential to impact the course of their life.

2. Educational & social politics

The educational system is America’s biggest bureaucracy, and its functioning is governed by politics. These politics frequently create biases or inadequacies that result in an unlevel playing field. Therefore children are frequently nudged towards one diagnostic category or another in accordance with the benefits that label will provide them.

In New York, for example, an autism diagnosis allows a child to be placed in a specialized autism program, whereas a diagnosis of PDD-NOS or Aspergers Disorder may result in placement in a class for emotionally disordered (ED) children. (Grinker, 2007, p. 133) If you’re a parent, you want your child in the class with specialized attention, not the class of disturbed misfits. Diagnostic differences can also impact what help a family receives on the homefront. As Roy Richard Grinker notes, “In Maryland, children with a diagnosis of mental retardation cannot receive a Medicaid waiver, but children with autism can. The waiver permits a child to receive intensive supports and medical care even if his or her family is not near the poverty line. Similar autism waivers are available in numerous states, such as Colorado, Indiana, Maryland, Massachusetts, and Wisconsin, owing to the successful lobbying of parent advocate groups.” (ibid)

It’s also a clear-cut example of how cultural trends drive diagnosis. Media publicity on autism drove politicians to act, creating new benefits for families of autistic kids. These new benefits in turn draw more families towards the autistic label, creating another surge.

It isn’t just parents who misrepresent children for financial purposes. Judy Rapoport, chief of child psychiatry at the National Institute of Mental Health, says that “I am incredibly disciplined in the diagnostic classifications in my research, but in my private practice, I’ll call a kid a zebra if it will get him the educational services I think he needs.” (ibid, p. 131)

3. Greed

More diagnoses mean more patients, and more patient’s means more money. Certain disorders are considered more chronic than others which mean a continued income stream down the road. This is one of the reasons that PTSD is so massively over diagnosed. Psychologists may not consciously think about these things or intentionally lead their patients into the wrong diagnosis, but they should know from their own research that these incentives inevitably sway their decisions. Executives at weapons or tobacco companies who create death for a living have no problem finding ways to justly the work they do; it’s even easier for a therapist to justify a diagnosis or treatment that a patient may not need or which might even be harmful.

Lobbying from drug companies is another relevant factor. “Overdiagnosis might be higher in the U.S. just because the pharmaceutical industry has more possibilities, like direct advertising, for example,” says Frank Jacobi, a clinical psychologist at the Technical University of Dresden in Germany. (Bialik, 2013)