OBJECTIVES: The purpose of the study is to investigate the factors affecting adequate provision of mental health care services to the psychiatric patients in mental hospitals and to suggest the introduction of a new reimbursement schedule for treatment of chronic Medicaid patients in order to avoid long-term hospitalization and to meet rising cost. METHOD: Five hundred and seventy-five psychiatric patients chosen by the stratified random sampling in six hospitals in Korea; three mental hospitals and three general hospitals, have been classified into three groups: two groups were selected from mental hospitals with the national health insurance system and Medicaid, while only one group from general hospitals with the national health insurance system. They were investigated about mental health care services provided for one week, which are transformed into financial cost by using Korean Resource Based Relative Value Scale points. The severity of their psychiatric symptoms were assessed with RAI-MH(Resident Assessment Instrument-Mental Health). RESULTS: When the Medicaid was compared to the health insurance in mental hospitals, sixty-seven percent was the relative ratio. Mental hospitals compared to general hospitals under health insurance, it was only 31%. The longer the hospitalization, the lesser services they received in all three groups. CONCLUSION: The significant factors affecting supply of mental health care services in Korean mental hospitals were duration of hospitalization, type of hospital, type of reimbursement. The introduction of Medicaid system, differentiated by duration of stay, may induce short-term hospitalization and prohibit deficient service care, especially in acute patients under Medicaid system.