Key Researchers


Key Results: Substance Abuse Treatment Benefits and Costs

Citations Listed in Key Results

  • The economic benefits of treatment exceed the costs of treatment, and the cost-benefit ratio shows that every dollar spent on care results in $7 dollars in benefits (Ettner et al., 2006; Gerstein et al., 1994; Roebuck et al., 2003; McCollister and French, 2003).
    A study of the economic benefits and costs of treatment for alcohol and drug disorders estimated that the average cost of care was $1,583 per individual and the economic benefit of care was $11,487; thus, the benefit to cost ratio exceeded 7:1 ($11,487/$1,583) (Ettner et al., 2006). The study used data from the California Treatment Outcome Project (CalTOP) and included 2,567 individuals from 43 treatment programs located in 13 California counties. A similar 7:1 benefit to cost ratio was found when the California Drug and Alcohol Treatment Assessment Program (CalDATA) was examined a decade earlier (Gerstein et al., 1994). Although the studies differed in terms of the time when they were conducted and in terms of the patients used for the study, the similar findings suggest that the 7:1 benefit to cost ratio can be used by policymakers as a reliable estimate.

    Economic analyses require detailed estimates of the costs of providing treatment services. A review of cost data from 85 drug abuse treatment programs found that costs varied widely (within and between levels of care) (Roebuck et al., 2003) and the mean costs were higher than the estimated cost in the CalTOP analysis (Ettner et al., 2006). California programs, moreover, tended to have shorter durations of treatment (Ettner et al., 2006). The mean benefit to cost ratio, therefore, may be less than 7:1 when the cost of care is greater. Estimates of total economic benefits include costs associated with increased productivity, reduced criminality, and reductions in medical costs. The most consistent and most substantial economic benefit is the avoided cost of criminal activity (McCollister and French, 2003). It is noteworthy that the increase in wages in the CalTOP study also exceeded the cost of care. Cost avoidance, is therefore not the only source of the economic benefits.
  • Treatment benefits include increases in employment income and decreases in avoided costs of criminal activities, incarceration, and hospitalization (Ettner et al., 2006).
    The economic benefits found in the CalTOP analysis included significant increases in employment income ($3,352) and significant decreases in avoided costs associated with victimization from criminal activities (-$3,019), additional costs associated with crimes (-$2,657), incarceration (-$1,788), and use of emergency departments (-$223) (Ettner et al., 2006).
  • Treatment in correctional settings plus aftercare in the community when offenders are released leads to substantial reductions in the rates of re-incarceration and the associated costs of arrest, prosecution, and incarceration (McCollister et al., 2003a, 2003b, 2004).
    Studies in California (McCollister et al., 2003b, 2004) and Delaware (McCollister et al., 2003a) confirm that in-prison treatment combined with continued care in the community following release is the most cost-effective treatment strategy for individuals involved with the criminal justice system. After five years, there was a 13% reduction in days of re-incarceration when inmates who completed an in-prison therapeutic community were compared with inmates who were assigned to a waitlist; the reduction was even more dramatic (45%) if the offenders continued in aftercare when released (McCollister et al., 2003a, 2003b, 2004). Similar results were found when services in Delaware were examined 18 months after program completion (McCollister et al., 2003a).
  • Treatment for alcohol and drug disorders can lead to reductions in the utilization and cost of medical care (Walter et al., 2005).
    Substance abuse treatment for Medicaid patients reduced total medical costs 30% in a comprehensive health maintenance organization (from $5,402 per treated member in the year prior to treatment to $3,627 in the following year) (Walter et al., 2005). The reductions, moreover, were in all major areas of health care utilization (hospital stays, emergency visits, and clinic visits) and did not reflect shifts in costs from one area to another (Walter et al., 2005). Washington State integrated addiction treatment databases with Medicaid data and found $2,500 reductions in annual costs of medical care among General Assistance clients who received substance abuse treatment when compared to those who needed addiction treatment but did not receive treatment (Wickizer et al., 2006).
  • Medicaid patients with histories of alcohol and drug disorders have elevated hospital and psychiatric admissions, and addiction substantially increases total health care costs (Clark et al., 2009).
    Analysis of Medicaid claims data from Arkansas, Colorado, Georgia, Indiana, New Jersey, and Washington compared medical expenditures among individuals with diagnoses of substance use disorders (n = 43,457) to individuals with diagnoses of mental health disorders (n = 105,000). Substance abuse patients had increased treatment for physical health problems in five of six states, and medical expenditures increased significantly with age (Clark et al., 2009).
  • Managed behavioral health care carve-outs appear to reduce the costs of care and support the introduction of parity (Stein et al., 1999; Steenrod et al., 2001).
    An analysis of one employer’s claims for substance abuse services following a shift from 23 health maintenance organizations to one managed behavioral health care organization reported significant decreases in the use of inpatient (from 10.6 to 2.5 members per 1,000) and outpatient (45.7 to 12.1 members per 1,000) services and an increase in the use of day hospital and intensive outpatient care (7.7 to 26.7 members per 1,000); a significant reduction in costs was observed in the second year of the carve-out (Stein et al., 1999). These findings appear to replicate across a wide range of studies and settings (Steenrod et al., 2001).
  • Higher insurance co-payments reduce the use of outpatient and inpatient treatment for alcohol and drug disorders (Lo Sasso and Lyons, 2002, 2004; Stein et al., 2000).
    Co-payments for alcohol and drug treatments can inhibit the use of outpatient and inpatient treatment. When co-payments increased from $10 per outpatient session to $20 per session, total treatment utilization declined from 5 to 4 outpatient visits (Lo Sasso and Lyons, 2004). Moreover, increased co-payments were associated with higher rates of readmission to treatment, presumably because the prior treatment ended prematurely (Lo Sasso and Lyons, 2002). Similarly, higher co-payments reduced the use of outpatient services following inpatient detoxification (Stein et al., 2000). Strategies that promote aftercare participation for detoxification patients are generally preferred because of the chronic nature of substance use disorders.
  • The loss of insurance benefits is associated with restricted access to care, decrements in beneficiary functioning, and closure of drug abuse treatment centers (Fuller et al., 2006; Deck et al., 2006).
    In 2003, as a response to substantial budget deficits, Oregon’s Legislature eliminated Medicaid benefits for recipients of outpatient alcohol, drug, and mental health treatment under the Oregon Health Plan Standard plan. Analyses of the policy change suggest a number of negative consequences.

    - Approximately 100,000 women and men lost coverage under the OHP-Standard health plan.
    - Impacts were especially apparent among individuals diagnosed with opiate dependence. The probability of admission to a methadone treatment program declined 60% in the year following the elimination of benefits; access was reduced most for homeless, young men, without a history of prior treatment (Deck et al., 2006).
    - A prospective assessment suggested that 65% of the 3,000 OHP-Standard beneficiaries enrolled in methadone treatment left care and reported immediate increases in drug use, legal, medical, psychiatric, and employment problems (Fuller, et al., 2006).
    - Qualitative interviews with treatment providers found that two methadone clinics were closed and other clinics laid off staff, reduced hours, and reduced health benefits; the net effect was a statewide reduction in access to methadone services for all patients including those with insurance resources or able to self-pay (Deck et al., 2006).
    - Outpatient mental health and substance abuse benefits were restored in August 2004. The number of OHP-Standard beneficiaries, however, had declined to about 25,000 and new enrollments were not permitted.
    - An analysis of Medicaid expenditures found substantial increase in medical care expenses among individuals who had been receiving substance abuse treatment prior to the elimination of the benefit and implies that elimination of the addiction treatment benefit contributed to the increased medical costs (McConnell et al., 2008).
  • Insurance regulations that deny payment for alcohol-involved trauma care inhibit efforts to identify alcohol problems among patients in emergency settings (Schermer et al., 2003).
    Trauma centers have increased the use of screening tools for alcohol involvement and the use of brief interventions to facilitate entry into treatment (Schermer et al., 2003). Trauma surgeons, however, report a reluctance to screen routinely because insurance regulations in many states permit a denial of claims if alcohol use is implicated in the trauma incident.
  • An evaluation of the introduction of parity for mental health and substance use disorders for federal employees concluded that parity had little impact on total costs (Goldman et al., 2006).
    Seven federal employee health benefit plans were compared to a matched set of health plans that did not have parity for mental health and substance use disorders. A difference-in-difference analysis suggested that increases in utilization of mental health and substance use services was associated with a general cyclical increase in service use rather than an effect of parity; differences between health plans were inconsistent and suggested that parity had little impact on expenditures for mental health and substance abuse treatment (Goldman et al., 2006).
  • Cost-benefit analyses are better than cost-effective analyses in judging economic benefits of substance abuse treatment (Sindelar et al., 2004).
    A methodological analysis of economic studies concludes that cost-benefit analysis is preferable to cost-effectiveness analysis because of the multiple beneficial outcomes associated with treatment for alcohol and drug disorders (Sindelar et al., 2004). Benefit-cost analyses allow the investigators to aggregate benefits across outcome dimensions.
  • A cost-effectiveness analysis of four treatment interventions for adolescents with drug and alcohol problems determined that group therapy was least expensive and most cost-effective but qualified the conclusion because of short follow-up periods and complexities in the comparison of the studies (French et al, 2008).
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