The Sensitivity of Drug Abuse Treatment Demand to Copayment Levels

OBJECTIVE: Employers can influence treatment decisions by adjusting characteristics of the structure of the benefits they offer, such as copayments. The authors estimated the relationship between copayment levels for substance abuse treatment and both the insurers' expenditures for treatment and the reoccurrence of treatment. METHODS: Retrospective data from a Midwestern behavioral health insurer were used to identify persons with a diagnosis of a substance use disorder. The claims data were used to construct episodes of treatment. Using the variation in copayment levels across 211 different employer groups, the authors used multiple regression models to estimate the effect of copayment levels on treatment expenditures and the likelihood of a treatment reoccurrence. RESULTS: Copayment levels had a significant effect on the reoccurrence of substance abuse treatment. Each 10 percent increase in copayment was associated with a 1 percent increase in the probability of reoccurrence. Copayment levels had a significant effect on current-episode treatment expenditures. Each 10 percent increase in copayment was associated with an 8.7 percent decrease in total per-episode expenditures. From the plan's perspective, a $1 increase in copayment for outpatient substance abuse treatment reduced per-episode spending by $110; however, roughly $13 is lost from that saving because of the increased likelihood of treatment reoccurrence. CONCLUSIONS: The longer a person is retained in substance abuse treatment, the greater the likelihood of recovery. Copayments may represent a barrier to retention in treatment. Higher copayments for substance abuse treatment make treatment reoccurrence more likely.

This study exploits variation in copayment levels among different contractual arrangements within a regional managed behavioral healthcare organization to estimate the relationship between copayment levels for substance use treatment services and the intensity of substance use treatment. The substance use treatment benefits involved a range of copayment levels across nearly 400 employers during the years 1993 through 1998. Multiple regression techniques were used to estimate the effect of copayment levels on treatment intensity. The results indicate that copayment levels had a significant negative effect on outpatient and inpatient substance use treatment. For outpatient treatment the effect on intensity implied a copayment elasticity of -0.18, implying that moving from a $10 copayment to a $20 copayment would result in, for example, a reduction from 5 to 4 outpatient visits per episode. However, the effect was larger for persons with combined alcohol and drug use disorders, as they exhibited a copayment elasticity of -0.27. For inpatient days, the copayment elasticity was considerably smaller at -0.017. Given the benefits of maintaining persons with substance use disorders in treatment, employers may have an incentive to take steps to minimize the barriers to treatment.