Substance Abuse Treatment Benefits and Costs

This policy brief summarizes recent research analyzing the benefits and costs of substance abuse treatment. An estimated $275 billion is spent annually in the U.S. on medical expenses, lost work productivity, costs associated with drug-related crimes, and on other expenses related to drug and alcohol abuse. The approximately $18 billion spent annually on drug and alcohol treatments is funded primarily by public money, and studies to address the cost effectiveness of these treatments are burgeoning. Questions such as 'to what extent should treatment programs be covered by medical benefits' and 'what is the return on these financial investments' are pressing. Some of the main points of the brief include:

  • Cost-benefit analyses of treatment programs show that for each dollar spent on treatment, results in an average of $7 saved in benefits. These benefits arise from decreased crime and its attendant expenses (incarcerations, costs of time in court, etc.), increased employment, fewer medical expenses and others miscellaneous expenses. For example, substance abuse treatment for Medicaid patients reduced total medical costs 30 percent in a comprehensive health maintenance organization (from $5,402 per treated member in the year prior to treatment to $3,627 in the year following treatment). The reductions 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.
  • Higher insurance co-payments lead to reduced use of outpatient and inpatient substance abuse treatment.
  • The introduction of parity for mental health and substance abuse disorders did not substantially affect total costs.
  • Treating substance abuse problems as chronic medical conditions may improve cost-effectiveness of programs and provide greater benefits to patients.
  • Cost-benefit analyses are better than cost-effectiveness analyses at judging economic benefits of substance abuse treatments.

Treatment of substance abuse problems can improve the quality of life for people suffering from such disorders, and a growing body of research shows that making these treatments available can be done cost effectively.