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POTENTIAL COST SAVINGS TO THE STATE OF LOUISIANA FROM THE EXPANSION OF SUBSTANCE ABUSE TREATMENT PROGRAMS

 Report  Prepared for  Department of Health and Hospitals Office for Addictive Disorders

 Prepared by:   Loren Scott & Associates, Inc.

Executive Summary 
 (Entire Report here)

Introduction and Approach

            Recent studies indicate that alcohol and drug abuse problems cost the national economy nearly 300 billion dollars per year.  A large share of this cost falls on state governments, which may allocate as much as 13.1 percent of their budgets to deal with the problems caused by substance abuse.  This study reviews the existing literature to determine how effective alcohol and drug abuse treatment programs have been in reducing the social cost of alcoholism and drug abuse to the economy as a whole and to state government in particular.

Economic Evaluations of Health Care Interventions

            There are four major types of economic evaluations that have been increasingly used in the health care intervention literature – cost-minimization analysis (CMA), cost-effectiveness analysis (CEA), cost-utility analysis (CUA), and cost-benefit analysis (CBA).  Very few of these types of evaluations have been conducted in the literature on alcoholism and drug abuse treatments because of the difficulties in identifying and measuring costs, outcomes, and benefits.

Methodological Issues in Economic Evaluations

            Conducting economic evaluations on alcohol and drug abuse treatment programs is difficult.  Evaluation results are highly sensitive to methodological decisions concerning the conceptual framework, the analyst’s point of view, the treatment design, the research design, the sampling design, and the identification, measurement, and valuation of costs and outcomes.  Evaluation results from the more methodologically sound studies should be given more weight than weaker studies when trying to make conclusions concerning the cost-effectiveness of alcohol and drug abuse treatments and programs.

The Social Cost of Alcoholism and Drug Abuse

            The estimated social cost of alcoholism in the United States in 1998 was 184.6 billion dollars.  The medical care cost share of this total was 10.2% or 18.9 billion dollars.  The largest component was in the form of lost productivity due to morbidity (47.5%) and mortality (20.0%) effects caused by alcoholism.

            The estimated social cost of drug abuse in the United States in 1998 was 143.4 billion dollars.  The largest shares of this cost were attributed to productivity losses also.  Specifically, mortality costs were 14.2%, morbidity costs were 15%, and incarceration costs were 17.5%.  Medical care costs were only approximately 4%.  Finally, it should be noted that crime related costs accounted for 62.0% of the total social cost of drug abuse.

            A high proportion of the social cost of alcohol/drug abuse falls on state governments.  In 1998, states spent collectively $81.3 billion, which represented 12.6% of the state budgets.  That same year Louisiana spent $1.06 billion dollars on substance abuse treatment or problems, which was 9.9% of its state budget.  Only 0.1 percent of Louisiana’s state budget was spent on prevention, treatment, and research.

Evaluations of Alcohol Abuse Treatments

            No consensus has been reached on the underlying causes of alcoholism so a wide range of treatments are being used to treat alcoholism.  These include (1) Pharmacotherapy, (2) Psychotherapy and Counseling, (3) Alcoholics Anonymous, (4) Alcoholism Education, (5) Marital and Family Therapy, (6) Aversion Therapy, (7) Controlled Drinking, (8) Operant Methods, and (9) Broad-Spectrum Approaches.

            Nine methodological problems make it difficult to interpret the findings in the literature evaluating alcoholism.

(1)   The lack of a standard treatment protocol

(2)   The lack of standard outcome measures

(3)   Patient Variations

(4)   No standard methodology for calculating costs

(5)   Research Design Problems:  Inadequate control groups

(6)   The pre-period “ramp-up” effect and the post-period “regression-to-the-mean” effect

(7)   Follow-up Sample Problems

(8)   The issue of relapse and readmission

(9)   The issue of spontaneous recovery

The Cost-Effectiveness of Alcoholism Treatments

            A very large number of studies have attempted to measure the effectiveness of alcoholism treatments.  Most of these studies have suffered from one or more of the methodological problems just noted.  Nevertheless, the consensus in the literature is that alcoholism treatments are effective.  They increase abstinence rates and reduce the use of alcohol.  All treatments are not equally effective.  It appears that social skills training, the community reinforcement approach, behavioral marriage therapy, and stress management training are effective while residential milieu treatment, general counseling, and metronidazole are not.  The effectiveness of other treatments currently being used is uncertain.

            There are almost no studies of the cost-effectiveness of alcoholism treatments.  Indirect evidence indicates that some effective treatments are low cost and some widely used ineffective treatments are relatively costly.  A consensus has emerged in the literature that alcoholism outpatient treatment is more cost-effective than inpatient treatment.  This conclusion is based on the assumption that patients and treatments are the same in both modalities, which is not necessarily true.

            No full-blown cost-benefit analysis (CBA) of alcoholism treatments has been published in the literature.  A number of partial CBA studies, called “cost-offset” studies have examined the impact of alcoholism treatments on health care utilization and expenditures.  Although weak, the evidence indicates that alcoholism treatment’s benefits exceed their cost; their ability to reduce future health expenses exceeds their own costs.  A few studies examined the effect of state alcoholism treatment programs on medical care spending.  They reported positive medical care cost-savings, but provided no information on the cost of treatments so no benefit-cost ratio could be calculated.

Evaluations of Drug Abuse Treatments

            The evaluation of drug abuse treatment is very complex because of the variety of treatments provided, the variation in the treatment population, and the difficulty in identifying and measuring costs and outcomes.  The same methodological problems that plagued evaluations of alcoholism treatments make it difficult to evaluate studies of drug abuse treatments.

            The NIDA has sponsored three large national studies (i.e., DARP, TOPS, and DATOS) which have greatly enhanced our knowledge of the cost-effectiveness of drug abuse treatments.  The individual studies flowing from these projects are methodologically stronger than earlier studies in terms of sample size, research design, and statistical analysis, but they continue to lack an adequate control group.  Despite their individual weaknesses, collectively they show that drug abuse treatments are effective.  Drug abuse treatments are able to increase abstinence, reduce drug use, reduce criminal activity, reduce health care utilization, and to a lesser extent increase employment and earnings.  The debate is over the magnitude of these effects.  Many studies report declines in drug use and criminal activity in the range of 40 to 60 percent, but these studies have methodological flaws which clearly upwardly bias their estimates.

            There are very few studies of the cost of drug abuse treatments or of the cost-effectiveness of such treatments.  Until standard methods are established for measuring costs and outcomes, individual cost-effectiveness studies cannot be compared and single studies have limited value.

            Cost-benefit studies can stand alone because both costs and benefits are measured in dollars.  Cost-benefit analysis can be used to determine if we are getting value for the money spent.  A number of cost-benefit studies of drug abuse treatments have been published in recent years.  However, the estimated benefit-cost ratios vary wildly from 26.3 to 0.38.  The estimated benefit-cost ratios are highly sensitive to methodology, the analyst’s perspective, the choice of benefits analyzed, and the type of modality or clients examined.

            Again, despite the methodological weaknesses of the individual studies, collectively they indicate that overall drug abuse treatments are efficient; their benefit-cost ratio exceed 1.0.  The cost-savings from reductions in criminal activity are the greatest and the benefits in employment and earnings appear to be the smallest.  The gains in medical care costs savings fall somewhere in between.  The five recent evaluations of state drug abuse treatment programs produced estimates of benefit-cost ratios similar to those for the private sector.  Collectively, they indicate that state substance abuse treatment programs are efficient (i.e., their B/C > 1.0).  The precise magnitude of their benefit-cost ratios is still uncertain.

Structure, Capacity, and Utilization in Louisiana AOD Treatment System

            Louisiana’s alcohol and drug abuse system currently is being fully utilized.  There is evidence of substantial unmet need for treatment.  Louisiana’s treatment system does not appear to be unique.  It does not substantially differ from systems in other states in terms of treatments, modalities, or client characteristics.  Therefore, it is reasonable to assume that the effects of alcohol and drug abuse treatments observed in other states are applicable to the Louisiana treatment system.

            Based on the available evidence, from the point of view of government, we conclude that for each dollar the state puts into alcohol and drug abuse treatment programs, it will reduce future expenditures on criminal justice, medical care, and public assistance by approximately $3.83.

            From the point of view of society, we estimate that for each dollar the state puts into alcohol and drug abuse treatment program society enjoys a reduction in future crime and health care costs of $3.69 to $5.19.  Based exclusively on crime and medical care cost-savings, we calculate that society gains in reductions in medical care and crime costs between $3.69 to $5.19 for each dollar spent on alcohol and drug abuse treatments.

            It is not clear if the estimated medical care cost-savings reported in the literature includes the potential cost-savings associated with HIV/STDs/Hepatitis C.  Because Louisiana has one of the highest HIV infection rates in the country as well as the highest incarceration rate, it is reasonable to assume that the medical care and crime cost-savings from alcohol and drug abuse treatment programs will be greater than the national average figures cited above.

            Finally, it should be noted that the estimated cost-savings would be greater if the effects of alcohol and drug abuse treatment programs on education, public assistance, insurance costs, and lost productivity were included in the analysis.

                                                                   CONTENTS

Chapter                                                                                                                                        Page        

      Figures ...................................................................................................................................... xii

      Tables....................................................................................................................................... xiii

       Executive Summary..................................................................................................................... ii

1.      INTRODUCTION AND BACKGROUND......................................................................... 1

1.1.    The Social Cost of Alcoholism and Drug Abuse............................................................. 1

1.2.    Value for Money and Economic Evaluations................................................................... 2

1.3.    Study Overview and Objectives..................................................................................... 4

1.4.    Outline of the Study....................................................................................................... 4

2.      ECONOMIC EVALUATIONS OF ALCOHOL AND DRUG

ABUSE TREATMENT PROGRAMS.................................................................................. 6

2.1    Economics Evaluations of Health Care Interventions........................................................ 6

2.2    Types of Health Care Evaluations.................................................................................... 6

2.2.1 Cost-minimization analysis (AMA)....................................................................... 10

2.2.2 Cost-effectiveness analysis (CEA)........................................................................ 10

2.2.3 Cost-utility analysis (CUA).................................................................................. 12

2.2.4 Cost-benefit analysis (CBA)................................................................................ 13

3.      METHODOLOGICAL ISSUES IN ECONOMIC EVALUATIONS................................. 16

3.1    Introduction.................................................................................................................. 16

3.2    The Conceptual Framework......................................................................................... 17

3.3    The Analyst’s Point of View.......................................................................................... 20

3.4    Treatment Design.......................................................................................................... 23

3.5    Identification, Measurement, and Valuation of Costs...................................................... 25

3.6    Identification, Measurement, and Valuation of Program

Consequences or Outcomes......................................................................................... 29

3.7    Research Design........................................................................................................... 36

3.8    Sampling Design........................................................................................................... 41

3.9    Incremental Analysis of Costs and Consequences of

Alternatives Performed................................................................................................. 43

3.10 Potential Bias in the Presentation and Interpretation

 of Results and Recommendations................................................................................. 44

3.11 Conclusions on Methodological Issues......................................................................... 45

4.      THE SOCIAL COSTS OF ALCOHOLISM AND DRUG ABUSE................................... 46

4.1  Introduction.................................................................................................................. 46

4.2  The Social Cost of Alcohol and Drug Abuse................................................................. 47

4.3    The Social Cost Model................................................................................................. 49

4.4    Estimates of the Social Cost of Alcoholism in the United States...................................... 51

4.5    Estimates of the Social Cost of Drug Abuse in the United States.................................... 53

4.6    Methods for Estimating the Component Costs of Alcohol and Drug Abuse..................... 58

4.7    The Uses and Abuses of Social Cost Estimates............................................................. 70

4.8    The Cost of Substance Abuse to State Government....................................................... 72

5.      EVALUATIONS OF ALCOHOL ABUSE TREATMENT................................................ 75

5.1    Introduction.................................................................................................................. 75

5.2    Alcohol Abuse Treatments............................................................................................ 76

5.3    Methodological Problems in Evaluating Alcoholism Treatment........................................ 78

5.3.1        Problem 1. Standardizing Treatment Protocols............................................. 78

5.3.2        Problem 2. Standard Outcome Measures..................................................... 79

5.3.3        Problem 3. Patient Variation........................................................................ 79

5.3.4        Problem 4. Costs of Treatment.................................................................... 80

5.3.5        Problem 5. Research Design Problem.......................................................... 81

5.3.6        Problem 6. The “Ramp-Up” Effect and “Regression-to-the-Mean” Problem. 83

5.3.7        Problem 7. Follow-up Analysis Problems..................................................... 84

5.3.8        Problem 8. The Relapse Issue...................................................................... 85

5.3.9        Problem 9. Spontaneous Recovery.............................................................. 86

5.4    The Effectiveness of Alcoholism Treatments.................................................................. 91

5.5    Cost Effectiveness Analysis of Alcoholism Treatments................................................. 103

5.6    Cost Effectiveness of Alcoholism Treatment Settings.................................................... 109

5.7    Cost-Benefit and Cost-Offset Studies of Alcoholism Treatments.................................. 112

5.7.1        Reviews of Cost-Offset Studies................................................................. 113

5.8    State Alcoholism Treatment Program’s Cost-Offsets................................................... 119

5.9    Summary and Conclusions on Alcoholism Treatment Evaluations................................. 120

6.      EVALUATIONS OF DRUG ABUSE TREATMENT...................................................... 124

6.1    Introduction................................................................................................................ 124

6.2    Drug Abuse Treatments and Modalities....................................................................... 126

6.2.1        Drug Treatment Modalities......................................................................... 127

6.2.2        Drug Abuse Treatments............................................................................. 129

6.3    Methodological Problems in Evaluating Drug Abuse Treatments................................... 131

6.4    The Effectiveness of Drug Treatments.......................................................................... 137

6.4.1        The Overall Effectiveness of Drug Abuse Treatments.................................. 138

6.4.2        The Effectiveness of Treatment Modalities.................................................. 142

6.4.3        The Relative Effectiveness of Treatment Modalities..................................... 149

6.4.4        Patient Characteristics and Outcomes......................................................... 150

6.4.5        Length of Treatment and Outcomes............................................................ 151

6.4.6        The Effectiveness of Individual Treatments and Program Components......... 152

6.4.7        The Matching Hypothesis .......................................................................... 155

6.4.8        Relapse and Readmission........................................................................... 156

6.5    CEA and CBA Evaluations of Drug Abuse Treatments................................................ 157

6.5.1        The Costs of Drug Abuse Treatments......................................................... 159

6.5.2        Drug Abuse Treatment Outcomes and Benefits........................................... 161

6.5.3        Cost-Effectiveness Analysis (CEA) of Drug Abuse Treatments................... 164

6.5.4        Cost-Benefit Analysis of Drug Abuse Treatments....................................... 166

6.5.5        Individual Evaluations of Drug Abuse Treatments........................................ 170

6.6    Recent Evaluations of State Drug Abuse Treatment Programs...................................... 177

6.7    Summary and Conclusions on Drug Abuse Treatments................................................ 186

7.      THE STUDY’S IMPLICATIONS FOR LOUISIANA’S PUBLICLY FUNDED ALCOHOL AND DRUG ABUSE TREATMENT SYSTEM.................................................................................... 193

7.1    Introduction................................................................................................................ 193

7.2    Structure, Capacity, and Utilization in Louisiana’s Treatment System............................ 193

7.2.1        Current Treatment System......................................................................... 193

7.2.2        The Need for Treatment............................................................................ 194

7.2.3        System Capacity........................................................................................ 195

7.2.4        System Utilization...................................................................................... 196

7.3    Client Characteristics.................................................................................................. 199

7.4    Interpreting the Study’s Findings and Their Implications for the Louisiana AOD System 202

FIGURES

Number                                                                                                                                      Page

2.1  Economic Evaluation.................................................................................................................... 9

3.1 Components of Economic Evaluation in Health Care................................................................... 18

5.1 Average Monthly Medical and Chemical Dependency Treatment Costs Before and

      After Need for Treatment Identified........................................................................................... 90           

6.1    Cost-Benefit Model................................................................................................................ 169

TABLES

Number                                                                                                                                      Page

Table 2.1  Distinguishing Characteristics of Health Care Evaluations ................................................... 7

Table 3.1  Possible Formulations of Economic Evaluation in Health Care.......................................... 22

Table 4.1  United States Social Costs of Alcohol Abuse................................................................... 52

Table 4.2  Social Cost of Drug Abuse in the United States................................................................ 55

Table 4.3  Crime Related Costs....................................................................................................... 57

Table 4.4  State Substance Abuse Spending by Category, 1998....................................................... 74

Table 5.1  Average Medical Costs in Pre- and Post-Event Periods for SSI Recipients...................... 88

Table 5.2  Ranking of Alcoholism Treatment Modality Effectiveness............................................... 102

Table 5.3  Comparative Ranking of Alcoholism Treatment Modality Effectiveness........................... 104

Table 5.4  Typical Costs per Unit for Alcoholism Treatment By Facility, Setting, and

                  Provider...................................................................................................................... 106

Table 5.5  Treatment Modalities Classified by Cost Effectiveness Categories.................................. 108

Table 6.1  Changes in Drug Abuse in the TOPS Study by Modality and Treatment

                 Duration....................................................................................................................... 143

Table 7.1  Estimates of Static and Annual Capacity of Louisiana’s Treatment Programs,

                 1998............................................................................................................................ 197

Table 7.2  Capacity Utilization Rates by Treatment Modality.......................................................... 198

Table 7.3  Client Characteristics at Admission................................................................................ 200

Table 7.4  Summary of Private Sector Cost-Benefit Studies of Drug Abuse Treatments................... 204

Table 7.5  Summary of Cost-Benefit Studies of State Substance Abuse Treatments........................ 206

(Entire Report here)