The Cost of Substance Abuse: The Use of Administrative Data to Investigate Treatment Benefits in a Rural Mountain State

Abstract: Findings from cost-benefit evaluations have suggested that the cost of substance abuse treatment is covered by the economic benefits to society. In this research we measure the economic impact of substance abuse treatment in a rural mountain state. Using a novel approach, cost data were gathered from four disparate state administrative databases, which were selected and matched to form one complete data set. A cost-benefit analysis was used to examine the aggregate economic impact of substance abuse treatment. The conservative post treatment outcome of the combined costs revealed a range or $4.12 to $3.98 million dollar overall offset, a difference that resulted in 20 to 16 percent savings above the fixed treatment cost. Policy implications are discussed. Keywords: cost-benefit analysis, treatment, substance abuse, administrative data INTRODUCTION There are many issues state policy makers must take into consideration when deciding how to allocate scarce economic resources to social service institutions and programs. In order to allocate resources most effectively, state policy makers and practitioners at all levels rely on several sources of information, including empirical research. The need for empirical research is at a premium in regard to substance abuse treatment specifically, where yearly expenditures for such treatment cost states in the hundreds of thousands, if not millions, of dollars annually (SAMHSA 2008b). Citizens and policy makers alike want to know that money is being spent effectively. Subsequently, an important branch within this body of substance abuse treatment research centers on economic analyses (Aos, Miller, and Drake 2006; Belenko, Patapis, and French 2005; Dismuke et al. 2008; French, Roebuck, and McLellan 2004; Koenig et al. 2005; Swaray, Bowles, and Pradiptyo 2005; Welsh, Farrington, and Sherman 2001). Some research on drug and alcohol treatment has focused on efficiency, as measured primarily by recidivism (Welsh et al. 2001). In the current study, we take a different, but related, approach that centers on whether substance abuse treatment renders cost savings as measured by decreases in correctional and medical spending and increased client earnings. We investigate the economic impact of substance abuse treatment on these relatively unexplored social support realms in a rural mountain state (hereafter referred to as Rural State). Analyses are made possible through the combined examination of four administrative databases, which originate from state Health and Welfare, Medicaid, Department of Corrections, and Department of Labor and Commerce agencies. Specifically, we begin to address the question of whether treatment has meaningful and positive effects on social phenomena, such as post-treatment earnings of participants, and whether treatment renders any cost offsets, which may indicate monetary savings at the state level. In regard to the above statement, readers should note that the research design utilized within this study is not strong enough to claim absolute certainty when speaking about causality. This issue is further discussed in the methods and discussion sections below. This research is guided by Cullen's (1994) contention that social support, in the form of private or public programs, buffers an individual from otherwise criminogenic correlates. Cullen suggested that the more support a person receives the more likely they are to resist and overcome a criminogenic environment. Importantly, Cullen argued that whereas a social support paradigm can retard crime, coercion, another paradigm popular in policy, increases crime (Colvin, Cullen, and Vander Ven 2002). There is empirical support for this contention (Chamlin and Cochran 1997; DeFronzo 1983, 1996; Hannon and DeFronzo 1998; Pratt and Godsey 2003) and implications for the current study, because substance abuse treatment can be seen as a form of social support, and the cost-benefit a positive collateral consequence. …