National Institute on Drug Abuse

RESEARCH

MONOGRAPH SERIES

Economic Costs,

CostEffectiveness,

Financing, and

CommunityBased Drug

Treatment

U.S. Department of Health and Human Services • Public Health Service • National Institutes of Health

113
Economic Costs, CostEffectiveness,

Financing, and

Community-Based

Drug Treatment

Editors:

William S. Cartwright, Ph.D.

James M. Kaple, Ph.D.

Research Monograph 113

1991

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Public Health Service

Alcohol, Drug Abuse, and Mental Health Administration

National Institute on Drug Abuse

5600 Fishers Lane

Rockville, MD 20857
ACKNOWLEDGMENT

This monograph is based on the papers and discussion from a technical

review on “Economic Costs, Cost-Effectiveness, Financing, and CommunityBased Drug Treatment,” held on May 21-22, 1990, in Rockville, MD. The

review meeting was sponsored by the National Institute on Drug Abuse.

COPYRIGHT STATUS

The National Institute on Drug Abuse has obtained permission from the

copyright holders to reproduce certain previously published material as noted in

the text. Further reproduction of this copyrighted material is permitted only as

part of a reprinting of the entire publication or chapter. For any other use, the

copyright holder’s permission is required. All other material in this volume

except quoted passages from copyrighted sources is in the public domain and

may be used or reproduced without permission from the Institute or the authors.

Citation of the source is appreciated.

Opinions expressed in this volume are those of the authors and do not

necessarily reflect the opinions or official policy of the National Institute on Drug

Abuse or any other part of the U.S. Department of Health and Human Services.

The U.S. Government does not endorse or favor any specific commercial

product or company. Trade, proprietary, or company names appearing in this

publication are used only because they are considered essential in the context

of the studies reported herein.

NIDA Research Monographs are indexed in the Index Medicus. They are

selectively included in the coverage of American Statistics Index, Biosciences

Information Service, Chemical Abstracts, Current Contents, Psychological

Abstracts, and Psychopharmacology Abstracts.

DHHS publication number (ADM)91-1823

Printed 1991

ii
Contents

Page

lntroduction

Introduction and Summary 1

William S. Cartwright and James M. Kaple

Economic Costs of Drug Abuse

Economic Costs of Drug Abuse 10

Dorothy P. Rice, Sander Kelman, and Leonard S. Miller

Economic Cost of Illicit Drug Studies: Critique and

Research Agenda 33

Jody L. Sindelar

Economics and Drugs: Promises, Problems,

and Prospects 46

Henrick J. Harwood

Cost-Effectiveness Analysis

Evaluating the Cost-Effectiveness of Drug Abuse

Treatment Services 57

Robert Apsler

iii
Cost-Effectiveness of Drug Abuse Treatment:

Relevant Issues and Alternative Longitudinal

Modeling Approaches 67

Yih-lng Hser and M. Douglas Anglin

New Perspectives on the Benefit-Cost and Cost-Effectiveness

of Drug Abuse Treatment 94

Robert L. Hubbard and Michael T. French

Cost-Effectiveness of Drug Abuse Treatment for Primary

Prevention of Acquired lmmunodeficiency Syndrome:

Epidemiologic Considerations 114

Thomas M. Lampinen

Financing Services for Drug Abuse Treatment

Policy-Relevant Research on Drug Treatment 129

Dean R. Gerstein

Community-Based Drug Treatment Reimbursement:

Progress and Barriers 148

Benjamin C. Duggar

Financing Treatment for Substance Abuse 165

Mark V. Pauly

Forecasting the Cost of Drug Abuse Treatment Coverage in

Private Health Insurance 175

Thomas G. McGuire and Barbara F. Shatkin

Health Insurance Coverage Questions, Public Health Surveys,

and Drug Abuse 190

William S. Cariwright and Albert M. Woodward

Recommendations

Recommendations 205

William S. Cartwright and James M. Kaple

List of NIDA Research Monographs 212

iv
Introduction and Summary

William S. Cartwright and James M. Kaple

There is renewed interest in the role of health services research in assisting the

Nation to improve the delivery of basic drug abuse treatment. The first National

Institute on Drug Abuse (NIDA) technical review to focus on the drug services

research agenda was convened May 21-22, 1990. The purpose of the

technical review was to identify and plan services research dealing with social

and economic costs, cost-effectiveness, and financing of drug treatment,

prevention, referral, and followup care in health and community settings. The

Financing and Services Research Branch (FSRB), Division of Applied

Research, NIDA, sponsored this technical review to examine research to

develop new methods of analysis and to improve current methods in these

areas,

The scientific environment in drug abuse services research is one of active and

intense interest in which scientific and programmatic policies are rapidly

evolving after a period of neglect. In June 1990, the Office of National Drug

Control Policy (ONDCP) issued a White Paper titled Understanding Drug

Treatment (Office of National Drug Control Policy 1990a). In September 1990,

the Institute of Medicine (IOM) published its report, Treating Drug Problems

(Institute of Medicine 1990a), and a previous IOM report, Broadening the Base

of Treatment for Alcohol Problems (Institute of Medicine 1990b), also was

published earlier that year. The ONDCP has published two reports, both titled

National Drug Control Strategy (Office of National Drug Control Policy 1989,

1990b), and each discusses national policy and research needs and

emphasizes services research as an important and integral part of a wellrounded research strategy. The FSRB is charged to nurture the development of

basic and applied research in the drug abuse services field.

This technical review used three main themes to organize the issues. First, the

review focused on the development of the latest cost estimates associated with

drug abuse and considered new approaches to improve the methodology.

Second, issues surrounding the state of cost-effectiveness research of

alternative drug treatments were dealt with in four chapters. Third, a review of

drug treatment financing from the public and private perspectives examined

1
how funding the delivery of drug treatment and other appropriate services was

undertaken. Finally, suggested services research opportunities and data

collection needs were examined, building on presentations made throughout

the technical review.

Services research investments over the next few years will lead to an improved

understanding of the relative effectiveness of organizational, structural, and

financial approaches to the Nation’s drug treatment system and the clients it

serves. Services research now in place and planned for the future will enhance

the knowledge base necessary to inform future policy decisions affecting

financing and delivery of drug treatment in the public and private sectors. This

technical review contributes to the research process by providing guidance in

the assessment of economic costs, cost-effectiveness, and financing issues.

ECONOMIC COSTS OF DRUG ABUSE

Establishing the economic costs of drug abuse presents an interesting

challenge to those who develop such estimates and those who would use such

estimates for policy purposes. The first chapter, by Rice and coworkers,

summarizes the most recent findings on drug abuse economic costs from an

FSRB-sponsored study (Rice et al. 1990) that included mental health and

alcohol costs. Sindelar and Harwood offer cautionary notes to researchers and

policymakers concerning the interpretation of the findings.

Rice and colleagues present a careful analysis of the burden of drug abuse on

society. The study uses the human capital approach rather than the

willingness-to-pay approach. The study also uses a prevalence approach to

estimate a 1985 base period of costs rather than an incidence approach that

would attempt to estimate lifetime cost over the sum of affected individuals.

The reader should remember that estimates were generated on data acquired

before the crack/cocaine epidemic in the late 1980s and therefore do not

capture the additional costs of this new drug usage. Overall, the computations

result in a 1985 estimated cost to the Nation of $44 billion, which is updated by

inflation only to an 1988 estimate of $58.3 billion. In 1988, $325 billion

represented crime-related costs-a large burden to the economy and to those

who do not use drugs. Such high crime-related costs distinguish drug abuse

costs from those related to alcohol and mental health costs.

This cost-of-illness study contributes, among other things, two technical

innovations. First, in estimating productivity losses (income losses) by age and

sex, the authors develop a model that takes into account the timing and

duration of the drug abuse disorder on current income. To do this, the National

Institute of Mental Health Epidemiology Catchment Area data are used along

2
with the available information on time of onset of last drug abuse symptom

relative to the time of the interview. Second, new variables for alcohol and drug

abuse and mental illness are used as explanatory variables in the income loss

equations. A major finding was that the income loss was lower for alcohol and

drug abuse than was found in an earlier study conducted by the Research

Triangle Institute (Harwood et al. 1984). The new study had the advantage of

newer and more complete databases and new statistical models and methods.

The striking thing about these cost estimates is how large the burden is and

how much of it falls on society rather than on the individual drug user. The

crime portion of this estimate accounts for nearly 74 percent of the total cost.

For policymakers, this crime factor creates a unique situation for financing and

reimbursement policy because there are such large external costs on other

members of society. One effect of these external costs is a willingness to pay a

subsidy for treatment to reduce these costs. The subsidy is present already in

the State block grant for alcohol, drug abuse, and mental health (ADM)

services, but at what level the subsidy should be set is a question of intense

policy interest.

Although such cost-of-illness studies indicate a large burden on society,

Sindelar cautions that this is not sufficient information for decisionmaking about

the allocation of scarce resources. Additional information must be collected on

the marginal effectiveness of policies and programs if decisionmaking is going

to move toward an optimum. Second, she recommends focusing studies on

individuals with defined constellations of ADM comorbidities rather than

artificially parceling diseases into distinct categories when dealing with

polysubstance abuse. Finally, Sindelar recommends that attention be paid to

certain hidden costs such as the deadweight loss attributable to government

taxation to finance public problems.

Harwood suggests additional caveats to the interpretation of cost-of-illness

studies. He notes that such studies provide a metric to summarize the burden

of disparate diseases, but it is a metric that is limited in calculating other

aspects of drug abuse problems such as pain and suffering. He reminds us

that, from 1980, cost-of-illness studies have undergone dramatic improvement

in methodology. As a result, estimates of the impact of drug abuse on persons

in the work force have fundamentally increased over previous estimates.

Finally, Harwood points out that economic concerns of efficiency and equity are

primary in the development of a national drug control strategy.

The editors wish to point out the significance of research findings related to the

large costs in productivity losses for individuals in the workplace. Such findings

underlay the basis for economic arguments of the benefits of workplace drug

3
policies related to testing and treatment. Of course, there will be a need for

additional estimates of such effects, although such measurements must be

conducted In an environment of heightened consciousness of workplace drug

problems. This heightened consciousness potentially biases the best efforts of

researchers to control for all Intervening variables. For example, increased

levels of general information affected the measured impact of health

interventions for reducing heart disease because controls generally were

subject to better knowledge concerning changes in healthy behavior. The

overall result Is an increased difficulty in detecting a measured difference

between the controls and the treatment groups and, hence, a bias to not finding

a treatment effect in the workplace.

COST-EFFECTIVENESS

Apsler’s review of the cost-effectiveness literature is a critical assessment of

accomplishments to date. For his purpose, the important question is, Are

today’s drug treatment programs cost-effective? Apsler develops a three-part

argument about the results in the literature. First, there is evidence that some

“typical” drug programs are of “questionable” cost-effectiveness. Moreover,

there is also evidence that some treatment strategies are “cost-ineffective.”

Finally, there is evidence that certain treatments have a positive costeffectiveness. Underlying these various estimates is what Apsler suggests is a

lack of rigor in research design and implementation. To redress this, he

recommends a renewed commitment to undertaking cost-effectiveness studies

and to using better research methods.

Hser and Anglin have comprehensively reviewed the effectiveness of drug

treatment in a paper published elsewhere (Anglin and Hser 1990). In the

chapter for this monograph, they point out new directions for research into costeffectiveness studies of drug treatment. They start with the definitional and

conceptual framework for cost-effectiveness studies and then focus on the

dynamic aspects of the treatment system and the client’s career in drug

addiction and treatment. Hser and Anglin discuss the use of time-series

analysis and its potential for studying the addiction career and for policy

analysis. They also discuss survival analysis, Markov and Semi-Markov

Modeling, and system dynamics approaches. Within such a methodological

focus, they argue that in the framework of these models interventions can be

examined to provide policy analysis of alternatives.

Hubbard and French maintain that, on balance, treatment is “an effective and

cost-effective strategy.” They recommend that attention be shifted from a

defensive posture regarding treatment outcome findings to a more offensive

one so that the maximum return on each dollar invested in treatment can be

4
achieved. This theme is strongly recommended throughout the first section on

social and economic costs. Hubbard and French’s chapter lays out new

perspectives on research to study treatment careers, components of treatment,

and the effects of client impairment (assessed at treatment entry). Hubbard and

French take a reductionist approach to disaggregating the “black box” of

treatment and the client types in the system. They argue that only through this

approach can a better understanding of what is cost-effective be developed.

Lampinen examines cost-effectiveness issues in the prevention of acquired

lmmunodeficiency syndrome (AIDS). He reviews epidemiologic and public

health Issues in evaluating cost-effectiveness of drug treatment as an AIDS

prevention strategy. The problem Lampinen perceives is that Federal AIDS

prevention dollars are distributed to areas with the highest cumulative incidence

rates of diagnosed AIDS cases. This is problematic because AIDS among

intravenous (IV) drug users is underweighted in resource discussions and

allocations and because the latency period for AIDS is so long. In assessing

alternative prevention strategies for IV drug users, he notes that the drug

treatment approach may be limited by the lack of treatment slots and the costs

associated with treatment. Outreach initiatives to conduct AIDS education and

prevention still remain the most logical alternative given the current size of the

drug treatment system. Finally, consideration must be given to epidemiologic

information on rates of infectivity in weighting prevention strategies so that

resource allocations will be more effective.

FINANCING

Gerstein lays out fundamental questions to guide policy research and

development. In particular, policy research must focus on public support for

financing drug treatment. He posits three principles on which such public policy

should focus: (1) reduce external social costs, (2) increase access to care, and

(3) stimulate effective treatment. In developing his thesis, Gerstein explores

several topics in a wide-ranging discussion that goes beyond considerations of

financing. In particular, he discusses the role of cost-of-illness studies, costeffectiveness and efficiency in treatment, and financing. In financing issues, a

problem unique to drug abuse clients is the moral conception about those

needing treatment. These moral conceptions play a role in determining the

willingness of others to pay for drug treatment and rehabilitation either through

the public system or through private, risk-pooling arrangements of private health

insurance. Gerstein advocates further research into Medicaid financing of drug

treatment, utilization management, incentive effects of regulatory controls, and

data requirements.

5
Duggar notes that in spite of the lack of comprehensive data there are

indications that third-party reimbursement for drug treatment has expanded to a

greater number of health insurance plans. There has been an expansion in

drug treatment coverage as measured in some national surveys, but details on

various reimbursement characteristics are not available. Limitations on drug

treatment benefits seem more restrictive than what is customary for other health

care benefits, but there has been expansion to provide drug treatment and

rehabilitation in what are called “other approved facilities,” which include

residential treatment facilities and freestanding drug abuse clinics as opposed

to costly inpatient care.

Duggar sees great possibilities in Medicaid program expansion where States

institute Medicaid coverage for drug treatment. Where this occurs, State

licensure activity for Medicaid reimbursement eligibility seems to stimulate

private payers’ interest in recognizing legitimate drug treatment programs and in

reimbursing for treatment. However, most Medicaid programs exclude

reimbursement for residential treatment facilities because there is no Federal

funding designated for this activity.

Duggar reports on some preliminary data concerning Pennsylvania’s

establishment of a “Health Insuring Organization” (HIO) to enroll a subset of

Philadelphia Medicaid clients. The HIO contracted with primary care physicians

on a capitated basis to have them serve as gatekeepers to medical care.

Preliminary results indicate some reductions for inpatient hospital costs, but

none for drug treatment costs because of the lack of HIO control over outpatient

drug treatment episodes. He recommends that such Medicaid demonstrations

are important natural experiments for studies of reimbursement for drug

treatment.

Pauly examines the current state of financing of treatment for drug abuse and

important economic factors that determine adequacy and future policy. He

highlights the dual and virtually separate drug treatment provided in the public

and private sectors. A fundamental problem facing both sectors is the

skepticism of payers that treatment works with any certainty. Thus, third-party

payers such as insurance companies, employers, and governments have the

difficult problem of determining whether treatment dollars are well spent. Pauly

further Indicates that, if there is a rational expectation of effective treatment,

then why would treatment be denied? He also asks, Why do the public and

private programs differ so greatly?

Pauly develops a series of research questions in logical sequence about public

and private financing of drug abuse treatment, with a special section on

employment-related insurance coverage. Under public and private financing,

6
drug treatment has a role of providing effective health investments for

communities or individuals. Along with such investments, consideration must

be given to the distribution of costs across various groups in society. In

employment-related insurance coverage, there are several issues, with State

mandates for minimal levels of drug abuse treatment coverage having several

effects that need to be studied and verified.

McGuire and Shatkin focus on the difficulties of estimating the cost of health

insurance for drug treatment. The cost of drug treatment has been perceived

as rising rapidly and requiring special attention to manage the cost of insurance.

State and Federal laws attempt to meet social goals by imposing mandates and

minimal requirements on the benefits and insurance contracts that may be

written in a State, which in turn increases costs to others elsewhere in the

economy. Estimates of these costs are a critical component in evaluating the

tradeoffs in achieving social goals. The authors critique two studies that

examine the impact of providing drug treatment on health insurance premiums

and the impact of State mandates to provide drug treatment benefits. McGuire

and Shatkin call for studies that can exploit large data sets of insurance claims

to examine the response to different reimbursement policies and for studies that

focus on determinants of health insurance coverage for drug treatment.

Cartwright and Woodward survey the use of health insurance questions in

national surveys to determine appropriate methods for estimation of insurance

coverage, substance abuse benefits, and access to care and propose a set of

questions to be added to the National Household Survey on Drug Abuse

(NHSDA) or other small area surveys. The chapter examines the Current

Population Survey (CPS), National Medical Expenditure Survey, and the

National Health Interview Survey. In asking questions about illicit use of drugs,

it must be remembered that confidentiality and anonymity requirements are

important factors in the survey design of the NHSDA. Obtaining household

information is difficult because the most knowledgeable person about the

household situation may not be questioned because persons within the

household are randomly selected. There are also many adolescents who may

have limited knowledge about their health insurance coverage. In the face of

these problems, it is necessary to use more than one survey to derive a picture

concerning health insurance coverage and drug coverage. The authors

recommend a strategy using CPS health insurance questions to link data with

the NHSDA. In this way, the CPS may be used to provide fundamental data on

the Nation’s population and household characteristics that may inform the study

of access to and adequacy of drug treatment.

7
CONCLUSION

This technical review was a first step for the FSRB toward defining a national

research agenda for drug abuse services research. This monograph presents

several exciting research opportunities for multidisciplinary research teams to

undertake. The technical review examined the methodology of cost-of-illness

estimates and reviewed cost-effectiveness and benefit-cost studies, two areas

that must be closely linked in the development of the research agenda.

However, financing also was included because of its potential role in providing

an important source of information on both costs and benefits. Furthermore,

financing issues are sources of research questions on efficiency and equity in

the drug treatment system. In drug services research, all the complications of

understanding the various roles of the public and private sector are conjoined in

questions of financing of the treatment system. The continued development of

the services research agenda represents a challenge for the research

community as theoretical work is combined with applied, empirical research to

achieve the goal of improved public health in the United States.

REFERENCES

Anglin, M.D., and Hser, Y. Treatment of drug abuse. In: Tonry, M., and

Wison, J.Q., eds. Crime and Justice: An Annual Review of Research. Vol.

13. Chicago: University of Chicago Press, 1990.

Harwood, H.J.; Napolitano, D.M.; Kristiansen, P.; and Collins, J.J. Economic

Costs to Society of Alcohol and Drug Abuse and Mental Illness: 1980.

Research Triangle Park, NC: Research Triangle Institute, 1984.

Institute of Medicine. Broadening the Base of Treatment for Alcohol Problems.

Washington, DC: National Academy Press, 1990b.

Institute of Medicine. Treating Drug Problems. Vol. 1. Washington, DC:

National Academy Press, 1990a.

Office of National Drug Control Policy. National Drug Control Strategy.

Washington, DC: Supt. of Docs., U.S. Govt. Print. Off., 1989.

Office of National Drug Control Policy. National Drug Control Strategy.

Washington DC: Supt. of Docs., US. Govt. Print. Off., January 1990b.

Office of National Drug Control Policy. Understanding Drug Treatment

Washington, DC: Supt. of Docs., U.S. Govt. Print. Off., June 1990a.

Rice, D.P.; Kelman, S.; Miller, L.S.; and Dunmeyer, S. The Economic Costs of

Alcohol and Drug Abuse and Mental Illness: 1985. Washington, DC: Supt.

of Docs., US. Govt. Print. Off., 1990.

8
AUTHORS

William S. Cartwright, Ph.D.

Health Policy Analyst

James M. Kaple, Ph.D.

Associate Director for Services Research

Financing and Services Research Branch

National Institute on Drug Abuse

Room 9A-42

5600 Fishers Lane

Rockville, MD 20857

9
Economic Costs of Drug Abuse

Dorothy P. Rice, Sander Kelman, and Leonard S. Miller

INTRODUCTION

Drug abuse and drug addiction are costly to the Nation in medical resources

used for care, treatment, and rehabilitation; in reduced or lost productivity; in

crime enforcement; and in pain and suffering of drug abusers and their families

and friends. Although the overall use of drugs has decreased in recent years,

drug addiction continues to be widespread and its consequences are more

serious (Committee on Ways and Means 1990). The 1988 National Household

Survey on Drug Abuse (National Institute on Drug Abuse 1990) estimates that

almost 28 million Americans over the age of 12, about one in every seven

persons, had used illicit drugs one or more times in the past year. Of these,

marijuana (including hashish) was the most commonly used illicit drug, with

over 21 million users in the past year, and heroin with about 600,000 users in

the past year. The 1988 survey also showed that over 1 million persons used

crack in the past year and that nearly 2.5 million persons had used the drug at

least once in their lifetime. Crack cocaine, the most addictive drug that

scientists have ever confronted, coupled with the emergence of acquired

immunodeficiency syndrome (AIDS) among intravenous (IV) drug users, are

major public health problems in the United States, flooding hospitals,

emergency rooms, drug treatment centers, child welfare systems, and ultimately

the Nation’s morgues.

Drug abuse imposes a substantial burden on individuals as well as society as a

whole. Although it is difficult to quantify all aspects of the burden that drug

abuse imposes on society, it is important to translate this burden into economic

terms to facilitate decisionmaking. With the continued rise in health care

expenditures and the growing pressures for cost-containment, limited financial

resources may limit the health care Americans need. Priorities should allow for

the greatest improvement in welfare or well-being per dollar spent. To

determine the expenditures on prevention, education, treatment, control,

interdiction, and research on drug abuse, it is necessary to understand the

burden it places on society as well as the cost and effectiveness of alternative

interventions.

10
The research presented in this chapter developed estimates of the economic

burden of drug abuse in 1985. It is part of a larger study, The Economic Costs

of Alcohol and Drug Abuse and Mental Illness: 1985 (Rice et al. 1990),

conducted for the National Institute on Drug Abuse (NIDA) and the Alcohol,

Drug Abuse, and Mental Health Administration. This chapter summarizes the

methods and sources of data used in estimating the direct and indirect costs of

drug abuse and presents the results for 1985 and 1988. The same

methodology applies to the costs of alcohol abuse and mental illness that are

part of the larger study.

METHODOLOGY

Cost-of-illness studies are typically divided into two major categories: core

costs and related costs. Core costs are those resulting directly from the illness,

whereas other related costs are the costs of secondary, nonhealth effects of

Illness. Within each category, there are direct and indirect costs. Direct costs

are those for which payments are actually made, and indirect costs are those

for which resources are lost. Indirect costs consist of morbidity and mortality

costs. Morbidity costs are the value of lost productivity by persons unable to

perform their usual activities or to perform them at a level of full effectiveness

due to the illness. Mortality costs are the value of lost productivity due to

premature death resulting from illness; lost productivity is calculated as the

present discounted value of future market earnings plus an imputed value for

housekeeping services.

Human Capital and Willingness-To-Pay Approaches

This study uses the human capital approach, whereby an individual is seen as

producing a stream of output over time that is valued at market earnings or the

imputed value of housekeeping services. It assumes a social perspective and

has the important advantage of using data that are reliable and readily

available. It is useful for answering questions regarding the economic burden of

disease for a specific duration (e.g., drug abuse in 1985) or for cost-benefit

analysis (e.g., determining the cost savings of a specific procedure or

intervention program that reduces illness and/or improves survival rates). The

human capital approach also has limitations. Because the value of human life

is based on market earnings, it yields very low values for children and the

retired elderly. Many drug abusers fall into these categories, especially young

persons. This approach may undervalue or overvalue life if labor market

imperfections exist and wages do not reflect true abilities. Finally, certain

dimensions of illness and death such as pain and suffering are ignored.

A conceptually different approach, willingness to pay, captures other aspects of

the value of life. This method values human life according to what indlviduals

11
would be willing to pay for a change that reduces the probability of illness or

death (Schelling 1966; Acton 1975). Objections to the willingness-to-pay

method are that it is difficult to implement in practice, that the value of individual

lives depends on income distribution (with the rich able to pay more than the

poor), and that people have great difficulty in placing a value on small

reductions In the probability of death (Hodgson and Meiners 1962). However,

the methodology has been refined considerably in recent years (Rice et al.

1989).

Prevalence and lncidence Approaches

Two approaches can be used to estimate the cost of illness by the human

capital method. Prevalence-based cost provides an estimate of the direct and

indirect economic burden incurred in a period (the base period) as a result of

the prevalence of illness during this same base period, most often a year.

Included is the cost of base-year manifestations of illness or associated

disability with onset in or at any time before the base year. Prevalence-based

cost measures the value of resources used or lost during a specified period

regardless of the onset of the illness or injury.

Incidence-based cost represents the lifetime cost resulting from the illness.

Incidence cost refers to the total lifetime cost of all cases with the onset of

disease In the base year. Incidence cost is difficult to estimate because it

requires knowledge of the likely course of an illness and its duration, including

survival rates since onset; the amount and cost of medical care to be used and

its cost during the duration of the illness; and the impact of the illness on lifetime

employment, housekeeping, and earnings (Hodgson 1983; Scitovsky 1982).

Most cost-of-illness studies employ the prevalence-based approach, as does

the one employed in the current study on the economic costs of drug abuse.

Definition of Drug Abuse

Drug abuse is defined as any of the diagnoses listed in the International

Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM), as

shown in table 1. Included are drug psychoses; drug dependence;

nondependent abuse of drugs; poisoning by drugs, including opiates and

related narcotics, sedatives, and hypnotics; psychotropic agents, central

nervous system (CNS) depressants and stimulants; and heroin, methadone,

opiates, and related narcotics causing adverse effects In therapeutic use.

These ICD-9-CM diagnoses are used for estimating the direct drug abuse

treatment costs of hospital and ambulatory care from the National Hospital

Discharge Survey (NHDS) and the National Ambulatory Care Survey. They

12
TABLE 1. Drug abuse diagnoses

Diagnosis ICD-9-CMa

 Code

Drug psychoses

Drug dependence

Nondependent abuse of drugs

Polyneuropathy due to drugs

Narcotics affecting fetus or newborn

via placenta or breast

Hallucinogenic agents affecting fetus

or newborn via placenta or breast

Drug withdrawal syndrome in newborn

Poisoning by opiates and related narcotics

Poisoning by sedatives and hypnotics

Poisoning by CNS muscle-tone depressants

Poisoning by psychotropic agents

Poisoning by CNS stimulants

Heroin causing adverse effects In therapeutic use

Methadone causing adverse effects in therapeutic use

Other opiates and related narcotics causing adverse

effects in therapeutic use

Sedatives and hypnotics causing adverse effects in

therapeutic use

Other CNS depressants and anesthetics

causing adverse effects in therapeutic use

Psychotropic agents causing adverse effects in

therapeutic use

CNS stimulants causing adverse effects in therapeutic use

292

304

305

357.6

760.72

760.73

779.5

965.0

967

968.0

969

970

E935.0

E935.1

E935.2

E937

E938

E939

E940

a

International Classification of Diseases, 9th Revision, Clinical Modification

also are used for estimating mortality costs based on the number of deaths from

these diagnoses reported in the National Mortality Detail File.

For estimates of morbidity costs, the Epidemiologic Catchment Area (ECA)

Surveys are used, which classify disorders according to the Diagnostic and

Statistical Manual of Mental Disorders III, Revised. The ECA data provide

diagnostic information on drug abuse and dependence for each of six

substances (barbiturates, opioid [heroin], cocaine, amphetamines,

13
hallucinogens, and cannabis [marijuana]) as well as a summary measure of the

six, considering each equally disordered.

Estimation Models

Estimating the economic costs of drug abuse is complex, involving a variety of

methods and sources of data that are spelled out in considerable detail in the

full report (Rice et al. 1990). This section briefly summarizes the models for

estimating the cost of drug abuse for 1985 by type of cost.

Direct Costs. The direct costs of drug abuse are the value of resources that

could be allocated to other uses in the absence of drug abuse. Direct costs

include the amounts spent for personal health care for persons suffering from

drug abuse, including care in drug-related specialty and Federal institutions,

short-stay hospital care, and physician and other professional services. Also

included are support costs related to the treatment of drug abuse, such as

expenditures for research, training costs for physicians and nurses, program

administration, and net cost of private insurance. Other related direct costs

encompass the costs of crime, including public police protection costs, private

legal defense, and property destruction.

In general, the direct costs of drug abuse are estimated as the product of two

components: total utilization of services and unit prices or charges. For

example, short-stay hospital days of care were obtained from the 1984, 1985,

and 1986 NHDS public use tapes. Included are days of care associated with a

primary diagnosis of drug abuse and the additional days of care (by age and

sex) reported as secondary or comorbid drug abuse diagnoses. Expenses per

patient day were applied to these days of care to obtain total short-stay hospital

costs. Table 2 summarizes the core costs of drug abuse by type of cost as well

as the data sources used.

Other related direct costs of drug abuse include the following components:

criminal justice system, drug traffic control, private legal defense, property

destruction, and social welfare administration. For each component, the costs

attributed to drug abuse are estimated employing the offense-specific

methodology developed by Cruze and associates (1981) and Harwood and

associates (1984) in which causal factors that represent the proportion of

offenses or arrests considered to be due to drug abuse are applied to the

number of known offenses and then multiplied by the costs per offense. Table

3 summarizes the other related costs and the data sources used.

14
TABLE 2. Core costs of drug abuse by type of cost, 1985

aAlcohol and other drug abuse and mental lllness

bDiscounted at 6 percent

NOTE: Percents may not add to total due to rounding.

15
TABLE 3. Other related costs of drug abuse by type of cost, 1985

Amount Percent

Type of Cost ($ millions) Distribution Date Sources

Total 32,401

Direct Costs

Crime

Public expenditures

Criminal justice

Police protection

Legal adjudication

Correction

13,209

13,203

11,063

9,508

5,810

100.0

40.7

40.7

34.1

29.3

17.9

1,108

2,500

Drug traffic control

Prevention

Law enforcement

Private Legal Defense

Property destruction

Other direct expendituresa

Indirect Costs

Victims of crime

1,535

175

1,380

1,381

759

6

3.4

8.0

4.8

.5

4.3

4.3

2.3

b

19,252

842

59.3

2.6

Incarceration 4,434 13.7

Crime careers 13,976 43.1

U.S. Department of Justice

1987a, 1986a

U.S. Department of Jusice

1987a, 1986a

U.S. Department of Justice

1987a, 1986b

U.S. Office of Management and

Budget 1988

U.S. Office of Management

and Budget 1988

U.S. Bureau of the Census 1985

U.S. Department of Justice

1987b

Blxby 1988

US. Department of Justice

1986c and average earnings

per day

U.S. Department of Justice

1985, 1986d, 1087c, 1987a,

1988 and average earnings

NIDA 1988: U.S. General

Accounting Office 1988;

Nurco et al. 1985; U.S. Bureau

of the Census 1987

aSocial welfare expenditures

b

Less than one-tenth of 1 percent

NOTE: Percents may not add to total due to rounding.

Morbidity Costs. Morbidity costs, the value of reduced or lost productivity due

to drug abuse, are estimated as the product of the number of individuals

affected times the average income loss per individual due to drug abuse. Each

of these terms is further divided into two parts: (1) The number of drug abusers

is the size of the reference population times the drug abuse prevalence rates;

and (2) the average income loss per drug abuser is the percentage loss due to

the disorder per individual times the average income level the individual would

16
have earned had he or she not been affected by this disorder. Each of these

terms is disaggregated by age, sex, and disorder, except average income for

persons without these disorders, which can be disaggregated only by age and

sex.

The identity is given below:

$LOSS= (POPlj*PREVljk) (bljk*Ylj)

Where:

$LOSS=the aggregate loss in income due to drug abuse

POPlj=the size of the population by age and sex

PREVljk=the prevalence rate by age, sex, and disorder

bljk=the percentage income loss per individual with drug abuse by age, sex, and

disorder

Ylj=the average Income by age and sex for individuals without disorders

Summing this four-term product over age, sex, and drug abuse disorder

provides an estimate of the aggregate loss of income due to drug abuse among

the entire population.

A timing model was developed in the estimation of impairment rates (percent of

income loss) that were applied to average incomes, including an imputed value

of housekeeping services, by age and sex. Maximum likelihood estimation is

employed to estimate impairment rates based on a model that measures the

lifetime effect on current income of individuals with these disorders, taking into

account the timing and duration of the drug abuse disorders. Timing and

duration are based on measures of time of onset and time of last symptom

relative to the time of interview. The impairment rates are the adjusted crosssection coefficients obtained when the probability of each observation in the

likelihood function is estimated by the integral of the error in the income

equation over the reported income interval. The error is equal to the difference

between the natural logarithm of personal income and coefficients multiplying

lifetime measures of functions of the timing and duration of individual drug

abuse disorders and other control variables. Multiplying the impairment rates

by average incomes, therefore, yields measures of the annual income loss per

individual with the disorder by age, sex, and disorder.

17
Alcohol and other drug abuse and mental disorders are not neatly segregated

among drug abusers who often abuse alcohol and vice versa, and both types of

substance abusers have higher than average rates of mental illness (Collins

and Schlenger 1983; Grande et al. 1984; Miller et al. 1983; Rachal et al. 1981,

1982; Wolf et al. 1988).

In the larger study, all income losses due to these disorders are distributed

among the three categories. The prevalence of multiple disorders in individuals

presents a unique problem-namely, how to allocate income loss attributable to

multiple disorders among the disorders. This problem was addressed by first

determining if measurable interaction effects of overlapping disorders were

identifiable. In initial regression studies, multiple diagnostic variables were

included to determine if overlapping prevalence introduced additional income

loss (over and above that found from first-order prevalence measures).

Because of the colinearity introduced by these additional variables, however, it

was not possible to statistically discern such effects. As a result, the analysis

assumes that the effects of overlapping prevalence are additive but not

interactive. In other words, the impairment rate found for drug abuse is the

same whether it is a sole disorder or in the presence of an alcohol and/or a

mental disorder.

Mortality Costs. Mortality costs are the value of lost productivity due to

premature death resulting from drug abuse. If an individual had not died

prematurely, he or she would have continued to be productive for a number of

years. The estimated cost or value to society of all deaths is the product of the

number of deaths and the expected value of an individual’s future earnings with

sex and age taken into account. This method of derivation considers life

expectancy for different age and sex groups, changing pattern of earnings at

successive ages, varying labor force participation rates, an imputed value for

housekeeping services, and the appropriate discount rate to convert a stream of

costs into its present worth.

The formula for calculating the present value of lifetime earnings (V) per person

is presented below:

85+

V =

n=a

(XnWn+HnKn

)Pa,n

(1+i)n-a

18
Where:

a=the midyear age for the given cohort of persons

Xn=the annual mean earnings for all persons with earnings in an age group

where the midpoint is age n

i=the discount rate

Hn=the annual mean imputed value of housekeeping services for all persons in

an age group where the midpoint is age n

Kn=the average housekeeping participation rate in the age group with midpoint

age n

Wn=the average labor force participation rate in an age group with midpoint

age n

Pa,n=the probability that a person of age a will survive to age n

A discount rate of 8 percent is used to convert the stream of lifetime costs into

its present value equivalent, and an average annual increase of 1 percent in the

future productivity of wage earners was assumed.

The estimate of lifetime earnings is based on varying labor force participation

rates. The assumption is that people will be working and productive during their

expected lifetime in accordance with the current pattern of work experience for

their sex and age group. The economic variables used for estimating lifetime

earnings are shown in table 4.

Output losses are based on annual mean earnings by age and sex adjusted for

wage supplements such as employer contributions for social insurance, private

pensions, and welfare funds. Cross-sectional profiles of mean earnings by age

and sex are employed to estimate lifetime earnings. In applying these data, the

future pattern of earnings of an average individual within a sex group is

assumed to follow the pattern reported by the U.S. Bureau of the Census

(1987) during a base year. The average individual may expect his or her

earnings to rise with age and experience in accordance with the cross-sectional

data for that year.

Marketplace earnings underestimate the loss resulting from injury because many

persons are not in the labor force. Many of these persons, as well as those in the

labor force, perform household services. The value of household work, therefore,

must be added to earnings. For this study, estimates are developed of hours

19
TABLE 4. Selected economic variables used in estimating mortality costs by

age and sex, 1985

Percent

of Population

With Earnings

Mean Annual

Earnings ($)a

Mean Annual Value

of HousekeepIng Services ($)b

In Labor Force Not In Labor Force

aMean annual earnings for year-round, full-time workers, including suppliments, consisting mainly of

employer's contributions to social insurance.

bValues are imputed by muitiplying hours spent In each type of domestic activity by the wager for

corresponding occupations.

SOURCES: U.S. Bureau of the Census 1985, tables 34 and 36; U.S. Bureau of Labor Statistics

1986. table 3.

spent on household labor employing regression analysis to control for

socioeconomic and demographic factors (Douglas et al. 1990). The hours are

then valued on the basis of 1985 wage rates. The present value of lifetime

earnings by age and sex at a 6-percent discount rate are shown in table 5.

AIDS. Drug abuse has contributed to the spread of the human

immunodeficiency virus and other sexually transmitted diseases, IV drug users

account for about one-fifth of the AIDS cases (Centers for Disease Control

1990). To estimate the cost of AIDS attributed to drug abuse, 20 percent is

applied to the total direct and indirect costs of AIDS in 1985 developed by

Scitovsky and Rice (1987).

Cost Estimates for 1988. The total cost of drug abuse is updated for 1988 by

employing economic data and indexes with known relationships to the drug

20
TABLE 5. Present value of lifetime earnings ($)a

 by age and sex, 1985

Age Males Females

<1 208,631 173,738

1-4 236,117 196,515

5-9 293,977 244,559

10-14 374,790 311,678

15-19 468,782 384,026

20-24 541,021 425,804

25-29 568,546 424,982

30-34 565,043 402,178

35-39 532,289 364,873

40-44 471,190 319,090

45-49 389,462 268,529

50-54 294,646 214,826

55-59 194,878 159,614

60-64 101,085 105,272

65-69 39,713 61,103

70-74 17,802 33,574

75-79 8,789 17,531

80-84 4,457 8,655

85+ 1,408 2,257

aCalculations are based on a 6-percent discount rate.

abuse cost estimates, To obtain the 1988 values, inflationary and real changes

are taken into account. Direct costs are adjusted using the percentage change

in the components of total personal health care expenditures between 1985

and 1988. These data incorporate inflation in the medical care market as well

as the effect of changing demographics and patterns of health care utilization.

For indirect costs, inflation and real change are estimated separately. The

change in hourly compensation in the business sector is used for inflation;

the change in the U.S. civilian labor force is used to reflect real change for

morbidity; and the change in the total number of deaths is used to reflect real

change for mortality.

Similarly, for other related crime expenditures, the gross national product

implicit price deflator for government purchases of goods and services is used

to reflect inflation, and the change in the number of arrests is used for real

21
change. For AIDS, inflation is accounted for by the change in the medical care

component of the Consumer Price Index and real change by the significant

increase in the number of AIDS cases diagnosed.

RESULTS

The 1985 costs to society of drugs are highlighted below. Crack cocaine

addiction and its devastating consequences are not included in the cost

estimates because this major public health problem emerged after 1985.

The total economic costs of drug abuse amount to $44.1 billion in 1985,

including direct treatment and support costs (5 percent), indirect morbidity

costs (14 percent), indirect mortality costs (6 percent), other related costs

(74 percent), and the cost of AIDS (2 percent) (table 6).

TABLE 6. Economic costs of drugs by type of cost, 1985 and 1988

Type of Cost

1985 1988

Amount Percent Amount Percent

($ millions) Distribution ($ millions) Distribution

Total 44,052 100.0 58,279 100.0

Core costs 10,624 24.1 12,896 22.1

Direct 2,082 4.7 2,656 4.6

Treatment 1,881 4.3 2,407 4.1

support 201 0.4 249 0.4

Indirect 8,542 19.4 10,240 17.6

Morbidity 5,979 13.6 7,194 12.3

Mortality 2,583 5.8 3,046 5.2

Other related costs 32,461 73.7 42,202 72.4

Direct 13,209 30.0 18,782 28.8

Indirect 19,252 43.7 25,420 43.8

AIDS 967 2.2 3,181 5.6

aCalculations are based on a 6-percent discount rate.

22
Direct costs of drug abuse amount to $2.1 billion for 1985. Of this total,

three-fifths are for short-stay hospital care of persons with primary and

secondary diagnoses of drug abuse.

Private sources account for 36 percent of the $2.1 billion direct costs for

treatment and support of drug abusers; 64 percent is borne by public

sources-39 percent from Federal funds and 25 percent from State and

local sources (table 7).

TABLE 7. Drug abuse core direct costs by treatment setting and source of

payment, 1985

Treatment Setting Total

Amount ($ milllons)

State end

Federal Local Privatea

Total 2,082 806 517 759

ADMb specialty and Federal institutions 570 233 298 39

Federal providers 178 178 - -

State and county psychiatric hospitals 91 13 74 4

Private psychiatric hospitals 30 4 3 23

Other ADM institutions 273 40 221 12

Other treatment costs

Short-stay hospitals

Office-based physicians

Other professional services

Nursing homes

Drugs

1,311 509 204 598

1,242 504 202 538

52 4 1 47

17 1 1 15

Support costs 201 64 15 122

a

Includes prlvate health insurance, direct payments by patients, and philanthropy

bAlcohol and other drug abuse and mental Illness

Drug abuse morbidity costs, the value of reduced or lost productivity, amount

to $6 billion based on a prevalence rate of 3.6 percent among adults ages 18

to 64, or 5.2 million persons, and 1,775 residents In mental facilities suffering

from this disorder. Prevalence is based on a diagnostic measure, defined in

terms of clinical criteria for a medical diagnosis of drug abuse or

dependence. People who use marijuana, hashish, cocaine, and other illicit

drugs without clinical manifestations of drug abuse or dependence and

without meeting severity criteria are not included here.

23
More than 6,100 deaths in 1965 are attributed to drug abuse, representing

231,000 person years lost, or 37.6 years per death and a loss of $2.6 billion

to the economy at a 6-percent discount rate, or $416,657 per death (table 6).

TABLE 8. Drug abuse mortality: number of deaths, person years lost, and

productivity Iosses by age and sex, 1985

Person Years Lost Productivity Losses ($)a

Number Number Per Amount Per

Age and Sex of Deaths (thousands) Death (millions) Death

Both Sexes 6,118 231 37.8 2,583 418,857

<15 61 4 71.5 14 238,244

15-24 581 30 53.9 277 492,928

25-44 4,007 169 42.1 2,049 511,452

45-84 885 22 25.4 209 241,696

65+ 824 6 10.2 13 21,108

Males 4,290 182 37.9 2,050 477,989

<15 30 2 88.5 8 252,967

15-24 383 20 51.7 203 529,138

25-44 3,108 127 40.8 1,700 547,389

45-84 485 1 1 23.5 135 278,883

65+ 288 3 9.2 5 17,111

Females

<15

15-24

25-44

45-84

55+

1,828

31

178

901

380

338

69 37.7 512 280,132

2 74.4 7 220,080

10 58.7 74 415,007

42 48.5 349 387,585

11 27.7 74 194,514

4 11.1 8 24,487

aCalculations are based on a d-percent discount rate.

NOTE: Numbers may not add to totals due to rounding.

About three-fourths of drug abuse deaths occur among persons ages 15 to

44 years. This age group accounts for 66 percent of the person years lost

and 91 percent of the mortality costs of drug abuse.

Core costs (direct and indirect health-related costs) account for $10.6 billion.

Adults ages 15 to 44 account for two-thirds of the total core costs. The cost

for men is almost twice that for women-$6.9 billion compared with $3.7

billion (table 9).

24
The major cost component for drug abuse is other related costs, amounting

to $32.5 billion and constituting almost three-fourths of the total economic

costs of drug abuse. Direct crime expenditures amount to $13.2 billion, twofifths of the other related costs. Crime expenditures include public police

protection costs, private legal defense, and property destruction.

TABLE 9. Core costs of drug abuse by age and sex, 1985

Age and Sex

Total

<15a

15-44

45-64

65+

Amount Percent

($ millions) Distribution

10,624 100.0

96 0.9

7,216 67.9

3,015 26.4

295 2.6

Males 6,953 100.0

<15a

57 0.8

15-44 4,977 71.6

45-64 1,792 25.6

65+ 127 1.6

Females 3,671 100.0

<15a41 1.1

15-44 2,239 61 .0

45-64 1,223 33.3

65+ 168 4.5

a

The <15 age group includes costs for 15- to 17-year-old persons for several

cost categories (including alcohol and other drug abuse and mental illness

specialty institutions and Federal providers); thus, the costs for the <15 age

group are overstated and the costs for the 15 to 44 age groups are

correspondingly understated.

Other related costs also include the value of productivity losses for those

who, as a result of heroin or cocaine addiction, engage in crime as a career

rather than in legal employment. These productivity losses are estimated at

$14 billion. In addition, the productivity losses of people incarcerated in

prisons as a result of conviction of a drug-related crime are estimated at $4.4

billion.

25
The direct and indirect costs of AIDS associated with IV drug users is

estimated at almost $1 billion. Of this total, indirect costs constituting fourfifths of the total, mainly due to high mortality among persons with AIDS.

The total cost of drug abuse is estimated at $58.3 billion for 1988 (table 6).

LIMITATIONS

The cost estimates presented in this study are based on the most current and

reliable data available and new methodology developed specifically for this

study. Nonetheless, several qualifications are in order.

Several known costs are excluded because data are unavailable. No attempt is

made to capture the costs of pain and suffering, and no attempt is made to

value the services of family members and friends who care for drug abusers.

This “informal care” cost is likely to be significant, but there are no reliable data

from which to make estimates.

Some of the cost estimates are likely to be low, again due to data limitations.

For example, hospital discharge data records may not list drug abuse

diagnoses because of the stigma associated with this disorder (Gfroerer et al.

1988). In one study, physicians identified only 40 percent of patients who

suffered from alcohol or other drug abuse (Coulehan et al. 1987). To

compensate for the probable omission of hospitalization of some drug abusers,

we use average expense per patient day in all non-Federal community hospitals

applied to the reported days of care to obtain total hospital costs. Because

most drug abuse short-stay hospital episodes do not involve surgery, the

average expense per day for drug abuse patients is probably less than for the

average patient, which is likely to overestimate the costs.

No estimates are made for drug abuse income loss among the transient and the

military populations, resulting in underestimation of costs. Estimates of income

loss among the civilian noninstitutionalized resident population are calculated

only for ages 18 to 64. To the degree that those younger than age 18 and older

than 64 suffer earnings losses due to drug abuse, the costs are understated.

Productivity losses are based on personal income rather than personal

earnings, Personal income, which includes receipt of transfer payments, may

be less sensitive to the effects of drug abuse than personal earnings, resulting

in possible understatement of costs.

A d-percent discount rate is employed to estimate the present value of future

earnings lost. Use of a lower discount rate would yield higher mortality costs.

Using the d-percent discount rate results in low estimates of mortality costs.

26
Full-time, year-round earnings for the civilian noninstitutionalized population and

average life expectancy are used in the estimates of forgone earnings. These

measures should be adjusted to reflect earnings and life expectancy without

drug abuse, but data are not available to make these adjustments, thereby

introducing a downward bias into the estimates.

For these reasons, the cost estimates presented in this study can be interpreted

as a lower limit of the true cost of drug abuse. As better data become available,

the approach can be refined and improved.

CONCLUSIONS

The measurable economic costs of drug abuse are high, amounting to $44.1

billion in 1985 and an estimated $58.3 billion for 1988. Each year an estimated

2 million individuals are hospitalized, and 125,000 visits with a drug abuse

diagnosis are made to office-based physicians. In 1985 more than 6,100

deaths are attributed to drug abuse, of which three-fourths occur among

persons 15 to 44 years of age, representing 231,000 person years lost, or 37.8

years per death.

The cost to society of crime estimated to be due to drug abuse is exceedingly

high, amounting to $32.5 billion, almost three-fourths of the total economic costs

of drug abuse. Included are expenditures for police protection, private legal

defense, and property destruction as well as the value of productivity losses for

those who engage in crime as a career as a result of heroin or cocaine

addiction and for people incarcerated in prison as a result of conviction of a

drug-related crime.

In light of these high costs, more attention must be directed at comprehensive

research-based strategies to reduce drug abuse in the United States. In

January 1990 President Bush announced a coordinated and comprehensive

National Drug Control Strategy to make drugs undesirable and difficult to obtain

through a mix of supply and demand policies by using all the drug reduction

tools at hand: criminal justice systems; drug treatment programs; prevention

activities in schools, businesses, and communities; international efforts aimed at

drug source countries; interdiction strategies; and a variety of intelligence and

research resources (Office of National Drug Control Policy 1990). Special

attention should be given to improvement of data collection, analysis, and

evaluation to provide reliable and timely information for policy use. These

expanded data efforts will enable the conduct of services research studies to

better estimate the economic costs to society of drug abuse.

27
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Consumption and Related Problems. National Institute of Alcohol Abuse and

Alcoholism. Alcohol and Health Monograph 1. DHHS Pub. No. (ADM)82-

1190. Washington, DC: Supt. of Docs., US. Govt. Print. Off., 1982.

Rice, D.P.; Keiman, S.; Miller, L.B.; and Dunmeyer, S. The Economic Costs of

Alcohol and Drug Abuse and Mental Illness: 1985. Report submitted to the

Office of Financing and Coverage Policy of the Alcohol, Drug Abuse, and

Mental Health Administration, U.S. Department of Health and Human

Services. DHHS Pub. No. (ADM)90-1694. San Francisco, CA: Institute for

Health & Aging, University of California, 1990.

Rice, D.P.; MacKenzie, E.J.; and Associates. Cost of Injury in the United

States: A Report to Congress. San Francisco, CA: Institute for Health &

Aging, University of California and Injury Prevention Center, The Johns

Hopkins University, 1989. pp. 101-109.

Schelling, T.C. The life you save may be your own. In: Chase, S.B., ed.

Problems in Public Expenditure Analysis. Washington, DC: Brookings

Institution, 1968.

Scitovsky, A.A. Estimating the direct cost of illness. Milbank Q 60(3):463-491,

1982.

Scitovsky, A.A., and Rice, D.P. Estimates of the direct and indirect cost of

acquired lmmunodeficiency syndrome in the United States, 1985, 1986, and

1991. Public Health Rep 102(1):5-17, 1987.

U.S. Bureau of Labor Statistics. Employment and Earnings. Table 3.

Washington, DC: U.S. Department of Labor, 1986.

U.S. Bureau of the Census. Census of Service Industries, 1982. Tables 34 and

36. Washington, DC: US. Department of Commerce, 1985. pp. 1-117.

U.S. Bureau of the Census. Money income of households, families, and

persons in the United States, 1985. Current Population Reports. Series P60, No. 156. Washington, DC: Supt. of Docs., U.S. Govt. Print. Off., 1987.

US. Department of Justice. Jail Inmates, 1983. Bulletin NCJ-99175.

Washington, DC: Bureau of Justice Statistics, 1985. p. 4.

U.S. Department of Justice. Criminal Victimization in the United States in 1985.

Bulletin NCJ-102534. Washington, DC: Bureau of Justice Statistics, 1986c.

US. Department of Justice. Crime in the United States, 1985: Uniform Crime

Reports. Washington, DC: Federal Bureau of Investigation, 1986a.

US. Department of Justice. Prisoners in 1985. Bulletin NCJ-101384.

Washington, DC: Bureau of Justice Statistics, 1986d. p. 2.

30
U.S. Department of Justice. Sourcebook of Criminal Justice Statistics.

Washington, DC: Bureau of Justice Statistics, 1986b.

U.S. Department of Justice. Criminal Victimization in the United States, 1985:

A National Crime Survey Report. Bulletin NCJ-104273. Washington, DC:

Bureau of Justice Statistics, 1987b.

US. Department of Justice. Jail Inmates, 1986. Bulletin NCJ-107123.

Washington, DC: Bureau of Justice Statistics, 1987c.

U.S. Department of Justice. Justice Expenditure and Employment, 1985.

Bulletin NCJ-104460. Washington, DC: Bureau of Justice Statistics, 1987a.

U.S. Department of Justice. Profile of State Prison Inmates, 1986. Bulletin

NCJ-109926. Washington, DC: Bureau of Justice Statistics, 1988.

U.S. Executive Office of the President. Budget of the United States

Government, 1987-Appendix. Washington, DC: Supt. of Docs., U.S. Govt.

Print. Off., 1986.

U.S. General Accounting Office. Controlling Drug Abuse: A Status Report,

GAO/GGD 88-39. Washington, DC: U.S. General Accounting Office, 1988.

US. Office of Management and Budget. Federal Drug Law Enforcement and

Abuse Summary-1981 to 1989. Washington, DC: US. Executive Office of

the President, 1988.

Wolf, A.W.; Schubert, D.J.; Patterson, M.B.; Grande, T.P.; Brocco, K.J.; and

Pendleton, L. Associations among major psychiatric diagnoses. J Consult

Clin Psychol 56(2):292-294, 1988.

ACKNOWLEDGMENTS

This chapter is based on research conducted for the Financing and Services

Research Branch, Division of Applied Research, National Institute on Drug

Abuse (contract no. 283-87-0007) and titled The Economic Costs of Alcohol

and Drug Abuse and Mental Illness: 1985.

The authors acknowledge the contributions of Sarah Dunmeyer for her research

assistance on the costs indirectly related to the treatment and lost productivity

of drug abusers and to Scott Hood for computer and statistical assistance.

AUTHORS

Dorothy P. Rice, Sc.D. (Hon.)

Professor

University of California, San Francisco School of Nursing

San Francisco, CA 94143

Sander Kelman, Ph.D.

Research Economist

31
New Jersey Division of Medical Assistance and Health Services

Trenton, NJ 08625

Leonard S. Miller, Ph.D.

Professor

University of California, Berkeley School of Social Welfare

Berkeley, CA 94720

32
Economic Cost of Illicit Drug Studies:

Critique and Research Agenda

Jody L. Sindelar

INTRODUCTION

This chapter suggests three main approaches for increasing the usefulness of

cost-of-illness (COI) and related studies. (1) Although economic cost studies

give an indication of the burden of the illnesses on society, they do not indicate

how to allocate scarce resources. Instead, one needs information on the

marginal effectiveness of policies and programs (i.e., information on the

marginal benefits of averting costs). (2) Instead of trying to parcel diseases into

distinct categories in the face of polysubstance abuse and comorbidities, one

could define types of individuals based on constellations of comorbidities and

use these sets of categories for analysis and cost estimates. (3) Hidden costs,

such as the deadweight loss attributable to government financing of programs

and policies, could be included in the cost and marginal benefit calculation.

COST OF ILLNESS VS. EXPECTED MARGINAL BENEFITS

Staggering figures on the economic cost of a particular disease or disorder are

frequently reported to generate and justify interest in a disease. These

numbers are helpful in estimating the scope of the problem to society and seem

to influence governmental spending, at least in the case of the National

institutes of Health (Mushkin 1979).

The cost-of-illness argument (implicitly or explicitly) goes as follows: The more

costly a disease, the more resources that society should commit to preventing

and treating the disease. Although seemingly reasonable, the relative

magnitude of the economic losses of one disease vis-a-vis another is not the

best guide to the allocation of resources. Consequently, economic studies and

political debates that use COI studies may be focusing on the wrong issues.

Political debates should not focus on estimates of how much the disease costs

society but on how much of society’s scarce resources would be saved by

additional spending on the disorder. Only if we could instantly and

33
costlessly rid ourselves of the disease and all its consequences would

estimates from COI studies represent society’s savings.

In allocating resources, the guiding principle should not be the costs of disease

per se but which policies and levels of expenditure would produce the greatest

savings to society. Savings here are interpreted broadly to include all

accumulated savings to society (e.g., savings on treatment, opportunity costs of

time, lives saved); that is, savings should include all those factors that typically

enter a COI study and even some that typically do not, as discussed below.

Effectiveness

The effectiveness of a policy or program in terms of costs saved is a key

element in deciding how to allocate resources. It is obvious, but worth stating,

that although some diseases are costly to society, additional expenditures on

treatment or prevention will not necessarily be productive.1 First, we may not

know how to treat a problem (e.g., crack), or we may not know how to change

behavior (e.g., prevent use of drugs by pregnant women or teenage

experimentation with drugs). Furthermore, given what society already has

spent on a problem or accomplished in terms of treatment, little productivity “on

the margin” may be attributed to additional expenditures, Thus, one should

know the effectiveness or benefit of costs saved by a program rather than the

overall cost of a problem. For example, although the costs of cocaine abuse

may be larger than the cost of heroin addiction, the treatment of cocaine

addiction often is considered to be less effective than the treatment of opiates.

In the case of drug use, this means that society needs information on the

effectiveness of such related topics as further drug interdiction, research on

specific drugs, education and other prevention policies, and treatment for drug

addiction. Sometimes the effectiveness of a program is not completely

predictable. One must thus develop informed expectations about the potential

productivity of expenditures.

On the Margin

One should examine not only the effectiveness of programs and policies (and

thus the expected benefits) but also the marginal benefits and costs of

proposed policies. Marginal benefits are the gains that accrue to small changes

in programs or policies. Good policy decisions should incorporate the concept

and insights of marginalism.2 What, for example, is the effectiveness of drug

prevention on the margin? Suicides of teenagers may pose higher economic

costs than cocaine use by employed adults, but on the margin, a dollar spent on

adult drug education may save more than a dollar spent on teenage suicide

prevention, because we may not know how to prevent the suicides. However,

34
after a certain level of resources has been allocated to a particular productive

program, the effectiveness on the margin probably will diminish such that

resources would be better spent in another way.

Although marginaiism is important, one must be cognizant of the properties of

the production process and take into consideration such properties as threshold

effects, learning by doing, and/or interactions of programs. For example, supply

interdiction programs may be effective only if implemented at a substantial scale

and only in concert with other policies such as demand reduction, Other

programs, such as research on preventing acquired immunodeficiency

syndrome (AIDS) in drug-abusing populations, may produce results only after a

threshold level of research expenditures.

Circularity

The implication of using COI studies as indicators of how to allocate money has

built-in circularity. This circularity may be acute with regard to drugs. For

example, the government spends substantial sums on controlling drug-related

crime, such as law enforcement, the judicial system, and the prison system.

The more the government spends on crime control related to drug use, the

greater the calculated costs of drugs to society. This would imply then,

according to the implications of the COI viewpoint, that greater dollar

expenditures should flow to drug policies. Similarly, the more money the

government pours into government-funded treatment centers, the greater the

apparent costs of drugs to society. Research costs pose the same issues: The

more dollars spent on research, the larger the problem looms. Obviously, it is

hoped that ail these types of expenditures will reduce the adverse effects of

drugs, albeit through different avenues, and ultimately reduce the economic

costs. However, these benefits may occur with a time lag and, depending on

the effectiveness of each, they may not occur at all, or not to any great extent.

The argument of circularity may be more compelling if turned around; if the

government spends less money on the drug problem, the costs of illness, at

least in the short run, could appear to be reduced, therefore implying that fewer

funds should be devoted to drugs.

The Alternative Focus

Instead of, or in addition to, focusing on the magnitude of the costs of illness,

one should focus on determining the optimal expenditure level and the optimal

types of programs and policies through calculating the expected marginal

benefits compared with the marginal costs. Cost-benefit analyses should be

conducted for treatment and prevention policies and research agendas.

Furthermore, one would want these analyses conducted on subgroups of the

35
population and/or subgroups of drugs, being sure to focus on the effectiveness

and cost savings of programs on the margin. No one would say that these

analyses are easy to conduct, yet neither are COI studies.

The shift in the emphasis of studies toward analyzing payoffs to interventions

should be reflected in a concomitant shift in policy circles. Politicians and

government officials should argue over the allocation of government funds

based on the potential payoff instead of the magnitude of the cost of illness.

COMORBIDITY

The issue of comorbidity in COI calculations generally and in the case of drugs

particularly is a serious and complicated problem. How does one attribute costs

of suicide or crime to a specific disorder when individuals have multiple

disorders? Several studies have made adjustments to account for comorbidity

(Rice et al. 1990). However, no study has truly and satisfactorily addressed the

issue. The information needed to address it far exceeds the current knowledge

base. Nonetheless, a conceptualization of how one should treat the issue

would help in directing research toward providing the relevant information. This

section provides some insights into the role of causation in assigning costs to

specific disorders, but first an alternative is suggested that analyzes types of

individuals based on their set of comorbidities instead of analyzing the costs of

a single disorder.

Comorbidity Types

The traditional approach in dealing with comorbidity is to try to determine which

costs should be parceled out to a specific disease (e.g., drug dependence). An

alternative approach is to recognize that many individuals suffer from multiple

disorders (e.g., polysubstance abuse and depression). Rather than attempting

to disentangle essentially intertwined costs in a co-occurring set of disorders,

one would analyze the costs by "types,” which are defined by the combinations

of disorders and addictions occurring in individuals, Types such as

polysubstance abusers or depressed alcoholics would be the unit of analysis.

One then would analyze the costs of or potential gains to treatment of

polysubstance abuse separately from the costs or treatment of a depressed

alcoholic

The advantage of this method is that it corresponds to clinical reality:

Comorbidities are common. The usefulness of defining new types would be

that individuals would be grouped together on the basis that they respond

similarly to treatment within types but differently across types. Moreover, the

validity of these types could be tested empirically. For example, one could test

36
whether coefficients in earnings regressions and treatment studies are similar

within types but different across types.

To develop the types, statistical methods such as cluster analyses or the newer

method of grade-of-membership analyses could be employed. See Woodbury

and coworkers (1978) for an early example and Berkman and colleagues (1989)

for a more recent example.3 Groups would be defined by individuals being

homogeneous within groups but heterogeneous across groups. One would

want to define a parsimonious set of groups to keep the set tractable.

Such a redefining of types may not be politically appealing because in the

Federal Government the lines of authority and interest are delineated into three

categories: alcoholism and alcohol abuse, drug abuse, and mental disorders.

Nonetheless, the artificial separation of these divisions does not reflect the

current state of co-occurring disorders and polysubstance abuse.

Comorbidities and Causation

In the traditional single-disorder approach, one would attribute costs to a

specific illness. To avoid arbitrarily parceling costs by disease, one needs

information on causation. For example, was a hospitalization caused by

alcohol-impaired driving or was the drug problem caused by attempts at selfmedication for another problem?4

Although it may be appropriate to think of causation in terms of the initiating

event when discussing prevention, it will not be useful in discussing treatment

and other programs that start from a point with an individual who already is

suffering from comorbidities. In these cases, one would not necessarily care

about the origin of the problems but about how to proceed from the current

state to a more desirable state (e.g., a cure for or management of the

addiction). For example, an individual may start by drinking occasionally, then

begin abusing alcohol, then turn to using stimulant drugs along with alcohol, but

he or she also may eventually use alcohol as a way to come down from a

prolonged high. Did the alcohol abuse cause the drug abuse, and if so, should

ail costs be attributed to alcohol? If the initial use of alcohol is the gateway into

a life of poiysubstance abuse, then a program to prevent this chain of events

might use estimates from cost-of-drug studies to get an indication of the gains

to effective prevention. However, COI estimates do not approximate the lifetime

goals of preventing a problem, but they do approximate the costs in a particular

year or a mixture of lifetime and current-year costs. If treatment is the primary

issue, the COI numbers generally are less useful as a guide to the expected

benefits. The issue is even more complicated with comorbidities.

37
In analyzing the benefits of treatment of a specific disorder, one would estimate

the expected benefits. However, calculations of the expected benefit are more

complicated in the case of comorbidities. With multiple disorders, even if one

disorder could be treated effectively the other disorder might emerge as more of

a problem. (For example, if one reduced drug dependence, would alcohol

abuse become more of a problem?) Alternatively, a 28-day alcohol inpatient

program may simultaneously ameliorate or “cure” both alcohol and drug

addictions. Accordingly, the true economic benefits of the treatment would

include the effects of the treatment of one disorder on the existence and

severity of the co-occurring disorders. Omission of the comorbidities could bias

the estimated results, and the direction of the bias cannot be predicted a priori.

Thus, further research is needed to address these issues.

Diagnoses vs. Symptoms

In the discussions of comorbidities above, the implication of the term is that one

is dealing with diagnosed disorders. However, symptoms, subclinical disorders,

hazardous use of substances, and clinically diagnosed disorders can occur

together in a variety of constellations. 5Their interactions could affect estimates

of the cost of illness, and the co-occurrence of all these could be factored into

the analyses of types. The interaction or co-occurrence, for example, could

make treatment or prevention more difficult. The suggestion here is to

incorporate several measures of data together (e.g., both diagnoses and

symptom data). Although data sets with diagnoses and symptoms are rare,

they do exist (e.g., the Epidemiologic Catchment Area [ECA] survey; see Reiger

and colleagues [1984] for a description of the ECA data and Muliahy and

Sindelar [1989] and Rice and coworkers [1990] for use of the ECA data), and

more data of this type could be gathered. As another example, the 1988

National Health interview Survey alcohol supplement has alcohol use and

alcohol symptom data together in one survey. Similar surveys could be

implemented for drug use.

The issues of subclinical disorders and/or of symptoms vs. diagnoses are of

broad concern but may be even more relevant in the cases of comorbidityregardless of how one deals with the comorbidity. For example, if two

subclinical disorders co-occur, they may have as big an impact as a single

diagnosed disorder.

HIDDEN COSTS

Several types of costs associated with drug abuse that are not directly

measurable yet are imposed on society. These costs should be factored into

the expected savings due to preventing and/or treating illnesses. Although

38
these costs are not necessarily of great magnitude generally, in specific

situations they may be of importance.

Deadweight Loss of Raising Revenue

One such cost is the loss associated with taxing individuals and corporations to

raise revenue for government-funded activities. In the case of drug abuse,

government-subsidized and -funded activities include research, training,

treatment, prevention, supply interdiction, transfer payments (e.g.,

unemployment and disability insurance), Medicaid payments associated with

drug use, and other programs. Not only do most of these government

expenditures reflect a cost to society per se, but they also engender a

deadweight loss. In the case of government transfer payments, the payment is

properly ignored as a cost to society because it is moved from one individual to

another: however, raising the funds for the transfer produces deadweight

losses.6

Because of the tax system, individuals and corporations change their behavior

and act in a suboptimal way, which is an opportunity cost to society. In the

case of an individual, he or she may choose to supply less labor to the market

than he or she would have in the absence of the tax.7 The individual would

have preferred to work more hours or retire relatively later and, thus, ultimately

consume more goods. However, the imposition of the tax changes the effective

renumeration per hour, thus eliciting a change in labor supply. The same

argument applies to revenues raised via corporate taxes, sales taxes, real

estate taxes, etc., but the magnitude of the deadweight loss depends on the

elasticity of the response to the tax.

The magnitude of the deadweight loss is difficult to measure. However, a body

of literature is devoted to estimating such losses (see Harberger [1964] for the

seminal piece on the welfare loss), and these numbers can be used to proxy

the magnitude. Estimates of the percentage of deadweight loss due to personal

income tax range from 5 cents per dollar of revenue (Browning 1976, 1985) to

about 29 cents (Hausman 1981, 1983a, 1983b).

These studies clearly give a range of estimates and, thus, do not provide

guidance as to the precise numbers to use. However, ignoring the issue is not

the solution, Ignoring the deadweight loss underestimates the associated costs

and the potential benefits of prevention and treatment, Alternative approaches

might include stating the direction of the bias, taking the midpoint of the range

as an estimate of the percentage of deadweight loss or performing sensitivity

analyses by estimating the deadweight loss at both the maximum and minimum

of the estimated range.

39
The administrative costs of raising revenue and operating the government

programs are also hidden costs that should be incorporated into estimates of

COI or the calculation of the expected marginal benefits of treatment or

prevention.

Moral Hazard or Not

Another hidden cost is that of moral hazard, which causes losses to society to

the extent that Insurance coverage reduces the out-of-pocket price of medical

care, and consequently, individuals consume more medical care than they

would have in the absence of insurance and more than is justified on social

grounds. The loss occurs because individuals use treatment to the point that

the marginal costs to society exceed the marginal benefits. Thus, on the

margin, each additional unit of care consumed yields net costs to society;

however, because the individual’s out-of-pocket price is low, use of medical

care still yields private benefits. For example, a person with coverage may stay

for 28 days in an inpatient program because 28 days are covered, even though

the marginal benefit of the last days may be nearly nil. The moral hazard costs

accrue not only to drug treatment but also to drug-associated medical care

costs.

Although moral hazard costs presumably do apply to those with private

coverage and may even apply to those in government-funded treatment

programs (where the marginal pecuniary cost to the individual is zero), the

situation may be reversed for those who have a drug problem but do not seek

sufficient care to prevent negative externalities to society.8 That is, the negative

externalities that accrue to society from drug use (e.g., crime or transmission of

AIDS) make it such that the society would like individuals to seek more

treatment than they do. In this case, the problem is how to encourage

individuals to seek care rather than to discourage use, as in the moral hazard

problem. The benefits to society of individuals seeking care rest on the

presumed effectiveness of care. Thus, important issues to explore, What is the

optimal amount of care to cover? How does the optimal vary with

characteristics of the person or of the environment? and How to encourage use

by those for whom society would like greater use?

Psychosocial Costs

The psychosocial costs are not hidden in that they are felt by society, families,

and individuals. However, they are hidden to the analyst because they are so

difficult to measure. Nonetheless, they should be considered because the

alternative of omitting them biases the costs of drug use downward.

40
The psychosocial costs of drug abuse would include society’s worry about

crime, families’ concern with children’s drug use, and the drug user’s stresses

and worries. The drug user may be concerned about loss of job, loss of friends,

arrest if detected, and long-term health consequences. The worry and stresses

to the family are losses in themselves but also may cause other losses. For

example, stress has been shown to relate to declines in health, which in turn

could result in such problems as lost productivity and additional medical care

expenses. Furthermore, individuals may change their behavior as a

consequence of drug use in society (e.g., not go out at night or move out of the

city).

CONCLUSIONS

Although COI studies can be useful in indicating the scope of the costs to

society associated with a disease or disorder, they do not provide a guide as to

how to allocate resources. To plan and prioritize for government programs, one

should look at the expected marginal benefit (i.e., those costs averted) of

research, prevention, and treatment. To arrive at an optimal allocation of

resources, one should analyze which type of treatment would be most costeffective, which subgroup of individuals (characterized by age, race, sex, drug

utilization, and comorbidities) should be targeted for prevention programs,

which policies would prevent the negative externalities from drug abuse, and

which policies would best deter the spread of AIDS. Policy debates should

focus not on the underlying costs of disease but on which government

expenditures would yield the greatest savings.

Comorbidities are an important and confounding issue in COI studies as well as

in cost-benefit analyses. The suggested approach is to redefine new types

based on the constellation of comorbidities observed to co-occur in sets of

individuals. This method is consistent with the ideas that (1) many individuals

have polysubstance abuse and/or have comorbidities and (2) w-occurring

diseases are so intertwined that it is not productive to try to disentangle them.

Instead, one would try to develop a parsimonious set of types that would group

homogenous individuals together. A benefit of this over the traditional singledisorder approach would be that empirically these groups should respond

differently across programs (e.g., prevention and treatment). Redefining types

would focus policy development on explicitly dealing with comorbidities when

designing prevention and treatment programs. The suggestion of redefining

disease groups may not be appealing politically because of the delineation of

responsibilities among the three agencies (the National Institute on Drug Abuse,

the National Institute on Alcohol Abuse and Alcoholism, and the Alcohol, Drug

Abuse, and Mental Health Administration). However, closer interaction and

alignment are warranted.

41
The last suggestion is to include costs that could be considered hidden costs.

Although possibly of relatively small magnitude, generally they may be of

considerable importance in specific incidences. The deadweight loss of raising

revenue for government expenditures and transaction costs or administrative

costs of operating government programs are potentially important hidden costs

in the case of drugs. Another area of potential hidden costs is the moral hazard

of insurance coverage, at least for those who enter treatment programs.

However, for those who do not seek treatment, the opposite problem may be

more relevant. Assuming that treatment is effective, society would like drug

abusers to seek more care to reduce the negative externalities to society (e.g.,

crime, crack babies, and transmission of AIDS). Another hidden, or at least

hard-to-measure, cost would be the associated psychosocial costs of drug

abuse. Individuals may be afraid to go out at night, parents may be worried that

their children will use drugs, and drug abusers will have extra stress and worry.

All these are costs to society.

NOTES

1.

2.

3.

4.

5.

The theme of Louise Russell’s book Is Prevention Better Than Cure?

(1986) suggests that one cannot merely invoke the palliative powers of

prevention, but rather one must look closely at the costs and benefits to

determine if prevention is cost-beneficial. Although the idea of prevention

is appealing, it is not necessarily cost-effective.

See Rhoads (1985) for a discussion of the importance of marginalism in

policy decisions.

Grade-of-membership analysis is a statistical method of assigning

individuals to groups or types based on characteristics of the individuals.

Instead of belonging to only one group (as in cluster analyses), individuals

can be assigned on a percentage basis to groups. For instance, an

individual could be assigned 80 percent to a polysubstance abuser group

and 20 percent to a depressive alcoholic group.

This suggested treatment of hospital costs with comorbidities is a different

method than others have used to assign medical care costs when

comorbidities exist. An alternative is to compare the costs of hospitalization

when there is only one disorder to the extra costs when there are two

disorders and then to assign the extra cost to the secondary disorder.

Diagnosed individuals are a subset of those with symptoms. But diagnoses

entail more stringent criteria for inclusion and presumably have more

severe associated costs. Use of diagnoses or symptoms should yield

42
6.

7.

8.

different results, and either could yield bigger magnitudes. Furthermore,

the differences could vary by disorder under analyses. Using symptoms as

the basis for analyses, more people would be included in the assessment

of and affected population, yet the costs per capita would be smaller.

Using diagnoses, the population included would be smaller but the costs

per person would be greater. See Mullahy and Sindelar (1989) and Rice

and colleagues (1990) for use of diagnoses and Harwood and coworkers

(1984) for use of symptoms.

Private transfers (e.g., transfers within a family) similarly should not be

counted as a cost, but private transfer payments do not have associated

deadweight losses because they are voluntary transfers and are not

caused by a change in price.

In the case of a backward bending supply, the individual would work more,

but the labor supply elicited still would be suboptimal for the individual.

An argument often made is that only the externalities imposed on

individuals should be considered in allocating government funds. The

private costs should be borne by the individual who chooses to behave in

such a way as to incur the costs (such as abusing drugs) and who makes

his or her own decisions about the net costs, and such costs should not be

considered in the public domain. This approach is taken in Manning and

coworkers (1989) to calculate the net costs to society. Several issues

arise, however, such as what is the definition of “private” (Does it include

family members)? Are these decisions really “rational”? Are individuals

knowledgeable about the long-term consequences of some addictions

when they start as casual users?

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Reiger, D.A.; Myers, J.K.; Kramer, M.; Robins, L.N.; Blazer, D.G.; Hough, R.L.;

Eaton, W.W.; and Locke, B.Z. The NIMH Epidemiologic Catchment Area

(ECA) program: Historical context, major objectives, and study population

characteristics. Arch Gen Psychiatry 41:934, 1984.

Rhoads, S.E. The Economist’s View of the World. New York: Cambridge

University Press, 1985.

Rice, D.P.; Kelman, S.; Miller, L.S.; and Dunmeyer, S. “The Economic Costs of

Alcohol and Drug Abuse and Mental Illness: 1985.” Report submitted to the

Office of Financing and Coverage Policy of the Alcohol, Drug Abuse, and

Mental Health Administration, U.S. Department of Health and Human

Services. San Francisco: Institute for Health and Aging, University of

California, 1990.

Russell, L.B. Is Prevention Better Than Cure? Washington, DC: Brookings

Institution, 1986.

Woodbury, M.A.; Clive, J.; and Garson, A. Mathematical typology: A grade of

membership technique for obtaining disease definition. Comput Biomed Res

11:277-298, 1978.

AUTHOR

Jody L. Sindelar, Ph.D.

Associate Professor

Department of Epidemiology and Public Health

Institution for Social and Policy Studies

44
Yale University School of Medicine

P.O. Box 3333

New Haven, CT 06510

45
Economics and Drugs: Promises,

Problems, and Prospects

Henrick J. Harwood1

INTRODUCTION

There are numerous intertwined economic facets of the drug problem: the

Federal budget for drug control of $10.5 billion in fiscal year (FY) 1991, with 71

percent allocated for domestic and international efforts to reduce the supply of

drugs and 29 percent allocated for treatment, education, and prevention; the

recent seizure of 40 metric tons of cocaine worth more than $4 billion on the

street; the recent estimate that alcohol and drugs cost the Nation $144 billion in

1988 for health services, criminal justice, losses to crime victims, premature

mortality, losses of workplace productivity, and criminal careers; the crimes

committed by addicts to pay for their drugs: the employers that sent substanceabusing employees for rehabilitation instead of firing them (their reward was a

notice from their health insurance carrier that their premium would be increased

by 70 percent); and the parents who cared so much about their drug-using

adolescent that they exhausted their health insurance benefits, drained their

college fund, and spent their retirement savings in repeated attempts to treat

their child’s addiction.

All these dimensions of the drug problem involve economics. But it is not clear

which of these are useful for policy formulation; in fact, all of them are highly

meaningful in the policy arena.

This chapter reviews what is known about some major economic aspects of the

drug problem; discusses the nature and problems with studies of the cost to

society of substance abuse; examines the potential of economic theory and

practice to inform national drug policy decisions: and discusses aspects of the

current national drug control policy.

1

The views expressed in this article are the author’s own and do not necessarily reflect the

position of the Federal Government or the Office of National Drug Control Policy (ONDCP).

48
ECONOMIC COSTS

The economic cost of a disease or a social problem is a concept that attempts

to summarize many disparate impacts using a single measure-dollars. Money

is a useful metric because it allows radically different commodities or services to

be compared using the standards of the market economy to set relative values.

Is an apple equal to an orange? Is a nurse equal to a policeman? Is

alcoholism equal to cancer? Market prices and cost-of-illness studies offer

insights into these questions even if they do not provide definitive answers.

Cost-of-illness studies are more and less than meets the eye: More than meets

the eye because In the case of diseases or problems such as alcohol and drug

abuse a cost estimate attempts to summarize the consequences of problems

such as cocaine babies, alcoholic cirrhosis of the liver, alcohol and drug

detoxification episodes, motor vehicle crashes due to excessive drinking,

alcohol-induced trauma and violence associated with drug trafficking, and

alcohol- and other drug-related impairment in the work force. It then tallies the

value of hospital, physicians, and other health services; destruction of motor

vehicles and other property; lost productive time due to sickness and injury;

impaired productivity while on the job: and premature mortality due to alcohol

problems. This effort produces a series of cost estimates that can be summed

to a single total. It is usually the single total value that is used most frequently

when observers refer to the economic impact of drug or alcohol problems and

when sight is lost of the disparate impacts of drug problems.

Cost-of-illness studies are less than meets the eye because, by themselves,

they never justify actions or policies, Public programs should be justified in the

first instance by their effectiveness. Next, do the benefits of undertaking the

intervention justify the costs of implementation? Cost-of-illness studies justify

giving more attention to the effectiveness of social and private instruments for

addressing the disease or social problem and resemble, but indeed are neither

cost-benefit or cost-effectiveness studies,

Cost-of-illness studies often are understatements because so much is left

unsaid about the intangible effects of drug and alcohol problems, which include

lives of addicts, problem drinkers, and innocent victims alike being cut short;

problem drinkers and their innocent victims often being left with physical and

mental disabilities; families, friends, and strangers being subject to violence

perpetrated by substance abusers; and the fear and uncertainty of those living

with substance abusers. Pain, suffering, fear, and bereavement are all too real

among the households, families, friends, neighbors, and even strangers

victimized by substance abusers. These intangible costs are excluded from the

majority of cost-of-illness studies, whether for drug or alcohol problems or for

47
any other health problem. It is debatable whether such costs are any greater or

less for drug problems than illnesses such as heart disease or cancer.

COSTS AND BENEFITS

Economic criteria have never been rigorously applied in managing the Nation’s

drug policy. However, economic arguments without rigorous analytic data

frequently have been used to justify the existence and funding of drug

strategies. These arguments have focused more on the putative economic

consequences imposed by untreated drug abusers than on the measured

effectiveness of enforcement, prevention, and treatment in producing reductions

of those consequences and their costs.

The absence of appropriate cost-benefit and cost-effectiveness studies has

meant resorting to national scope studies of the impact of drug abuse on the

economy. The various national studies have estimated economic costs at

approximately $10 billion from 1973 to 1975 (A.D. Little Corporation 1974;

Lemkau et al. 1974; Rufener et al. 1977); $18.4 billion in 1977 (Cruze et al.

1981); 948.9 billion in 1980 (Harwood et al. 1984); and $59.7 billion in 1983

(Harwood et al. 1984). The most recent study has estimated costs of $44.1

billion in 1985 and $58.3 billion in 1988 (Rice et al. 1990). The vast majority of

costs before the 1980 estimate were associated with drug-related crime.

The increases in the cost estimates made between 1974 and 1980 primarily

were due to increased and improved knowledge about the nature of impacts of

drug abuse on society and to differences in estimation methodology. The most

fundamental change was due to examining the effect of drug abuse problems

on persons employed in the workforce, which accounted for $25.7 billion in the

1980 estimate and $33.3 billion in the 1983 estimate (Harwood et al. 1984), but

values of only $1 billion to $2 billion in prior studies.

The strongest conclusion that can be justified from aggregate cost-of-illness

studies is that there are large potential benefits to society from reducing the

extent of drug problems through enforcement, prevention, or treatment.

Whether the interventions are cost-effective or cost-beneficial cannot be judged

without rigorous studies of their effectiveness.

Few studies have attempted detailed examinations of the cost-effectiveness or

costs and benefits of drug policies. Interestingly, most studies that have

examined drug treatment are nearly unanimous in concluding that drug

treatment is a worthwhile investment, Some studies have produced

astonishingly high benefit-cost ratios of 30 to 1, while others have found

benefits roughly equal to costs.

48
However, the quality of these studies varies enormously (Gerstein and Harwood

1990), and it is apparent in retrospect that the early and most favorable studies

depended on assumptions about retention of clients in treatment and the

success of treatment that have not stood the test of time. Many studies clearly

were too optimistic in their conclusions, yet even the more rigorous and

conservative studies produce positive results.

As little cost-benefit information is available on treatment, much less is known

about the economic valuation of the benefits of education, prevention, and

workplace policies and enforcement on the drug problem. If cost-benefit

concepts are to be used to direct Federal policy, then much more must be

known about the relative effectiveness of these tactics before their cost-benefit

ratios can be compared. The knowledge base for implementing such a

planning process currently is being built through aggressive research initiatives,

There have been promising school-based prevention studies such as Project

ALERT (Adolescent Learning Experiences in Resistance Training) in California

and Oregon (Ellickson and Bell 1990) and project STAR (Students Taught

Awareness and Resistance) in Kansas City (Pentz et al. 1989) that seem to

yield at least short-term delays in initiation of exploratory drug use. The Federal

Government is spending about $1 billion per year on school-based prevention

and drug education (Office of National Drug Control Policy 1990). These and

future studies will address several sophisticated questions: How many youths

will different programs save from lives of addiction or abuse? How many youth

will be entirely prevented from having drug problems? and How many will have

briefer or less severe problems? Putting a societal value on these effects will

be difficult and controversial.

Workplace policies can deter and detect drug abusers, yielding reduced

workplace problems and improved productivity. Strategies include explicit

policies about drug use, training of supervisors to detect problems, provision of

employee assistance programs and insurance coverage for treatment, and drug

testing. The Navy has estimated that rehabilitating identified drug users instead

of firing them can pay for itself several times over because replacement of

highly trained personnel is expensive (Caliber Associates 1989).

Three percent of the Nation’s 14 million employers are testing at least some

workers (US. Department of Labor 1989). There are various approaches to

implementing workplace policies with or without drug testing. Testing may be

performed only with job applicants or may be directed at current workers on a

random or “cause” basis. Preemployment testing has been found to be

successful at detecting drug users among applicants (Gust and Walsh 1989).

When the military services started random tests of active military personnel, the

49
self-reported and testing-detected incidence of drug use declined dramatically

(Bray et al. 1989). These impacts are real benefits to the Nation, and further

work must be performed to assign economic values to these benefits.

Whatever the state of knowledge of the costs and benefits of prevention,

workplace, and treatment programs, probably less is known about these

aspects than about the economic valuation of the results of law enforcement

efforts. A great deal is known about tangible results of law enforcement such as

arrests, persons incarcerated or under community supervision, and seizures of

drugs. Police arrested nearly 1.4 million persons on drug charges In 1989 (U.S.

Department of Justice 1990), and illicit drugs were seized with street values of

billions of dollars. One recent survey of local and State enforcement agencies

(Godshaw et al. 1987) estimated that they were spending nearly $4 billion (20

percent of their total budgets) on drug law enforcement alone. The Federal

Government was spending almost $4 billion on law enforcement in 1990. The

Armed Forces are now engaged in the effort to stop the flow of drugs into the

United States, with estimated expenditures of $780 million in 1990. However, at

this early date very little is known about the effectiveness of using the military

for this purpose (Reuter et al. 1988). With U.S. economic assistance of $400

million in 1990, foreign nations are seizing and destroying large volumes of

drugs at the urging of the United States (Office of National Drug Control Policy

1990).

To justify the law enforcement expenditures primarily on economic grounds,

numerous questions will be addressed regarding the effectiveness of the many

different tactics employed in this fight. These start with near-term productivity

measures such as arrests and seizures, but broader, more subtle impacts also

must be measured: the general deterrence effects on other users and pushers,

the specific deterrence of future behaviors of those caught and punished, and

the effect of the severity of punishment.

Ultimately, the economic model should be refined to where it could address

sophisticated policy and research questions such as the balance of

enforcement between users and pushers of drugs, the levels of the drug

distribution systems that should be targeted, how convicted users and pushers

should be punished, and how much of an investment should be made in

treating their drug problems.

This discussion about alternative policies and their costs and benefits is not

merely academic. In fact, ONDCP has initiated a study by the Federal

Government to develop and use such a tool to manage the national effort

against drugs. To quote the Research Agenda from the National Drug Control

Strategy (Office of National Drug Control Policy 1990).

50
A multi-year research project involving numerous drug reduction

agencies and departments will develop the capacity to simulate

alternative policy approaches in each area of our National Drug

Control Strategy and compare these approaches (and combinations

of approaches) in terms of their costs and potential effectiveness.

With this knowledge, we can make more precise decisions about

the contribution of any set of drug policies and determine which

policies best complement one another.

To economists and social policy researchers, this aspect of the national drug

strategy is intellectually appealing, even if, realistically, it will take more than a

few years to develop and validate this tool.

THE NATIONAL STRATEGY

A national strategy against drugs has three interrelated issues to address:

What should be the roles of Federal, State and local governments (and private

citizens) in the strategy? What should be the balance of efforts dedicated to

domestic law enforcement? Treatment and prevention initiatives, and

international supply reduction? and How much should be dedicated to these

efforts from the Federal budget. Each is the subject of intense debate, although

usually in a different order.

The 1991 National Drug Control Strategy calls for the Federal Government to

spend $10.5 billion to fight drug problems. The total enacted expenditure for

1991 represents a 66-percent increase over 1989 and a 10-percent increase

over 1990, even though Congress has been fighting historically high Federal

budget deficits over this period. This is the most rapid rate of growth of any

major initiative in the Federal budget over these 2 years.

The Federal effort is dedicated primarily to law enforcement (supply reduction).

Enforcement-both domestic and international efforts-is proposed to receive

about 71 percent of the total budget allocation in 1991, whereas treatment and

prevention (demand reduction) is proposed to receive 29 percent, or $3 billion.

The relative shares of the drug control budget are unchanged from 1989 and

1990. Thus, the relative roles of supply and demand reduction efforts have not

changed in the past 2 years.

This balance between supply and demand reduction in the Federal budget has

generated debate about a “lack of balance” between the two components of the

strategy. Balance, when so simplistically used, is taken to mean that roughly

equal amounts “should” be spent on supply and demand reduction,

respectively. Although this definition may constitute “balance” on a child’s seesaw, it is far from the mark in the economic sense.

51
By economic or cost-benefit criteria, the optimal balance between supply and

demand reduction is achieved when the expenditure of an additional dollar on

either alternative yields an equal benefit (in more technical terms, when the

ratios of marginal benefit to marginal costs are equal). By economic criteria,

there is no more reason for this balance to be reached at a ratio of one to one

than at seven to three or three to seven, The optimal balance is determined by

how effectively resources can be used in each of the alternatives and the value

of those effects. There is no grand synthesis cost-benefit model that has

determined the optimal balance between supply and demand reduction.

However, as discussed above, there is a commitment on the part of the Federal

Government to ensure that funds are allocated rationally and used effectively

and to incorporate more cost-effectiveness and cost-benefit analysis into

resource allocation decisions.

Demand reduction activities-both treatment and prevention-have vital roles in

the national strategy. About $3 are being spent on demand reduction for every

$7 spent on supply reduction, and unprecedented amounts are being spent by

the Federal Government on demand reduction activities-$3 billion in 1991.

Probably the most controversial element of the National Strategy is the amount

of Federal funds dedicated to drug treatment. William J. Bennett, the first

Director of ONDCP stated unequivocally in his Introduction to the National Drug

Control Strategy published in January 1990: “Making sure treatment is

available so that people seeking help won’t be turned away is a priority” (Office

of National Drug Control Policy 1990). The Federal Government has moved

aggressively to address this priority.

Public discussions often ignore the final issue of this section-the respective

roles of the Federal, State, and local governments and private individuals in

financing various drug control activities-and assume that the Federal

Government should take “leadership” in paying for drug interventions, Public,

as opposed to private, financing of most drug control initiatives clearly is

warranted because there are “externality” effects or multiperson spillover effects

of drug problems and therefore from drug control.

In an economic sense there are several rationales for financing drug control

activities from the Federal level, as opposed to State and local governments, or

even from individuals. Primary Federal responsibilities would include activities

of national or multistate impact (essentially an externality argument) and

programs to redistribute national wealth.

National impact drug control activities comprise (among others) supply

reduction efforts at the international and “high levels” of the distribution system,

52
where individuals in many States and localities are likely to benefit from the

activity, however localized. By this theory, the lower down the drug distribution

system that a particular enforcement effort is directed, the less rationale there is

for Federal financing. Similarly, the whole Nation benefits from research into

treatment, prevention, and law enforcement strategies.

Treatment and prevention services primarily benefit the individual recipient in

the first instance; however, there are also benefits that spill over into local

communities and then Into other areas due to the mobility of drug abusers. In

theory, financing for treatment and prevention should be shared between the

individual and Federal, State, and local governments.

Redistribution programs redirect national income or resources to or from areas

most afflicted by drugs and from areas making large Federal tax contributions

relative to the extent of their drug problem. The redistribution effects from the

Federal financing of various drug control programs are most obvious when

funding allocation formulas are written into laws such as the Federal Block

Grants for law enforcement, education, and substance abuse services.

A clear policy statement in the National Drug Control Strategy recognizes

the crucial role that State and local governments have to play.

Drugs have placed an unprecedented burden on their schools,

hospitals, criminal justice systems, and above all, their residents.

These problems are chiefly a State and local responsibility,

augmented in certain areas by Federal funds. For fiscal year 1991

nearly $2.8 billion will be sent to the states for law enforcement,

treatment, and drug prevention activities (Office of National Drug

Control Policy 1990).

The Federal-State partnership in financing drug control services is perhaps

most explicit in the Medicaid program, arguably the least appreciated and

utilized Federal resource for addressing the need for increased and improved

treatment services. Medicaid has an explicit Federal-State matching formula for

selected health care services. The Federal match is about one to one for

relatively high-income States and up to three to one for low-income States.

This joint Federal-State public health insurance program for low-income

populations is an important avenue for increasing access to quality treatment for

select populations such as low-income women, newborns, and adolescents.

Under Medicaid, States have great discretion within Federal guidelines in

deciding who will be eligible for Medicaid and what services will be reimbursable

by Medicaid. In the publicly subsidized treatment system, nearly 50 percent of

53
clients in 1988 were women or adolescent males. An appreciable proportion of

these might already meet State-established Medicaid eligibility standards that

would qualify them to have their drug treatment wholly or partially reimbursed by

Medicaid.

Equally important, virtually all types of drug treatment services in most kinds of

facilities may be covered by States based on existing Federal Medicaid

statutes. The notable exception is for psychiatric hospitals or distinct units of

residential facilities larger than 15 beds for adults ages 22 to 64 years. Virtually

all other types of services can be paid for by Medicaid if States elect to do so.

In fact, several States do make significant use of Medicaid for reimbursement of

drug treatment services.

CONCLUSION

Economics provides invaluable insights into the current drug problem.

Economics and the money metric make it possible in some sense to add

together or summarize many of the disparate negative consequences of drug

and alcohol problems. It fails to do justice to many of the more poignant

aspects of drug and alcohol problems.

There are economic theories that can inform decisions such as how much to

dedicate to drug control, how to allocate funds, and how much should be

contributed by various levels of government as well as individuals. The

concepts certainly are acknowledged in the National Drug Control Strategy, and

cost-benefit analysis has been proposed as a grand synthesis tool for policy

analysis and formulation. Cost-benefit analysis would be ideal to use in shaping

a national strategy that includes as many different tactical and strategic options

as does the drug problem. We now have modest knowledge about the

economic value of major parts of the system we use to fight drugs. The current

national strategy has set the goal of rigorously assessing the effectiveness of

the menu of tactics to improve the cost-effectiveness of the national effort,

REFERENCES

A.D. Little Corporation. Social Cost of Drug Abuse. Report to the Special

Action Office of Drug Abuse Policy, The White House, Washington, DC,

1974.

Bray, R.M.; Marsden, M.E.; Guess, L.L.; Wheeless, S.C.; lannacchione, V.G.;

and Keesling, S.R. 1988 Worldwide Survey of Substance Abuse and Health

Behaviors Among Military Personnel. Research Triangle Park, NC:

Research Triangle Institute, 1989.

54
Caliber Associates. Cost Benefit Study of the Navy’s Level III Alcohol

Rehabilitation Program: Phase Two: Rehabilitation versus Replacement

Costs. Report to Naval Military Personnel Command, NMPC-6, Arlington

Navy Annex, Washington, DC, March 31, 1969.

Cruze, A.; Harwood, H.; Kristiansen, P.; Collins, J.; and Jones, D. Economic

Costs of Alcohol and Drug Abuse and Mental Illness-1977. Research

Triangle Park, NC: Research Triangle Institute, 1981.

Eilickson, P., and Bell, R. Prospects for Preventing Drug Use Among Young

Adolescents. RAND Report R-3896-CHF. Santa Monica, CA: RAND

Corporation, 1990.

Gerstein, D., and Harwood, H.J., eds. Treating Drug Problems. A Report of a

National Academy of Sciences Committee. Washington, DC: National

Academy Press, 1990.

Godshaw, G.; Koppel, R.; and Pancoast, R. Anti-Drug Law Enforcement Efforts

and Their Impact. A Report to the U.S. Coast Guard. Philadelphia: Wharton

Econometric Associates, 1987.

Gust, S.W., and Walsh, J.M., eds. Drugs in the Workplace. National institute

on Drug Abuse Research Monograph 91. DHHS Pub. No. (ADM)89-1612.

Washington, DC: Supt. of Docs., U.S. Govt. Print. Off., 1989.

Harwood, H.; Napoiitano, D.; Kristiansen, P.; and Collins, J. Economic Costs of

Alcohol and Drug Abuse and Mental Illness- 1980. Research Triangle Park,

NC: Research Triangle institute, 1984.

Lemkau, P.; Amsel, Z.; Sanders, B.; Amsel, J.; and Seif, T. Social and

Economic Costs of Drug Abuse. Baltimore: Department of Mental Hygiene,

The Johns Hopkins University School of Hygiene and Public Health, 1974.

Office of National Drug Control Policy. National Drug Control Strategy.

Washington, DC: Supt. of Docs., U.S. Govt. Print. Off., 1990.

Pentz, M.; Dwyer, J.H.; MacKinnon, D.P.; Flay, B.R.; Hansen, W.B.; and

Johnson, C.A. A multi-community trial for primary prevention of adolescent

drug abuse: Effects on drug use prevalence. JAMA 261:3259-3266, 1969.

Reuter, P.; Crawford, G.; and Cave, J. The Effects of Increased Military

Participation in Drug Interdiction. RAND Report R-3594-USDP. Santa

Monica, CA: RAND Corporation, 1988.

Rice, D.; Kelman, S.; Miller, L.; and Dunmeyer, S. The Economic Costs of

Alcohol and Drug Abuse and Mental Illness-1985. San Francisco: Institute

for Health and Aging, University of California, San Francisco, 1990.

Rufener, B.; Rachal, J.; and Cruze, A. Management Effectiveness Measures

for NIDA Drug Abuse Treatment Programs: Volume II: Costs to Society of

Drug Abuse. Research Triangle Park, NC: Research Triangle Institute,

1977.

U.S. Department of Labor, Bureau of Labor Statistics Survey of Employer AntiDrug Programs. Report 760. Washington, DC: Supt. of Docs., U.S. Govt.

Print. Off., 1989.

55
US. Department of Justice, Federal Bureau of investigation. Crime in the

United States. Washington, DC: Supt. of Docs., US. Govt. Print. Off., 1990.

AUTHOR

Henrick J. Harwood

Senior Policy Analyst

Office of National Drug Control Policy

Executive Office of the President

Washington, DC 20500

56
Evaluating the Cost-Effectiveness of

Drug Abuse Treatment Services

Robert Apsler

Are today’s drug abuse treatment programs cost-effective? What can be done

to increase the cost-effectiveness of drug abuse treatment? The need to

answer these questions is becoming more critical as calls for additional

treatment capacity confront scarce resources and as some individuals advocate

placing greater emphasis on treatment as a major solution to the Nation’s drug

problem.

EXAMPLES OF DRUG TREATMENT THAT ARE PROBABLY NOT COSTEFFECTIVE

At present, there are several reasons to question whether drug abuse

treatment, in general, is cost-effective. There is some evidence that once drug

abusers choose to stop or moderate their drug use, they do so whether or not

treatment is available. Brown and colleagues (1988) report large declines in

drug use among individuals waiting 1 to 6 months to enter a residential

treatment center for cocaine abuse. Similarly, Cohen and colleagues (1889)

report that smokers trying to quit on their own have roughly the same rate of

success as smokers attending treatment programs. Providing treatment for

drug abusers who can quit as easily on their own as they can with treatment is

not cost-effective.

Other evidence raises questions about the cost-effectiveness of typical (as

opposed to model) drug abuse programs. For example, Shikles (1889) found

that 15 methadone maintenance programs surveyed in 5 States for the General

Accounting Office (1) failed to eliminate clients’ opiate use, (2) reported high

levels of alcohol abuse among clients, (3) offered few comprehensive services

to clients, and (4) did not know if clients utilized services to which they were

referred. High levels of alcohol use among clients in narcotics programs are not

new. For instance, Simpson and Sells (1983) and Lehman and coworkers

(1980) showed that many clients in the Drug Abuse Reporting Program

increased their use of alcohol and marijuana while reducing their use of opiates.

Treatment that results in the substitution of alcohol abuse for opiate abuse is

57
hardly cost-effective. Furthermore, some investigators contend that alcohol

abuse is a greater obstacle to rehabilitation than the abuse of opiates (Riordan

et al. 1976).

Certain common treatment strategies are known to be cost-ineffective. For

example, many methadone maintenance programs administer doses of

methadone that are too small to eliminate successfully clients’ desire for opiates

(unpublished National Institute on Drug Abuse report). Similarly, numerous

programs provide costly inpatient treatment to clients even though there is no

evidence that inpatient treatment is more effective than relatively inexpensive

outpatient treatment. In fact, alcoholism research shows that outpatient

treatment is as effective for most clients as inpatient treatment (Miller and

Hester 1986; Hayashida et al. 1989).

Finally, research by McGlothlin and Anglin (1981) raises questions about the

cost-effectiveness of long-term drug abuse treatment when clients are kept in

treatment longer than necessary. More than 25 percent of the clients in a

methadone maintenance program reported that their involuntary discharge,

resulting from the program’s forced closing, helped them stop using methadone

and end their dependence on narcotics.

COST-EFFECTIVE DEVELOPMENTS IN DRUG ABUSE TREATMENT

Several promising developments in the drug field could increase markedly the

cost-effectiveness of drug abuse treatment. Perhaps the most dramatic is the

possibility of slowing the spread of acquired immunodeficiency syndrome by

reducing intravenous (IV) drug use and needle sharing. Ball and coworkers

(1998), for example, studied methadone programs in 3 cities and found that 71

percent of the patients who remained in treatment 1 year or more ceased IV

drug use, while 82 percent of those who left treatment quickly renewed IV drug

use. Similarly, McAuliffe (personal communication, 1990) reports preliminary

results showing large reductions in the incidence of human immunodeficiency

virus among drug users in a community-wide, comprehensive treatment

program.

There are other positive developments. For instance, McLellan and colleagues

(1983) demonstrated that effective matching of clients to treatment can improve

outcomes, McAuliffe and coworkers (1985) showed that successfully treated

opiate addicts who received aftercare had better 12-month followup outcomes

than clients who were not offered aftercare. Wider utilization of these two

strategies alone, patient matching and the provision of aftercare, might improve

significantly the cost-effectiveness of drug abuse treatment.

58
Finally, Anglin and Hser (1990) explored the potential impact of significantly

expanding treatment programs for incarcerated drug abusers. Prison drug

programs have access to large numbers of drug users, and they can require

drug users to participate in treatment. Anglin and Hser responded to concerns

about the value of coerced treatment in two ways: They noted that clients in

many existing drug programs are there only because of threats of fines and

imprisonment, and they presented examples in which involuntary drug abuse

treatment produced results similar to those from voluntary treatment.

ABSENCE OF RIGOROUS COST-EFFECTIVENESS STUDIES

Unfortunately, estimates of the current and future cost-effectiveness of drug

abuse treatment are highly speculative-no rigorous cost-effectiveness analysis

of drug abuse treatment has been conducted. In fact, only a few studies even

have addressed the issue of the cost-effectiveness of drug abuse treatment

(Apsler and Harding 1991; Hubbard et al. 1989).

The most ambitious effort to assess the cost-effectiveness of drug abuse

treatment was conducted by Hubbard and colleagues (1989), who analyzed the

costs and crime-reducing effects of 41 drug abuse programs. Unfortunately,

their claim that the programs were cost-effective is clouded by several factors:

(1) No control groups of untreated drug abusers were included in the design; (2)

the validity of the results depends heavily on unverified self-reports of illicit drug

use and criminal behavior; and (3) key measures of impact, such as costs to

victims, criminal justice system costs, and lost productivity costs, were

estimated from national surveys-measurements were not made of the actual

costs attributed to clients.

Reasons for the Absence of Cost-Effectiveness Studies

There are many reasons for the surprising lack of cost-effectiveness studies of

drug abuse treatment. Recently, Apsler and Harding (1991) discussed the

following explanations.

Conceptual Problems. Numerous conceptual problems exist due to the

absence of satisfactory definitions for key terms such as “drug abuse,”

“dependence,” and “addiction.”

Dlsagreement About Treatment Goals. Strongly held beliefs about treatment

goals divide the treatment community. At one extreme Is a focus on

abstinence, while at the other is the belief that drug abuse is only one aspect of

a constellation of problems that must be dealt with to improve an individuals’

overall functioning and reduce drug use.

59
Disagreement About Outcomes. The problem of selecting outcome

measures is integrally related to questions about treatment goals. Is it enough

to measure drug abuse? Or should abuse of all substances be examined?

Which other areas, if any, of the client’s functioning should be measured, such

as interpersonal relations, job performance, illegal activities, and physical and

mental health?

How Long Should Treatment Last? One of the least discussed variables in

the treatment outcome literature is length of treatment. Often the time spent in

treatment is employed as a dependent measure, such that the more time spent

in treatment, the higher the outcome score. However, at some point, spending

additional time in treatment might be unproductive for clients and might even

become counterproductive if continued too long.

Variability Among Treatment Programs. In addition to the major differences

among the few basic types of programs, there is extensive variability among

programs espousing the same model. For example, methadone programs differ

in the size of methadone dose, in whether methadone can be taken home, in

the provision of ancillary services, and in the degree to which program

regulations are enforced. This variability severely limits the generalizations that

can be drawn from research conducted on only a few programs.

High Dropout Rates. The high dropout rates typical of many drug abuse

treatment programs pose another set of interpretation problems for researchers.

For example, which clients should be counted as having been treated? If only

those who remain in treatment for several months are counted, positive

outcomes could be an artifact of a self-selection process. Perhaps only those

clients who would have improved even without treatment stay several months.

On the other hand, if all clients who enter a particular program are counted,

then the program is penalized unfairly for being unable to help clients who

received only a minimal exposure to treatment.

Reliance on Self-Reports. Finally, a host of technical problems continues to

plague efforts to conduct cost-effectiveness analyses of drug abuse treatment.

The most troublesome is the difficulty of obtaining objective measures of

outcomes. The field continues to depend almost entirely on clients’ self-reports.

Even worse, clients typically are asked to report the details of events that

occurred many months and even many years ago. Respondents’ cooperation

can be increased by using known and trusted interviewers, and their recall can

be stimulated by referring to memorable events in their lives. Nevertheless,

investigators typically have no way of measuring drug users’ level of

cooperation, and they cannot detect unintentional forgetting and distortion.

Unfortunately, occasional descriptions of underreporting (Harrell 1985) and

60
overreporting (Aiken 1986) seriously undermine the conclusions of studies

based entirely on self-reports.

CONDITIONS CONDUCIVE TO COST-EFFECTIVENESS RESEARCH

Several interrelated developments need to occur for rigorous cost-effectiveness

analyses of drug abuse treatment to be conducted. Funding agencies must

play multiple, key roles, and researchers must solve critical conceptual and

technical problems.

The Role of Funding Agencies

Funding agencies must provide broad and strong support if cost-effectiveness

studies of drug abuse treatment are to be initiated.

Long Project Periods. As in most treatment outcome research, sufficient time

must be provided to collect followup measures after clients leave treatment.

Posttreatment followup is especially important for cost-effectiveness research,

because most outcome research shows that treatment works only as long as

clients remain in treatment-those who leave treatment quickly relapse.

Nevertheless, it long has been known that some drug users “mature” out of their

abuse of drugs (Anglin et al. 1986; Wineck 1962). Also, work on relapse

prevention (McAuliffe et al. 1985) suggests that there may be alternatives to

unending treatment. Cost-effectiveness studies must monitor closely clients

who are terminated from treatment to learn if time-limited treatment is a costeffective alternative to unlimited treatment.

Objectlve Outcome Measures. Funding agencies also must support the high

cost of incorporating objective outcome measures in cost-effectiveness

research. Self-report measures dominate the treatment outcome literature

because they are so much less expensive than the alternatives. Yet, in the face

of continuing challenges to their validity, self-reports are a short-sighted

economy. Even the most elegant study is unlikely to have a powerful impact as

long as its conclusions depend on the unsubstantiated claims of former drug

addicts involving illicit drug use and other illegal activities.

Unfortunately, satisfactory alternatives to self-reports are expensive and

difficult, especially when the measures are collected at regular and relatively

frequent intervals. For instance, the impact of drug abuse treatment on illicit

drug use by clients who leave treatment should be measured by obtaining and

testing bodily specimens, such as urine and blood, every few months. The cost

of tracking clients every few months and obtaining valid bodily specimens will

be considerable. Yet there appears to be no alternative to obtaining convincing

61
evidence of clients’ drug use following treatment. If the results of testing bodily

specimens confirm the results of self-reports, then future research can reduce

the collection of bodily specimens, reserving them for occasional verification

checks.

Funding agencies also should support the cost of obtaining and checking

institutional records necessary for validating many aspects of client functioning.

Employment, educational, criminal justice system, health, and mental health

records all can play an important role in creating a profile of client functioning

that is much more convincing than one that relies entirely on client interviews.

Funding agencies also need to support the use of participant observers and

collateral contacts. Given the limitations of institutional records and that many

client actions, such as criminal behavior, often go undetected by institutions,

investigators must obtain information from people who know the clients well. If

detailed reports about subjects’ behaviors from several individuals are

consistent, then the reports are likely to be valid. Once again, the cost and

effort of developing participant observers and/or collateral contacts are high.

Cooperation of Treatment Programs. A different avenue of essential funding

agency support is the need to “encourage” drug programs to cooperate fully in

cost-effectiveness research. Without the full cooperation of drug programs, it

will be difficult, and perhaps impossible, to conduct cost-effectiveness studies.

Some service providers have little interest in research, and some actively resist

research. Drug abuse programs must open themselves to the scrutiny of

researchers for cost-effectiveness research to succeed. Researchers must

have the opportunity to determine what takes place in the program, as opposed

to what was planned or desired. They need to describe the nature of clients’

interactions with the program to make progress in identifying the factors that are

associated with client improvement. In adaition, programs must open their

financial books so that investigators can make a complete accounting of the

costs of operating the program.

Large Samples of Treatment Programs. Another costly aspect of conducting

cost-effectiveness analyses of drug abuse treatment is the need to study many

programs. As described above, the lack of uniformity among treatment

programs translates into a requirement for drawing relatively large samples of

programs to ensure that the results of the study are representative and not

restricted to a few, unique programs. This latter point raises again the

distinction made earlier between model and typical drug abuse treatment

programs. Model programs may score high on effectiveness, although usually

at great cost, whereas less costly, typical programs are likely to have a much

more modest impact. It may make sense to begin with model programs to

62
maximize the chances of obtaining positive client outcomes, even though the

costs might be high. Then, attention can turn to less costly programs in the

search for ways to maximize the cost-effectiveness of drug abuse treatment.

Until evidence shows otherwise, there seems to be no point in studying

programs with high dropout rates. As mentioned above, research has shown

that clients must remain in a program for at least several months to be affected

positively by the program; therefore, programs that devote substantial portions

of their resources to clients that quickly drop out have so little chance of proving

to be cost-effective that they do not warrant study at this time. Of course, future

research might show that the impact on drug abusers of multiple, brief

encounters with treatment programs is cumulative and beneficial.

The Role of lnvestigators

For progress to occur In conducting cost-effectiveness studies of drug abuse

treatment, investigators must, at a minimum, (1) establish working definitions of

treatment goals, (2) derive appropriate outcome measures from the treatment

goals, (3) work with programs to implement experimental designs that are

acceptable, practical, and still rigorous, and (4) develop a comprehensive set of

objective measures for assessing outcomes,

Although definitive solutions to these problems are unlikely in the near future,

interim or “working” solutions are needed to enable research to begin. As with

any new area of research, cost-effectiveness analyses of drug abuse treatment

must pass through a learning period during which many details and problems of

conducting the research must be addressed. This time-consuming phase can

proceed while work on the conceptual problems continues.

Multiple Models of Drug Abuse. Investigators must confront incompatible

views about the goals of drug abuse treatment that result from multiple models

of drug abuse (Anglin and Hser 1990). Ideally, a working consensus should be

forged among the many constituencies that have a stake in drug abuse

treatment. However, it would be naive to count on an early resolution to some

of the controversies, such as the abstinence vs. “responsible use” debate. The

most likely solution is that investigators will have to incorporate within their

designs multiple treatment goals representing all major points of view. Then, at

the analysis stage the data can be analyzed separately for each set of

treatment goals.

By incorporating a broad range of treatment goals in their designs, investigators

would simplify the problem of selecting outcome measures-they would have to

include an equally broad range of dependent measures. Such an approach is

63
necessary until consensus about what should be measured is reached.

Otherwise, if researchers pick measures representing only one treatment

philosophy, they risk the criticism from adherents of other points of view that the

results would have been different if only the correct variables had been studied.

Multiple Outcome Measures. Researchers also must solve one of the

unpleasant side effects of using multiple outcome measures-namely, how to

combine the results from different measures. One example of this problem was

mentioned previously. Outcome measures employed by narcotics programs

have shown that some clients increase their use of alcohol at the same time

that they reduce their use of opiates. How then does one judge the

effectiveness of these programs? The difficulties are even greater when it

becomes necessary to combine measures of different areas of functioning, such

as substance use, emotional well-being, and criminality.

Objective Measures of Outcomes. Major conceptual and technical advances

are necessary in developing objective measures of outcome variables. For

example, strategies must be developed for obtaining valid specimens from

subjects at regular intervals. Methods for working with collaterals and

participant observers must be studied and integrated into cost-effectiveness

research. In addition, techniques must be developed for integrating data once it

is collected from institutional records, participant observers, collaterals, and selfreports.

CONCLUSION

Assessing the cost-effectiveness of drug abuse treatment is a massive

undertaking. The conceptual issues are complex, and the technical solutions

will be expensive. Nevertheless, the key ingredient for progress is a

commitment to undertaking cost-effectiveness research. The main problem is

that of neglect. Once a commitment is made to assessing the costeffectiveness of drug abuse treatment, progress is likely to be rapid.

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Anglin, M.D.; Brecht, M.L.; Woodward, A.; and Bonett, D.G. An empirical study

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Apsler, R., and Harding, W.M. Cost-effectiveness analysis of drug abuse

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Ball, J.C.; Lange, W.R.; Myers, C.P.; and Friedman, S.R. Reducing the risk of

AIDS through methadone maintenance treatment. J Health Soc Behav

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Brown, B.; Hickey, J.; Chung, A.; Craig, R.; and Jaffe, J. Waiting for treatment:

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Ossip-Klein, D. Debunking myths about self-quitting: Evidence from 10

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Harrell, A.V. Validation of self-report: The research record. In: Rouse, B.A.;

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Volpicelli, J.R.; Raphaelson, A.H.; and Hall, C.P. Comparative effectiveness

and costs of inpatient and outpatient detoxification of patients with mild-tomoderate alcohol withdrawal syndrome. N Engl J Med 320(6):358-364,

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Hubbard, R.L.; Marsden, M.E.; Rachal, J.V.; Harwood, H.J.; Cavanaugh, E.R.;

and Ginzburg, H.M. Drug Abuse Treatment: A National Study of

Effectiveness. Chapel Hill: The University of North Carolina Press, 1989.

Lehman, W.E.K.; Barrett, M.E.; and Simpson, D.D. Alcohol use by heroin

addicts 12 years after drug abuse treatment, J Stud Alcohol 51(3):233-244,

1990.

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Harvard Group Aftercare Program: Preliminary evaluation results and

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McGlothlin, W.H., and Anglin, M.D. Shutting off methadone: Costs and

benefits. Arch Gen Psychiatry 38:885-892, 1981.

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detoxification from methadone maintenance: Follow-up study of 38 patients.

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AUTHOR

Robert Apsler, Ph.D.

Senior Scientist

Bigel Institute for Health Policy and Social Science Research Evaluation, Inc.

Brandeis University

Waltham, MA 02254

66
Cost-Effectiveness of Drug Abuse

Treatment: Relevant Issues and

Alternative Longitudinal Modeling

Approaches

Yih-lng Hser and M. Douglas Anglin

INTRODUCTION

A comprehensive literature review on the effectiveness of drug abuse treatment

(Anglin and Hser 1990a) concluded that, although many evaluation studies are

Individually limited by methodological considerations, when taken together, their

findings consistently support the general effectiveness of treatment. A corollary,

and critical, public policy question is whether resources devoted to treatment

yield benefits in excess of treatment costs in the short and long terms. Further

questions concern the comparative assessment of treatment programs,

modalities, and components that are most cost-effective. A more general

concern at the highest policy level is whether the treatment system overall has

met the diverse personal needs of drug-abusing individuals and whether it

effectively reduces social costs in short- and long-term perspectives, and if not,

how the system can be improved to achieve an optimal return for society’s

investment.

Only limited studies analyzing the cost-effectiveness or the cost-benefits of

drug treatment have been conducted. Of these studies, most have used

conventional methodologies that typically focus on the inclusion and

categorization of various costs of drug abuse that are attenuated by treatment.

Although inclusion of relevant sources of costs and assignment of appropriate

monetary values to such cost categories are important decisions and often

involve sophisticated philosophical considerations, calculation methods are

usually simple arithmetic. Although they provide important information, such

approaches only provide static descriptions within limited timeframes.

Overlooked are cost-effectiveness analyses that consider the time dynamic

aspects of the phenomena so as to allow prediction of the future course of

alternative policy plans. The major focus of this chapter is exploring the

67
applicability of several potential methods for longitudinal cost-effectiveness

analysis that may contribute to a better policy decision process.

Common procedures in conducting cost-benefit analysis include defining

relevant concepts, identifying cost-benefit categories, and determining

associated monetary values for the identified program modality and outcome

measures. We maintain that the time dynamic nature of the treatment system

has to be incorporated if projection to the future is desired. Therefore, new

methods are needed to extend conventional methods and allow several levels

of analytic units (i.e., treatment system, modality, program, or individual addicts)

to be examined from a longitudinal perspective. This chapter is organized in the

following manner: The next section defines several key terms, describes in

detail the conceptual framework, and discusses some relevant issues in

longitudinal cost-benefit analysis. We then illustrate exemplary conventional

approaches to cost-benefit analysis and present several innovative statistical

methodologies to illustrate how these methods can be applied to answer some

relevant cost-benefit policy questions. Next, we suggest several future research

directions and end with our conclusions.

DEFINITIONAL AND CONCEPTUAL FRAMEWORK

Definitions

Cost-effectiveness and cost-benefit analysis of drug treatment programs

provide information necessary for policy decisions. These analyses often are

used to determine program efficiency or whether resources devoted to

programs yield benefits in excess of their cost. However, the idea of overall

treatment system efficacy must be considered as a separate concept to

emphasize the flow of population (both treated and untreated individuals) to

reflect a holistic view of system efficiency in reaching, retaining, and intervening

in the behaviors of these treatment-in-need individuals. We define these terms

as follows.

Treatment effectiveness is defined as the reduction of adverse behaviors and

consequences of drug abuse as well as the increase in desired positive

behaviors, regardless of cost.

Cost-effectiveness and cost-benefit are comparisons between treatment

benefits and the associated costs to determine if resources expended for the

treatment modality, program, or component are warranted. Cost-effectiveness

analysis evaluates these intervention units by some outcomes that are not

necessarily expressed In monetary values (e.g., moral hazard, safe

communities). When effectiveness can be quantified and expressed in dollars,

68
such intervention benefits can be used for cost-benefit analysis. Because some

interventions may be costly relative to the benefits received, not all effective

programs are efficient. A program is efficient only if the benefits exceed the

costs. This concept is usually applied to single programs or modalities but also

can be applied to multiple programs or modalities for comparison purposes.

Treatment system efficacy is an extension of cost-benefit methodology to an

aggregate system level, taking into consideration the number of people served

and duration times in treatment for those processed by the treatment system,

while also considering the necessity to meet diverse needs of individual

abusers. In addition, from a system’s view, to meet the diverse needs of

individual addicts, and in the absence of better alternatives, some programs or

modalities will have to be maintained even if they individually may not be

evaluated as efficient. Efficacy is determined not only by clinically successful

matching between clients and treatment but also by management morale,

physical layout of program, and policies and protocols that meet client needs.

Efficacy also may involve analyzing the aggregate benefits of bringing, by

various means (e.g., legal coercion), increasing fractions of untreated or

unserved populations into treatment as well as how the level of overall

treatment system effectiveness can be improved with better and more efficiently

delivered services.

A Conceptual Framework

As trained and experienced evaluators/methodologists, we feel our contribution

to improving cost-benefit analysis is best built on our evaluation knowledge and

experiences. As opposed to other types of training and approaches, the tasks

of cost-benefit analysis are essentially converting evaluation results into dollar

amounts. Thus, our conceptual framework for cost-benefit analysis parallels

that for treatment evaluation discussed In our review paper (Anglin and Hser

1990a) and extends to cost-benefit analysis by calculating associated costbenefit values in a relatively straightforward way.

A comprehensive cost-effectiveness and cost-benefit analysis requires

attendance to a framework of the following three dimensions: analysis units,

timeframes, and categories of cost-benefit measures. These elements are

described below.

Analysis Units. System, program modality, and individual addiction career

comprise the various levels or analysis units for which cost-benefits can be

assessed. Analyses addressing each level’s effectiveness are essential

because each provides information necessary for different types of policy

decisions. Cost-benefit analysis for system or program modality usually is

69
based on a selected unit of time (e.g., year) or unit of service, and such

analyses are applicable to questions dealing with the production, delivery, and

financing of services. Measures of individual career refer to the cost-benefits of

treatment over a person’s lifetime and are important for answering questions

dealing with meeting the needs of a specific population as well as the long-term

social and personal return from resources applied to treatment.

System. Treatment system processes and functions involve assessing,

assigning, and “mixing” treatment modalities, programs, and components for

those individuals who need treatment intervention. Figure 1 illustrates potential

flows of drug users through different pathways of the system. An efficient

system should be able to meet the various needs of clients and achieve optimal

distribution of individuals, services, and programs and maximal return on dollars

invested. System efficacy also should consider failure to detect and intervene

with untreated drug-dependent persons or to provide sufficiently intense

treatment of sufficient duration to achieve change. That is, in addition to

specific cost-benefits obtained for those served, the system also should

consider diverse needs of those avoiding treatment and make intervention

resources available to reach them until the demonstrated point of diminishing

returns for the social resources Invested. Improvements introduced or other

actions, either taken by society or possibly taken to elevate the treatment

system to a more cost-effective functioning level, also should be considered. A

successful treatment system should operate with an adequate “dispersal” of

available resources across components, with interconnection among its various

elements and a rational “flow” of clients through the system until a “criteria” level

of behavioral control is achieved and maintained so that clients may choose or

be allowed to exit the system. However, an efficient system depends on

efficient components that make up the system.

Program Modality. In practice, demonstrated cost-effectiveness of a specific

program or modality is often a critical consideration for justifying its existence

and for obtaining public support. Comparative effectiveness is also Important

when allocation choices need to be made among alternative programs. Within

one treatment modality, there can be significant variation among different

programs, and such variations should be considered in the cost-effectiveness

analysis. For example, one significant variation among program modalities is

the length of a planned treatment episode. Therefore, in comparing program

modalities we need to consider not only the effectiveness shown by outcome

measures but also the number of people served per unit resources. Figure 2

illustrates treatment retention and other outcome variables using survival time

analysis to compare three Southern California counties’ multiple-site methadone

maintenance programs. The operating costs for these three programs were

approximately equal, but the observed differences in outcomes are all

statistically significant (Anglin and Fisher 1987; Fisher and Anglin 1987).

70
FIGURE 1. Systematic view of user flow
FIGURE 2a. Survival curves of time to discharge FIGURE 2b. Survival curves of time to

(conditional sample) incarceration (conditional

sample)
FIGURE 2. Differential program outcomes (continued)

FIGURE 2c. Survival curves of time to

readdiction (conditional sample)

FIGURE 2d. Survival curves of time to

commission of crime

(conditional sample)
Individual Addiction Career. Once drug dependence is developed, drug use

tends to persist with intermittent abstinent periods and frequent relapses, a

process often characterized as an addiction career. For some people,

treatment may have rehabilitative effects so that treatment benefits last beyond

time in treatment, whereas for others, amelioration of adverse behaviors occurs

only when receiving treatment. Recycling through new or repeated treatment

episodes is a common pattern and may be necessary for some clients to

accumulate significant treatment effects, These considerations suggest that the

lifetime cost-benefit for individuals whose drug dependence career is modified

by treatment is an important measure of cumulative and aggregate treatment

efficacy (Hser et al. 1988).

Figure 3 illustrates how cost-benefit analysis can be accomplished within this

perspective. Time-related costs imposed on society by an untreated drug user

are shown by the height of the top line. It is assumed that as users “naturally”

recover annual costs diminish over time (although at slower rates than

treatment-accelerated recovery) and eventually vanish at the point of “maturing

out,” which occurs at the end of the addiction career. Lifetime costs are

indicated by the area under the curve. The treatment profile indicates that

during treatment social costs are positive but lower than without treatment.

Although treatment may not be 100 percent successful at curbing drug use and

the associated social costs, it can achieve a substantial savings.

After treatment, costs rise as relapse and other negative behaviors occur, but

costs typically do not attain the level they would have without intervention. The

gross gains from treatment are measured by the difference between the total

lifetime social costs of an untreated drug user less those costs for one who is

treated. The costs of treatment are indicated by the area of the shaded

rectangle, and the net benefit from treatment is equal to the gross gains less the

treatment program expense.

The profile depicted in figure 3 is meant to be conceptual only and needs to be

examined empirically. Furthermore, this type of perspective allows a framework

for differential cost-benefit assessments that are associated with individual

addict characteristics (e.g., women of childbearing age), when such

characteristics need to be taken into consideration. Thus, for the unit of interest

in the cost-benefit analysis, a “family” of profiles characterizing different addict

groups may best represent the efficacy of a particular intervention.

Cross-Sectional and Longitudinal Timeframes. Cross-sectional and

longitudinal analysis provide useful cost-benefit information. Cross-sectional

data are usually easier and cheaper to obtain, are more likely to be

comprehensive, and have adequate quality control. Longitudinal analysis is

74
necessary because the treatment system and addiction career both require

time-related changes to be considered. Considerable evaluation research has

demonstrated that treatment benefits last beyond the time spent in treatment

(Anglin and Hser 1990a). Such posttreatment performance measures are

important indications of treatment effectiveness and should be incorporated in

long-term, cost-benefit considerations. In addition, especially in the area of

policy planning, being able to project to the future is an important feature that

may be obtainable only by examining longitudinal trends.

FIGURE 3. Addiction career perspective

Categories of Cost and Benefit Measures. Analogous to evaluation

research, variations in study design, sample representativeness, and outcome

measures often lead to inconsistent estimates of treatment effectiveness.

These considerations also apply to cost-benefit analysis, even though the

prominent considerations of most studies primarily have been determining the

categories of cost and benefit measures that should be considered and the

magnitude of associated costs.

75
Treatment Benefits. The simplest treatment goal traditionally has been

abstinence. From a public policy perspective, however, drug abuse reduction is

associated with a variety of other treatment goals directed to social problems

such as crime reduction, prison management, and the spread of acquired

immunodeficiency syndrome (AIDS). In our review article (Anglin and Hser

1990a) we argued that in examining the effectiveness of treatment, evaluations

should employ outcome measures that encompass a variety of behaviors.

Several specific outcome categories are important: cessation or decreased use

of the primary drug of dependence and other drugs; decreased levels of illegal

activities such as drug trafficking, property crime, or prostitution; increased

employment and decreased reliance on social service agencies; improved

social and family functioning; improved psychological functioning; and

decreased mortality and improved physical health. Additional criteria might

need to be considered when targeting different levels of analysis units within the

treatment system. For example, some treatment modalities, such as

detoxification, are not considered effective in achieving the above goals on any

long-term basis. However, from a system’s point of view, such programs are

necessary to control drug withdrawal symptoms temporarily and perhaps as an

opportunity to engage clients in other modalities for long-term rehabilitation.

Finally, for a truly effective system, some components (e.g., programs) may

never be cost-effective. For example, programs for the dually diagnosed may

need to provide lifetime services at considerable investment for some clients,

but alternatives (mental hospitals or prisons) are too costly.

Most cost-benefit analyses have considered these multiple categories by

translating these behaviors into economic cost terms. Implicit in this approach

is that cost-benefit analysis considers the overall effectiveness of treatment for

those served and applies cost factors as “weights” that “revalue” effectiveness

in terms of social “return on investment.”

Detailed categories of drug abuse costs attenuated by treatment may include

reduced medical expenditures on drug-related illness; increased school or labor

productivity; reduced amounts of property stolen by drug abusers to support

their habits; reduced private costs of crime-prevention measures to deter and

detect such thefts (e.g., alarms, locks, security services, etc.); reduced anxiety

and fears stemming from the possibility of victimization; reduced levels of abuse

and other emotional and physical harm imposed on the children, parents, and

spouses of drug abusers; reduced public expenditures for police, courts, and

corrections to detect and process drug violations and property crimes

committed by drug users; reduced public expenditures to treat drug-related

illness, including overdoses, hepatitis, and AIDS; reduced welfare payments

made to drug users and their families; and reduced loss of tax revenues

because of lower productivity and reduced labor-market participation by drug

76
users. The reduction in these costs constitutes a large measure of the benefit

of drug abuse treatment and other intervention programs and provides the

rationale for their support by public funds (Anglin and Hser 1990b). For

example, Harwood and colleagues (1984) estimated the economic cost to

society of drug abuse in 1983 to be close to $57 billion. A substantial part of

the total cost was attributed to crime and reduced productivity. A later study

reported that the annual cost of illicit drugs to American society has risen to

$58.3 million in 1988 (Rice et al., this volume, p. 22). Increased medical costs

for crack addicts and their infants and drug-related AIDS cases seem to be

causing a significant portion of the rising expense.

However, some major costs of drug abuse are almost impossible to quantify.

For example, it is difficult to place a dollar value on the benefit to society of

reducing the public fear of being victimized by drug users who have turned to

robbery and burglary to finance their dependence. Consequently, only those

costs that can be quantified are estimated, and the resulting estimates

conservatively understate the true costs associated with treatment

effectiveness.

Treatment Program Cost. In measuring the costs of a specific treatment

program, the appropriate perspective considers the higher of (1) the monetary

expenses of the program and (2) the value of these resources for the next best

use, for example, what the benefits would have been in using the resources in

an alternative type of drug treatment program. This latter perspective

represents the opportunity cost of the investment. For a program to be

comparatively efficient, resources that it utilizes should not be able to be better

employed elsewhere.

In practice, measuring opportunity costs is rarely attempted. It requires not only

an examination of the program’s effectiveness but also an examination of the

effectiveness of all other programs with which it competes for resources.

Consequently, monetary costs are examined instead. Treatment costs vary

across cities and programs due to differences in local treatment policies,

salaries, cost-of-living, specific services provided, the age and type of facilities,

and other related factors (National Association of State Alcohol and Drug Abuse

Directors 1988). There are also several ways these monetary program costs

can be measured, depending on whether the perspective derives from

operational, societal, or client considerations (Yates 1985). A method that has

been commonly used is to seek an estimate of the average cost to treat a drug

user in a specific program for a specific period, that is, a week, year, or possibly

the length of time typically taken for a treatment episode.1 Program overhead

costs as well as operating costs must be measured; in addition, the opportunity

costs of resources used by the program should be counted, even if the

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resources utilized do not represent direct costs. This consideration conceivably

could affect the cost estimate for a program that utilizes a large volunteer staff

that would otherwise be likely to provide free services to another socially

worthwhile cause.

On the whole, other than at a relatively primitive level, surprisingly little is known

about the costs of providing drug treatment to people in need (Wallack 1990).

Some crude estimates of direct costs, without amortization for improved

outcomes after discharge, suggest that, per person, the cost of residential

treatment is about three times the cost of outpatient methadone or outpatient

drug-free treatment (Harwood et al. 1988; Wallack 1990).

Adjusting Costs for Temporal Treatment Dynamics. When comparing programs

that require resources over several years, several distortions need to be

adjusted to monetary data, and these adjustments are applicable for both cost

and benefit calculations. Cost adjustments are needed for temporal distortions

such as inflation and present value. If monetary costs have been assessed

over several years, data collected later may be distorted by inflation. A

common method for adjusting costs for different years is to divide the cost for a

year by an inflation factor available from government offices for that year and

region. This way, cost data can be standardized in the same “base year” units,

Combining Cost and Benefit Estimates. There are several ways in which to

analyze cost, benefit, and effectiveness data once they are obtained (Yates

1985). A commonly used method is to form a benefit-to-cost ratio. In this way,

efficiency can be quantified. For example, if $8,000 was required to care for a

heroin addict for 1 year in a therapeutic community and this resulted in benefits

of $24,090 in present-value terms, then the benefit-to-cost ratio would be equal

to three. A ratio in excess of unity would indicate efficiency and be required to

rationalize continuation of the program. However, it may not be a sufficient

condition to the extent that alternative programs that vie for scarce dollars

exhibit even larger ratios.

An analysis that examined economic benefits to society of drug abuse

treatment utilized data from the 1980 Treatment Outcome Prospective Study

(TOPS) (Hubbard et al. 1989; Harwood et al. 1988). This analysis focused on

the economic benefits derived from a decrease in criminal activity during

treatment and 1 year after treatment discharge. The cost-benefit of treatment

was compared across three treatment modalities based on average length of

stay. The benefit-to-cost ratio was larger than unity for residential, methadone

maintenance, and outpatient drug-free programs. This finding suggests that the

benefits from reducing crime that are derived from these treatment modalities

outweigh the cost of providing treatment. At a more aggregate level, treatment

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costs are a small percentage of the total cost of drug abuse to societyapproximately 3 percent (Wallack 1990).

Although ratios simplify findings, they discard important information such as

absolute net benefits that prove the investment worthwhile or caseload and

scale-of-service provisions. In addition, ratios do not allow prediction of how the

cost and outcome relationship would change as relevant policy changes (i.e.,

client load was altered within a program). A more complete model of the

relationship among costs, outcomes, and other relevant variables is neededone that can be provided only by mathematical models. These models may be

considerably more generalizable than single ratios.

METHODOLOGICAL APPROACHES TO COST-BENEFIT ANALYSIS

Numerous statistical methods are available for analyzing many different but

relevant cost-benefit questions. Methodologies involved with cross-sectional

analysis are usually straightforward, have been applied frequently, and are

discussed in detail by other authors elsewhere in this monograph. This section

concerns mainly those methods applied or applicable to longitudinal cost-benefit

analysis. We first review conventional methods and their results when applied

to longitudinal data. Several selected methodologies that may potentially

produce more useful information then are described. Applications of these

models are illustrated by at least one level or unit outlined in the conceptual

framework; generalizability or adaptation to other levels of analysis units also

may be possible.

Conventional Methods

Several cost-benefit analysis studies of a longitudinal nature are available in the

literature. Approaches typically establish “critical periods” of interest, determine

behavior of clients during these periods, and assign cost values. Perhaps the

most common approach is to “cost-out” periods before, during, and after

treatment to examine relative changes, This approach corresponds to a level of

analysis at the individual addiction career (Hser et al. 1988). A variation on this

approach is a during- and after-treatment design when circumstances allow a

“natural” experimental design, such as the involuntary termination of a treatment

program to meet funding or policy requirements. Another approach also takes a

critical date, usually treatment admission, and compares subsequent costbenefits among groups, programs, or modalities. In summary, these studies

examine cost-benefits associated with (1) pretreatment, during treatment, and

posttreatment; (2) Involuntary termination of treatment; and (3) programs with

different dose and retention policies.

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Cost-benefit analysis of drug treatment seldom is based strictly on an addiction

career approach. Several pretreatment and posttreatment analyses have been

described in the previous section (Harwood et al. 1988). McGlothlin and Anglin

(1981 a) investigated the effects of involuntary termination of methadone

maintenance when a Bakersfield, CA, clinic was closed by local officials. A 2-

year followup compared behavior of the 94 methadone clients discharged from

the Bakersfield clinic with a matched comparison group of 83 clients obtained

from the Tulare, CA, clinic where no such policy change was enforced. Of the

terminated clients, 55 percent became readdicted to heroin compared with 31

percent of the Tulare sample, and the arrest and incarceration rates were

approximately double for the comparison sample. The economic costs

preclosure, during closure, and postclosure for the Bakersfield clinic at annual

per person cost were about $12,000, $8,100, and $5,200, respectively; for the

Tulare group the respective figures were $17,600, $6,200, and $5,600.

Although the postclosure costs are similar, when the benefits resulting from new

admissions are considered, the clinic closing represented a net economic loss

in addition to the detrimental effects experienced by the clients.

A similar policy change occurred in San Diego County, although, unlike the

Bakersfield clinic closure where no alternative programs were established, San

Diego allowed private methadone maintenance providers to open clinics. For

those who transferred to private methadone maintenance after the closure of a

clinic, few differences were observed compared with a matched sample of

clients in continuing public clinics in nearby counties (Anglin et al. 1989). Major

adverse effects, however, were found for clients unable or unwilling to transfer

to private programs: high crime and drug-dealing rates, more contact with the

criminal justice system, and higher rates of illicit drug use. The mean annual

cost for those male clients who transferred was $4,031, and for those who did

not transfer it was $10,982; for female clients, the respective figures were

$3,881 and $9,889. Savings resulting from a reduction of publicly funded

methadone maintenance program costs were offset by increased costs for

incarceration, legal supervision, and other government-funded drug treatment.

Comparisons among three multiple-site methadone maintenance programs in

three Southern California counties were conducted by McGlothlin and Anglin

(1981 b). Programs in Los Angeles and San Bernardino Counties used high

doses (a mean stabilization dose of 95 and 82 mg, respectively) and flexible

program policies with respect to client management, discharge for program

infractions, and degree of supportive counseling. The Orange County program

used low doses (i.e., a mean of 43 mg) and a relatively strict policy with respect

to involuntary termination for program violations.

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For the two high-dose and flexible programs, retention was much longer than

for the low-dose program (figure 2a). During the 6- to 7-year period from

program entry to interview, the clients from these two programs had significantly

fewer arrests and less incarceration, narcotic addiction, and self-reported

criminal behavior than clients in the low-dose program. These benefits

persisted until the time of interview and were present whether the client was on

or off methadone. The social cost analysis among these programs calculated

arrest, trial, incarceration, legal supervision, property crime losses, and welfare

costs per year for the years from first daily narcotics use to program admission;

then these same costs plus treatment costs were calculated per year for the

years from treatment to followup. The estimated annual costs of subjects in

these programs, as a percentage of pretreatment costs, were 47, 62, and 85

percent for Los Angeles, San Bernardino, and Orange Counties, respectively.

The Los Angeles program is the most expensive because of its long retention

time and was also the most cost-effective, netting a 53-percent saving in social

cost compared with only a 15-percent saving for the Orange County program.

The above analysis deals only with the costs associated with the patients who

were treated, raising the question as to whether a program should have a

shorter retention time so that more patients per slot could be treated, perhaps

making it more efficient in this aspect. Hargreaves (1983) took this slot-fraction

factor into account and extended the above social cost estimates to derive

benefit-to-cost ratio rates for the three programs. The high-dose, long-duration

programs still showed superior benefit-to-cost ratios (6.1, 4.5, and 2.7 for Los

Angeles, San Bernardino, and Orange Counties, respectively).

The importance of these studies is that treatment outcomes, especially when

used for cost-benefit analysis, have several social goals, not simply abstinence

from drug use. In addition, estimates of the subject performance categories or

domains were considered for each of the periods of interest, including those

extending beyond the time in treatment. The shortcomings of these studies are

that, although longitudinal data are analyzed, the description of the variables or

processes involved remains essentially static. Failure to incorporate dynamic

relationships limits research potential for projection or simulation purposes.

Time Series Analysis-The Addiction Career Perspective

Time series analysis examines detailed patterns of change in variables over

time (Box and Jenkins 1970). A lengthy series of observation is required; the

repeated observations in the series may represent a single case or the

aggregation of many individuals’ observations on a specified variable or system

of variables at each sequential time point. Typically, time intervals are

consistent units, for example, months or years. A sufficiently large number of

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time points (typically 60 or more) are considered critical for reliable statistical

estimation of time-related relationships. Time series analysis often allows

prediction of future aggregate behavior based on the statistically estimated

relationships. That is, the parameterized model based on real data can be used

for forecasting purposes. Simulation models also can be constructed to

evaluate hypothetical policy changes by artificially changing one variable (such

as treatment) and assessing effects on other variables In the set under

examination. Analysis based on group aggregate data is particularly useful in

policy decisions that involve overall system-wide cost-benefits.

Time series analysis applied to the addiction career perspective for policy

analysis has been illustrated by Powers and coworkers (Powers 1990; Powers

et al. 1991). A set of procedures has been specified in these papers for policy

analysis involving model development, forecasting and simulation, and cost

analysis. In Powers and colleagues’ (1991) work, the addiction career histories

(averaging 12 years in length) of 627 narcotics addicts were analyzed to assess

the intervention effects of methadone maintenance treatment and legal

supervision (i.e., parole and probation) on the level of narcotics use and

property crime involvement. A multivariate time series model or, specifically,

the cointegration and error correction approach (Engle and Granger 1987), was

developed as an adequate description of the interrelationships among five

variables: methadone maintenance, legal supervision, narcotics abstinence,

narcotics daily use, and property crime. A unique characteristic of the model

was the separation of long-term from short-term relationships within the

dynamic system represented by these five variables’ interacting effects. In the

context of time series analysis, long-term relationships refer to how stochastic

trends of separate time series are related to each other, and short-term

relationships are measured by how chronologically proximal changes in one

variable relate to changes in other variables. The error correction model allows

the examination of short-term relationships within the system in conjunction with

partial adjustment for long-term behavior among the variables within the

system.

The overall model development results showed that the system dynamics

among the five variables formed a cointegrated system where relationships

among variables were characterized predominantly by long-term rather than

short-term relationships, Although each variable could individually move up or

down over time without mean reversion, a dynamic equilibrium state existed

toward which all other variables adjusted.

Methadone maintenance treatment demonstrated long-term benefits in terms of

reduced narcotics use and reduced criminal activities; on the other hand, legal

supervision was not shown to reduce either narcotics use or crime involvement

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in the long run. Instead, a positive long-term relationship existed when a higher

amount of legal supervision was related to a higher amount of narcotics use

involvement and criminal activity. Addict involvement in either methadone

maintenance or legal supervision increased the likelihood of involvement In the

other. These latter findings are consistent with the observation that either drug

use or criminal activity is likely to bring addicts to the attention of the legal

system for prolonged periods. However, as a group, these addicts were not

directly responding to legal supervision by changing their drug use or crime

involvement, except perhaps through coerced treatment. The study also

suggested that legal supervision may increase long-term methadone

maintenance involvement, both in motivating entry and in prolonging retention.

These results provide strong evidence of methadone maintenance treatment

effectiveness and suggest the importance of legal coercion in linking chronic

narcotics addicts convicted of crimes to treatment.

The forecasting capability of this long-term relationship model also was

examined In contrast to a model considering only short-term dynamics, and

comparisons between the two models demonstrated the superiority of the longterm model. Predicted values of the outcome variables based on the long-term

model can be used in cost-benefit analysis, particularly for planning purposes.

Simulation of policy alternatives, such as increased methadone maintenance

capacity and the resultant potential effects on narcotics use and crime, also are

important for policy planning. Forecasting and simulation provide a quantitative

description of predicted relationships between the intervention and the outcome

variables. Cost-benefit analysis based on these approaches involves the cost

estimates for the variable per unit of person and time, and the summations

across persons and time for the desired level of aggregation (e.g., population

size or time coverage) are simple multiplications.

An illustration of how to perform cost estimation of hypothetical situations was

provided by Powers (1990). For example, one simulation examined the effect

of decreasing methadone maintenance cost by $2,565 per person for the 19

bimonthly periods examined ($68 per month per person). The results showed a

corresponding monthly average decrease of 5 percent for time of abstinence

and increases of 2 and 3 percent for time in daily narcotics use and property

crime involvement, respectively. Although small when expressed as

percentages, these increases resulted in costs exceeding the savings in

reduced methadone maintenance costs.

Survival Analysis-The Program Modality Perspective

Survival analysis not only allows comparisons of long-term outcome measures

among programs or groups but also tests the time-dependent nature of

83
outcome differences. When longitudinal data are available that can be

expressed as measures of duration of behavior or effects, survival analysis can

utilize these data as a function of time and can fully explicate their temporal

patterns. In addition, survival analysis statistically corrects biases that can be

caused by the types of censored observations that are common in followup

studies because subjects usually are followed for periods of different length. A

further advantage of survival analysis is that explanatory variables, or

covariates, can be considered simultaneously for their influences on the survival

time function (Cox and Oakes 1984; Tuma and Hannan 1984).

Covariates either can be fixed measures or measures that change with time.

Fixed or time-independent covariates are usually specific individual

demographic characteristics such as sex or race. Time-dependent variables

usually reflect individual behavior changes over time, such as employment,

treatment, or legal status, that evolve simultaneously with the dependent

variable survival curve. Hazard rate models can be fitted to examine the effects

of these covariates on survival rates. These hazard rate estimates are useful in

determining individuals who may need additional treatment support services

and when an individual is most likely to fail.

Applications of survival analysis for drug treatment evaluation are illustrated by

Fisher and Anglin (1987), Anglin and Fisher (1987), and Hser and colleagues

(1991). Fisher and Anglin’s studies compared outcome data from multiple-site

methadone maintenance programs in three California counties and has been

previously discussed (figures 2a-d). The Hser and coworkers’ study focused on

the differential responsiveness to methadone maintenance treatment among

male and female white and Mexican-American addicts. This latter study also

examined several covariates for their ability to predict treatment retention, The

likelihood of treatment discharge was higher among young male addicts who

were using narcotics daily during treatment and who were unemployed and

unmarried.

Extension of these survival analyses to cost-benefit analysis, especially costbenefits based on conditional aspects such as sex or race, involves setting the

timeframe of the analysis, which can be flexibly determined by policy interest

and data availability. Cost-benefit calculation is straightforward with the number

of people, duration, and associated costs per unit being available. Projections

beyond the observation period are possible because parameterized survival

rates allow expected durations to be estimated beyond the censored

observations.

84
Markov and Semi-Markov Modeling-The System Perspective

At any given time interval, the addict population can be categorized for policy

analysis purposes into a small set of discrete states that characterizes whether

these addicts are actively addicted and whether they are being captured by

social intervention systems (e.g., treatment, incarceration, legal supervision) in

some identifiable manner. An individual’s status among these states will

change over time, thus a dynamic method such as a Markov model Is useful to

provide a more precise description of the population distribution as it varies over

time (Wickens 1982). Longitudinal information from a defined population (such

as the addict career histories) allows an empirical testing of this dynamic model.

If the appraisal of the model’s performance measured against the known

population distribution over time proves satisfactory, confidence can be gained

for its application to larger populations, Furthermore, the accuracy of the

estimates can be improved by incorporating explanatory variables shown to

affect the model, such as race, sex, or other variables that are associated with

the individual. This type of adjustment can be accomplished in the manner of

the proportional hazard rates function described by Cox and Oakes (1984). The

dynamic nature of the model thus not only provides a description of the past

patterns of change over time but also should allow predictions of future patterns

in a precise manner.

To illustrate the applicability of a Markov or semi-Markov model to cost-benefit

analysis, the construction of such a model involves the operational specification

of several aspects.

Status Representation. The status specification can be altered as necessary

to provide alternative assumptions about the underlying phenomenon or

questions of interest. For example, the members of the addict population might

be classified into six states: SN, using but not addicted yet; SA, currently

addicted; ST, in treatment; SI,, incarcerated; SU, no longer using drugs

(unaddicted); and SL, lost from population (died, left country).

The system of interest can be one particular treatment program or modality or

some aggregation, and treatment states can be constructed as such. If interest

is in several program modalities and their differential effects within the overall

system, distinction can be made by inclusion of several states, each

corresponding to a different program modality of interest.

Transition Probabilities and Rates. The movement, or transition, of the

individuals among these states over time can be represented either with

transition probabilities or transition rates. If the transitions are independent of

time, the process is known as a Markov process. If they depend on time, then a

85
semi-Markov process results. If the population size at any given time is known,

multiplying by the transition matrix gives the number of people in each of these

states.

Population Closure. When new members move into the process or old

members move out, an open population model would be necessary to provide

an accurate description of the true phenomenon and more exact estimates.

When evaluating system efficacy, such movements are important to consider,

because individuals start or move into their addiction careers at different time

points, and some eventually reach a state of maintained abstinence, or die, and

thus move out of the population at later times.

Populatlon Heterogeneity. Variables such as sex and race, which are

expected to influence transition rates, can be incorporated as explanatory

variables in a manner similar to the proportional hazard rate model (Cox and

Oakes 1984). The establishment of relationships between explanatory

variables and the transition rates also allows the comparisons of relative risks

among subpopulations defined by these variables.

Cost-Benefit Analysis and Projection. Once the model is developed,

multiplication of population size, transition rate, duration in the state, and costbenefit values per unit of time and people for each state can be calculated

straightforwardly to obtain the cost-benefit estimates over time. If assumptions

about the past on which the model development is based are accepted to be

true for the future, projection for limited future cost-benefit estimates can be

performed through the same process. Simulation studies also can be

performed. For example, one can artificially increase treatment effectiveness

by increasing transition rates from treatment to an unaddicted state and then

observe associated consequences produced by such change.

System Dynamics Modeling-The System Perspective

A system dynamics model analyzes dynamic phenomenon through feedbackoriented computer modeling and is used to model systems-level relationships

among constituent components or variables. A system dynamics model

consists of an interconnected set of difference equations representing

continuous time flows and accumulations of people, materials (e.g., resources),

and information. An adequate system dynamics model allows for the explicit

interlinking of a variety of causal factors that drive each other iteratively over

time. Through the appropriate manipulation of input parameters, it also can be

used to project outcomes under different assumed scenarios related to policy

interventions. Attaching costs to the “stocks” and “flows” of people and

86
resources throughout the system allows a dynamic estimation of the costbenefits of the constituent components of the model.

System dynamics has been used to study a broad spectrum of issues arising in

corporate, socioeconomic, psychosocial, biomedical, and ecological systems.

For example, several system dynamics simulation models were developed for

technology assessment used to evaluate the social impact of medical practices

(e.g., the diffusion of evolving medical technologies) (Homer 1987; Finkelstein

et al. 1984). Recently, a dynamic model of cocaine use prevalence in the

United States was developed to depict the relationships among various drug

use indicators (Homer 1990). This model also produces prevalence estimates

and near-future projections for several population categories, including

recreational and compulsive cocaine users, Although none of these models

produces direct cost-benefit figures, such application is an appropriate

extension of this work.

SUMMARY

Choices of appropriate methodologies depend on the research or policy

questions being asked, the design of the study, and the type of data that is

available. Most of the models described above can be adapted for different

applications. Time series analysis requires evenly spaced sequential data over

lengthy periods. Aggregations across time or people allow flexibility for

answering questions at different levels of policy concern. Both survival analysis

and Markov models are based on linear probability theory. Information about

number of people, timing, and sequences of change is best utilized by these

types of models. System dynamics models integrate more varieties of sources

of information and encompass a larger scope of the system. Time series

analysis and system dynamics modeling are useful tools for making projections

and for answering “what-if,” or policy simulation, questions. These longitudinal

modeling approaches add to the traditional cost-benefit analyses by relating

cost and benefit in mathematical models, taking into consideration time changes

and other related changes. Such modeling approaches not only deepen our

understanding of the phenomenon under study but also allow projection and

simulation to be carried out in a precise, quantitative fashion.

SUGGESTIONS FOR RESEARCH DIRECTIONS

Quality of Data Collection

Modeling approaches provide a simplified representation of an often

complicated underlying phenomenon and could help to identify important

relationships that are responsible for driving the system. Knowledge of the

87
past dynamics then can be used to project to the future, if the future resembles

the past-a situation that is often the best guess that researchers can rely on.

However, quality of the model’s estimates only can be as good as the input

data. One cannot overemphasize the importance of the effort to collect quality

data at the initial evaluation level and at the cost-benefit level.

Considerations of Addict Heterogeneity

Addict populations are heterogeneous groups for which constituent subgroups

may have different needs and demands for drug treatment. Cost-benefit

analyses that consider such diverse addicts’ characteristics are likely to provide

more accurate information for resource allocation. For example, women addicts

generally are involved less often in criminal justice systems, but for those who

have children or are of childbearing age, drug use can produce damage to

children that results in considerable cost to society. Cost-benefit analysis that

also can identify the areas that are most costly and suggest improvement, for

least cost and maximal return, of the treatment services is valuable.

Modeling Approaches

Drug treatment evaluations have become more sophisticated in recent years in

appreciation of the strengths and weaknesses of alternate research designs

and in the application of statistical modeling approaches for analysis (Anglin

and Hser 1990a; Brecht et al. 1991). However, cost-benefit analysis has not

kept up with such progress. Time series analysis and survival analysis have

made major advances over past practice in evaluation research. Markov

modeling and system dynamics modeling represent potentially important tools

for integrating various aspecta of the system. We believe that extension of

these applications to cost-benefit analysis will provide useful and important

information for policymakers.

Generalizability to Untreated Populations

According to the National Institute on Drug Abuse (NIDA), only 1 in 10 injecting

drug users was in treatment during 1989 in the United States. As many as 45

percent of intravenous heroin users located in community settings have never

entered drug abuse treatment, and even larger percentages of intravenous

cocaine users have not obtained any treatment services. The number of drug

users in need of treatment among the homeless, pregnant women, or minority

groups such as Asian and Pacific Islanders, is largely unknown.

Considerable information gaps exist in the extent and consequences of drug

use for those who avoid treatment. Given an increased national policy focus on

88
treatment improvement and expansion (Office of National Drug Control Policy

1989, 1990), a proactive effort toward control of drug demand is necessary to

ensure an effective treatment system.

Drug users not in treatment are generally thought to be especially difficult to

reach and perhaps difficult to treat. Because current treatment populations may

not adequately represent the full range of drug-dependent individuals,

evaluation results that are based only on treatment populations may not be

applicable to those who have avoided treatment and may have resulted in

inflated estimates of the potential aggregate benefits of treatment. However,

the costs of failure to attract drug-dependent users into treatment can be much

higher, especially among those who, instead of seeking long-term solutions to

their drug problems, have been using emergency room services, committing

crimes, or contracting sexually transmitted diseases, including human

immunodeficiency virus, as a “revolving door” among health, social, and legal

networks (Harwood et al. 1988).

CONCLUSIONS

Expressed public concern about drug dependence and the resources requested

for devotion to ameliorating its consequences are evidence that the social costs

of drug abuse or dependence are substantial. Meanwhile, converging results

from evaluation research and cost-benefit analyses justify, on purely economic

grounds, a larger investment in drug treatment programs.

This chapter maintains that cost-benefit estimates can be Improved by applying

new methodologies to provide more valid descriptions of the underlying

phenomenon. To the extent that representative models provide accurate

representation of the phenomenon, better policy decisions can be made. This

chapter has not discussed extensively the issues of determining cost-benefit

categories and the associated monetary values except for listing those

commonly used and pointing out their importance and difficulties. The

magnitude of these costs sometimes implicitly reflects the value that society

assigns to the different categories, Data are available for those costs that lend

themselves to quantification, but considerable disagreement exists for those

“fuzzy” costs that cannot be easily translated to dollar values. The

inconsistency in determining cost categories/values across studies often

produces inconsistent results. For these reasons, we caution that cost-benefit

analysis results be interpreted within their specific context and, in most cases, in

relative rather than absolute terms.

Further development of statistical methods and their appropriate application to

diverse data also can improve cost-benefit estimates. Interventions could be

89
mathematically simulated to provide a basis for forecasting and policy analysis;

when there is no consensus on particular relationships, alternative parameter

estimates can allow sensitivity analysis and the development of an envelope of

possible results (Thompson 1980; Brecht et al. 1991).

Better understanding of the underlying structure of the phenomena, better

quality data, and applications of valid and appropriate modeling techniques will

improve estimates of cost-benefits. Advancements in all these areas will

contribute to more reasonable budgeting decisions that must be made within

overall drug abuse treatment policies and priorities.

NOTE

1. If we are examining the efficiency of an overall program of a given size

rather than estimating what that optimal size ought to be, average and not

incremental cost is the relevant concept to estimate. Note that in an

examination of the optimal or most efficient program size, the incremental

benefit and not the average also must be considered. It is plausible that an

expansion in program size would imply that the incremental benefit will be

less than the average as more and more intractable drug users were dealt

with and as effectiveness diminishes. The optimal scale for the program is

where incremental cost just equals incremental benefit.

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Anglin, M.D.; Speckart, G.R.; Booth, M.W.; and Ryan, T.M. Consequences and

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ACKNOWLEDGMENTS

This research was supported in part by NIDA grants DA-06250 and DA-05544

and National Institute of Justice grant 90-IJ-CX-0014. Drs. Hser and Anglin also

are supported by Research Scientist Development Awards DA-00139 and DA00146, respectively from NIDA.

92
AUTHORS

Yih-ing Hser, Ph.D.

Adjunct Assistant Professor

M. Douglas Anglin, Ph.D.

Adjunct Associate Professor

Neuropsychiatric Institute

Drug Abuse Research Group

University of California, Los Angeles

Suite 763

1100 Glendon Avenue

Los Angeles, CA 90024-3511

93
New Perspectives on the Benefit-Cost

and Cost-Effectiveness of Drug Abuse

Treatment

Robert L. Hubbard and Michael T. French

INTRODUCTION

Questions continue to be raised about the effectiveness of drug abuse

treatment. The overwhelming weight of evidence from clinical trials and

carefully designed epidemiological outcome studies is that treatment contributes

significantly to change in client behavior during and after treatment. A more

limited number of studies indicate that the benefits of these changes

considerably outweigh the costs of the treatment (Anglin et al. 1989; Harwood

et al. 1988; French et al., in press). However, due to the lack of studies of

elements of treatment or alternative demand-and-supply reduction strategies,

the comparative cost-effectiveness of different treatment components or

treatment vs. prevention or enforcement is not known.

While awaiting initial cost-effectiveness and benefit-cost studies of other

approaches, policymakers and program administrators can have confidence

that treatment is an effective and cost-beneficial strategy. However,

fundamental questions need to be addressed in economic analyses of

treatment. Although various treatments have been shown to produce positive

outcomes and favorable benefit-cost ratios, many factors limit the effectiveness

of treatment. Many drug abusers do not enter treatment, and many do not stay

a sufficient amount of time to receive the full benefits of treatment. Services to

deal with increasingly complex problems of clients need to be expanded in

quantity and enhanced in quality. Even after extensive treatment experience,

many clients relapse and renew their treatment careers.

Clearly, the full potential of treatment is not being realized. Questioning the

aggregate effectiveness of treatment diverts research from the fundamental

issue, which is how to maximize the return on each dollar invested in treatment.

To address this question, three new perspectives and their potential contribution

94
to a more comprehensive assessment of benefit-cost and cost-effectiveness of

treatment need to be considered. These perspectives are:

• Concept of treatment career vs. individual treatment episodes

• Model of treatment structure and process components vs. program-level

descriptors

• Definitions of client subgroups with differing types of impairments vs. general

characteristics of client populations

To ground these new approaches in an overall framework, a brief synopsis of

the conclusions of Hubbard and colleagues (1989) and French and colleagues

(in press, 1990) is presented on effectiveness and cost-effectiveness analyses

of the data obtained in the Treatment Outcome Prospective Study (TOPS)

coordinated in the late 1970s and early 1980s.

EFFECTIVENESS AND COST-EFFECTIVENESS

Data collected from a national sample of 10,000 clients (Hubbard et al. 1989)

established that publicly funded methadone, residential, therapeutic community,

and outpatient counseling treatment programs are effective in reducing levels of

drug use and criminal behavior and that long-term treatment helps addicts

become more productive members of society. These benefits of reduced drug

use and criminal behavior combined with increased productivity justify the tax

dollars expended on outpatient methadone, residential, and outpatient drug-free

programs. The costs of drug abuse treatment are substantially recovered

during the time a client is in treatment, and the savings to society after a client

has left treatment represent further returns on the investment (Hubbard et al.

1989, p. 163).

Substantial decreases in heroin abuse, reductions in cocaine abuse, less

nonmedical use of psychotherapeutic drugs, and diminished overall severity of

drug abuse were apparent during and after treatment for clients treated for at

least 3 months. The prevalence of regular heroin use for methadone clients in

the first year after treatment (17 percent) was one-fourth of the pretreatment

rate; the prevalence of regular cocaine use was cut in half; and regular

nonmedical psychotherapeutic use was cut by one-third. With respect to

residential clients, the posttreatment prevalences of regular heroin (12 percent)

was one-third of the rate before treatment; nonmedical psychotherapeutic drug

use (9 percent) was one-fifth of the rate before treatment; and regular use of

cocaine declined by half to 16 percent in the posttreatment period. With respect

to outpatient drug-free clients, reductions in prevalence of regular use were

95
one-half for heroin and nonmedical psychotherapeutic use and one-third for

cocaine. Although relapse was not uncommon within the 5 years after

treatment, in any given year less than 20 percent of former clients in any

modality were regular users of any drug other than marijuana or alcohol. The

pretreatment proportions of clients involved with criminal activity were reduced

by at least 50 percent after treatment in all modalities. For criminal behaviors, a

pattern similar to that for drug abuse was evident: dramatic improvement during

treatment, some deterioration immediately after leaving a program, and a

leveling that was maintained for as much as 5 years after treatment (Hubbard et

al. 1989, p. 164).

A variety of multivariate analyses considering many competing hypotheses

confirmed that the time spent in the program was the single most important

factor contributing to the observed improvement after treatment (table 1).

Residential clients staying in treatment more than 1 year were significantly less

likely than other clients to report regular use of heroin, marijuana, or

psychotherapeutics. In addition, the likelihood of their being employed full time

and not engaging in crime was almost three times greater than for clients

remaining in treatment less than 3 months. The results for outpatient drug-free

clients staying in programs for at least 6 months showed a similar pattern.

Compared with those methadone clients staying in treatment less than a year,

maintained clients were four times less likely to use heroin regularly, three times

less likely to commit predatory crimes, and two times less likely to use alcohol

heavily. There was also a significantly decreased likelihood of regular heroin

use for clients who stayed in methadone treatment at least 1 year compared

with those leaving after less than 1 year; however, this reduced likelihood was

not as great as for clients maintained in methadone (Hubbard et al. 1989, p.

165). Analyses of labor market behavior after treatment show that time in

treatment has a statistically significant positive effect on legal employment

earnings in ail modalities and a negative effect on illegal income (French and

Zarkin, in press).

Combined with results from other research, these findings provide

comprehensive and convincing evidence that long-term treatment is effective.

Several studies, however, including experiments with random assignment

(Newman and Whitehill 1979) and evaluation of abrupt closures of methadone

programs (McGlothlin and Anglin 1981), provide evidence that programs

produce effects independent of client motivation to remain in treatment.

Furthermore, the multivariate analyses and the research design used by

Hubbard and colleagues (1989, pp. 165-166) carefully considered alternative

assumptions about measurement validity and took into account potential

indicators of client motivation, including previous treatment and reasons for

entering treatment.

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TABLE 1. Odds ratios* for treatment duration for posttreatment outcomes in

the first year after treatment

*Results of logistical regression models considered age, race, sex, source of referral, prior

treatment, and pretreatment drug use pattern and controlled for posttreatment recidivism to

treatment.

+Because of small sample sizes, two categories of time In treatment are combined for the

logistical regression model.

a

p<.05

bp<.01

c

p<.001

SOURCE: Hubbard et al. 1969

Analyses of the costs and benefits of each modality found that there was a

substantial return on investment in terms of reducing crime. Using a cost-ofillness framework, the crime-related economic costs of drug abuse before,

during, and after treatment were estimated. Regardless of the summary

measure used or the modality, the benefits matched or exceeded the costs of

treatment within the first year after a typical client terminated a program. By this

time, there was a four-to-one return on the investment of tax dollars for law97
abiding citizens for both methadone and residential programs (table 2).

However, the crime-reduction impact estimated here represents only a portion

of the potential savings attributable to drug abuse treatment. Significant returns

also are gained by changes in employment, productivity, and illegal earnings

independent of criminal activity (French et al., in press; French and Zarkin, in

press) and in terms of the contributions of treatment to reducing the health care

costs related to drug abuse (Hubbard et al. 1989, p. 166).

TABLE 2. Crime reduction in the first year after treatment: ratio of benefits to

costs of treatment

Modality

Impact Category

Outpatient

Methadone Residential

Outpatient

Drug Free

Costs to law-abiding citizens 4.04 3.84 1.28

Costs to society 0.92 2.10 4.28

SOURCE: Hubbard et al. 1989

TREATMENT CAREERS

Drug abuse and its treatment is a recurring phenomenon for many. The history

of drug abusers often is marked by numerous episodes of drug abuse and

treatment. However, there is little research that documents the nature of

treatment histories or their role in the effectiveness of any specific treatment

episode, the long-term prognosis of recovery from drug abuse, or the

cumulative costs and benefits of the treatment career (Marsden et al. 1988).

Much of what is known about the treatment histories of drug abusers comes

from the Drug Abuse Reporting Program (DARP). Joe and Gent (1978) found,

for instance, that 39 percent of those entering the programs participating in

DARP had been admitted previously to drug abuse treatment, and in the 6

years after leaving the program, about 61 percent had a subsequent treatment

experience. The percentage of clients in drug abuse treatment during each of

the posttreatment years ranged from 39 to 40 percent in years 1, 2, 3, and 6

and was 31 percent 12 years after admission to treatment (Simpson et al.

1986).

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Comparing the average age of those entering treatment in the TOPS with those

in the DARP studies suggests that the average age of beginning regular drug

use and then entering treatment for the first time decreased between 1970 and

1960. Younger clients born in 1960 or later began regular drug use on average

at age 14 and first entered treatment at age 17. Older clients born in previous

decades began drug abuse and first entered treatment at progressively older

ages. Although these groups of clients may not be representative of all drug

abuse treatment clients, these trends are indicative of an increasingly younger

client at treatment entry and a younger drug abuse treatment population.

About two of five clients had a drug abuse treatment episode before entering

the program included in the study; 21.5 percent had received treatment for

alcohol abuse; and about 24.1 percent had received treatment for a mental

health or emotional problem.

The drug abuse treatment histories of many clients in TOPS are lengthy,

characterized by multiple episodes in several modalities and perhaps years

spent in treatment. Excluding detoxification and including only the three major

modalities, there were an average of 2.4 episodes of drug abuse treatment. If

we consider the experience of clients ages 30 and older to represent the

experience of a drug abuser who may be near completion of the drug abuse

and its treatment history, drug abusers may in their lifetimes expect to have

three episodes of treatment, and 63 weeks are likely to be spent in treatment.

These lifetime measures of drug abuse treatment histories suggest that drug

abuse and its treatment are recurrent phenomena for many. Although any

specific treatment episode may result in lengthy periods of abstinence, for many

the episode results only in improvement, not cure. There is a possibility of

relapse to drug use and a subsequent return to treatment. These findings

suggest that substantial public expenditures may be necessary over the life of a

typical drug abuser to provide treatment for recurrent problems.

Weighing the costs and benefits for a specific treatment episode has been a

typical approach for benefit-cost models. Average lengths of stay in the TOPS

data are 159 days for residential treatment, 267 for outpatient methadone

treatment, and 101 for outpatient drug-free treatment, yielding total average

treatment costs for a single treatment episode of $2,942 for residential, $1,602

for outpatient methadone, and $606 for outpatient drug-free clients. Summing

the intreatment and posttreatment benefits often yields a favorable ratio of

benefits to costs for society; indeed, in most cases the benefits of providing

treatment are substantially higher than the costs.

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If we include the total treatment career, an average of $2,153 (based on 21

weeks of methadone, 8 weeks of residential, and 4 weeks of outpatient drug

free) had been spent on treatment for a typical client before clients entered the

programs studied in TOPS. If one adds this career cost, the benefit-cost ratios

for a single episode are substantially reduced.

Furthermore, treatment received after termination from a program needs to be

considered. Approximately 20 to 30 percent of clients in each modality return to

some form of treatment within 1 year. About 25 percent of methadone clients

are maintained on methadone for extended periods, and about one in five

residential and outpatient clients reports readmission in the 5 years after

treatment. Appropriate calculation of these subsequent treatment costs also

needs to be factored into a comprehensive benefit-cost model.

Two alternative approaches are suggested: one focusing on the individual

program as the cost element and the other on the treatment system as the cost

element. If one considers the costs of previous and subsequent treatment in

calculating the benefit-cost ratios, reduction in expected future treatment costs

could be considered as part of the benefit equation. A broader perspective

requires a summing of all treatment costs compared with the benefits. Thus,

the accumulation of benefits over a drug-using career after initial treatment

should be compared with the accumulating costs of treatment over that career.

A more refined approach would consider the marginal benefits of each

succeeding episode.

COMPONENTS OF TREATMENT

A comprehensive cost framework of drug abuse treatment programs assumes

that there is an agreed-upon definition of treatment, that the dimensions of

treatment have been identified, and that there is a fair degree of consistency

within treatment types. However, there is no consensus on what constitutes

treatment. Similarly, treatment process is poorly defined. However, it is useful

to regard treatment as a specific set of procedures, approaches, therapies, or

services that are designed to achieve certain goals. Treatment process, which

can be thought of as the steps or the dynamic movement from addiction to

recovery, also is defined poorly. In the context of drug abuse, this typically

involves changes in one or more areas of a client’s life. Formal specifications

and descriptions of drug abuse treatment and treatment process lag behind the

work generally present in the literature on treatment outcomes. Thus, Sells

noted that “in view of the general development of the field of drug abuse

treatment, no standard and generally accepted ‘treatments’ . . . exist” (1974, p.

256). Economic research on drug abuse treatment will have serious limitations

until these problems are resolved.

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Several researchers have examined elements of drug abuse treatment and

treatment process. Ball and coworkers (1986) and Simpson and colleagues

(1986) have analyzed data at the aggregate program level. Price (1986)

examined the organizational environment of drug abuse treatment but included

no client-level data on treatment process. Magura and coworkers (1988)

assessed participative decisionmaking by clients in methadone clinics and its

effects on process and outcomes. De Leon (1986) outlined the levels of the

therapeutic approach as structure, elements, and process. Holland (1986)

included organizational, client, and process variables as predictors of planned

duration. Allison and colleagues (1985) focused on service for clients in the

programs. LoSciuto and colleagues (1984) and Aiken and coworkers (1984)

concentrated on the counselor characteristics and the progress of clients in

terms of behavioral change, as have McLellan and colleagues (1988). Biase

and coworkers (1986) and Wheeler and colleagues (1986) focused more on the

progress of the client through treatment in terms of cognitive development of

self-concept. Joe and coworkers (1991) conducted a secondary analysis of

TOPS to examine the process of services received and tenure in methadone.

None of these studies has fully integrated the many elements of treatment

structure and treatment process. To develop a cost framework, we must

attempt to integrate the complex array of elements. A first step is the

development of a conceptual model that organizes the various components and

suggests how the effects of the individual components and their interactions

can be identified.

A proposed framework drawn in part from psychotherapy models is illustrated in

figure 1. This framework suggests that five levels of variables and the factors

influencing each level need to be considered:

• The environment

• The program

• The counseling and services available to clients in the program

• The treatment plan specifying the service for individual clients

• The client

At the client level, the process of individual change during the course of

treatment needs to be considered. This dynamic element of treatment process

often has been neglected. Each level and the linkages among the levels must

be examined systematically, and cost implications for each need to be

developed. At the program level, interest should focus on the administrative

structures, policies and procedures, staff-to-client ratios, staff training, and other

objective, clearly identifiable characteristics of the program environment. At the

program level, structure refers to such factors as modality, stated admissions

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FIGURE 1. Conceptual model of treatment process

102
policy, organization, staff training level and experience, and staff-to-client ratio.

Philosophy concerns the program’s stated theoretical orientation, treatment

rationale, and goals. Function relates to how well the program’s operation

conforms with its stated philosophy.

At the counseling and service level the focus is on the functional aspects of

different program components, including the more qualitative aspects of

availability, nature, and quality of services, Service is more specific and refers

to identifiable services a program offers and their quality; examples are

vocational and educational training, insight-oriented group psychotherapy,

family therapy, and biofeedback training. A key element of counseling and

service is the provider (McLellan et al. 1988). Characteristics of counselors and

service providers include objective features such as years of training and

experience and personal qualities such as warmth, sensitivity, and empathy.

The final primary dimension is the client. Treatment at the client level

comprises variables such as the receipt of, satisfaction with, and perceived

need for services. Perhaps more important at the client level is the dynamic of

change experienced by the client. Most programs implicitly or explicitly plan

progression through treatment, either as a 12-step model, a methadone-toabstinence or maintenance regimen, or stages in a therapeutic community.

Research has seldom, if ever, examined the nature and rate of this progression

as either a dependent or predictor variable.

A major limitation of past drug abuse treatment research is a failure to examine

fully changes in attitudes, motivation, knowledge, and skills associated with

participation in treatment. These include changes in beliefs, attitudes, and

knowledge about dependence and recovery and behavioral changes during

treatment. These cognitive and behavioral changes need to be related to the

major types of treatment considered here as well as, where possible, to specific

components of treatment. Comparisons of treatment outcomes, posttreatment

and in-treatment among programs with different components of treatment

should provide valuable information about those components of multimodal

programs (McCrady and Sher 1985) that are either useful or superfluous, The

application of psychological learning theory to the study of relapse (Marlatt and

George 1984) has led to the development of specific treatment techniques

designed to prevent relapse and minimize the effects of brief lapses (Sorensen

et al. 1987; McAuliffe and Chien 1986).

The key concept is that clients may receive essentially the same treatment but

progress at different rates. To fully understand treatment process and link

process to cost and outcome, it is necessary to understand client change and

describe the program and service/counseling-level components, including the

103
characteristics of therapist and service provider. As an example of the

component approach, a model of methadone treatment based on a resource

allocation and consistent with clinical experience is described.

If methadone treatment is to achieve its objectives, ways to further enhance its

efficacy must be developed and demonstrated in typical community-based

programs. The efficacy must be established within reasonable cost constraints

and with replicable (and disseminable) clinical protocols that can be

implemented in other community-based programs, In the example shown in

figure 2, a multifaceted protocol for methadone treatment is presented, and four

key components built on a standard base on effective counseling are identical.

These elements have been shown to be critical outcomes through reviews of

the literature, current experience with clinical trials to improve counseling in

methadone treatment, and consultation with program directors and staff.

The model shown in figure 2 indicates the need for treatment to consider both

the reduction of drug use and the improvement of productive functioning. The

achievement of both goals requires an integration of services focusing on

medical/drug management to reduce drug use and the provision of

psychological/social services to restore productivity. Peer support groups can

encourage treatment integration and retention in treatment to maximize the

opportunity to benefit from the available services. To maintain the benefits, a

program of aftercare or continuing care with a strong peer component is

necessary to prevent relapse. The basic hypothesis is that there is an

interactive or additive effect of each component on outcomes.

From a benefit-cost perspective, it Is necessary to assess the marginal benefits

of the incremental services compared to the marginal costs. To investigate this

issue, the budget allocation for each component is specified, and the

incremental benefits are compared to the costs. The most expensive services

for assessment, stabilization, and treatment planning and integration are

required in the first 6 months of treatment. Most clients stabilized in treatment

for more than 1 year typically will need less intensive and expensive services

such as relapse prevention and crisis intervention. Our assumption is that

effective service could be delivered for $5,000 in the first year of treatment and

then for less than $1,500 in subsequent years.

Although many clients need long-term prescriptions of methadone, they often

reach a point after which they are employed and lead stable, functional, and

socially acceptable lives, and their service needs are no longer as great as they

were. Some researchers (Novick et al. 1988) have argued that traditional

treatment places increasing demands on clients and that long-term clients

should be able to get methadone with less restriction. Wesson (1988) pointed

104
FIGURE 2. A resource allocation model for methadone treatment
out that, although some level of reduced services may be appropriate, 8 of the

40 clients (20 percent) in the medical maintenance experiment (Novick et al.

1988) relapsed, even after several years of stability before the trial. Based on a

review of the literature, Brown and Ashery (1979) found that aftercare focused

on relapse prevention and the development of self-help groups may be the

most appropriate for an addict population. This approach not only reduces

treatment demands for stable clients but also includes intensive early

monitoring and education to prevent relapse. The benefits of an effective

aftercare relapse prevention program can result in a reallocation of resources to

clients entering treatment and to those who relapse despite maintenance on

methadone.

IMPAIRMENT AMONG DRUG ABUSERS ENTERING TREATMENT

Drug abuse treatment programs traditionally have been expected to accomplish

three main objectives: reduce drug use, eliminate criminal behaviors, and help

clients get and hold jobs. Drug abusers currently entering treatment suffer from

a greater variety and severity of problems in addition to their drug abuse than

previously has been the case. An accumulating array of studies reveals

multiple psychiatric, physical, vocational, social, and other problems among

drug abusers. Many treatment programs also must deal with more numerous

and more complex problems such as pregnant addicts and their prenatal care,

human immunodeficiency virus risk behaviors, and co-occurring psychiatric

disorders. To address the traditional and new issues it is necessary to develop

a more comprehensive understanding of the range and severity of the problems

presented by clients/patients entering treatment, the role of these problems in

treatment, and the potential costs and benefits of drug abuse treatment alone

and in combination with comprehensive services.

Studies of the relationship between drug abuse and criminal behavior,

employment, and severity of psychiatric problems have been the only research

available on the types and levels of problems of clients/patients entering drug

abuse treatment. Research based on assessment of multiple problems, such

as that with the Addiction Severity Index (ASI) (McLellan et al. 1985), has

identified a range of problems presented by clients. The investigation of their

role in service allocation and treatment outcome is expanding. Such research is

important because outcomes of treatment could be affected as strongly by cooccurring problems as by the treatment, especially if those problems are not

addressed with tailored treatment plans and/or adjunct services.

Some client problems may predate drug abuse. An antisocial personality

disorder may, in fact, precipitate involvement with drugs. In addition, other

problems may develop along with drug abuse. A subset of these co-occurring

106
problems may be, at least in part, the result of external circumstances that also

are causally related to drug abuse. A severe loss, for example, may bring on

depression and drug or alcohol abuse, and socioeconomic and environmental

factors may increase the risk of unemployment and exposure to illegal drugs.

Finally, concomitant problems may be the direct result of drug abuse, for

example, organically based cognitive and health problems attributable to the

use of certain types and amounts of alcohol and/or other drugs. Some clients

entering treatment will have none of these other problems; some may have a

few moderate problems; and some may have multiple serious problems, Table

3 presents the prevalence of the problems reported by clients entering the three

major treatment modalities in the years 1979 to 1981.

TABLE 3. Concomitant behaviors in the years before admission, by modality

Outpatient Outpatient

Methadone Residential Drug Free

(N=4,184) (N=2,891) (N=2,914)

Behavior (%) (%) (%)

Predatory criminal activity 33.4 59.8 36.5

Illegal activity as primary

source of income 23.2 33.9 12.0

Fully employed

(40 weeks or more) 23.6 14.7 25.4

Heavy alcohol 25.0 41.7 35.7

Suicidal thoughts or attempts 28.9 43.8 47.6

Multiple (3 or more)

drug-related problems 40.9 63.3 50.1

NOTE: Clients may report more than one type of behavior. Because the

number of respondents differs slightly for each of the behaviors, only

total population sizes for the three modalities are presented here.

SOURCE: Hubbard et al. 1989

Limited information is available about the nature and extent of problems that

might be characterized as “impairments or dysfunctions,” and we know even

less about how they may affect treatment and outcomes. Comprehensive and

standard assessment of the variety of problems presented by clients is needed.

Furthermore, how these problems are related to the treatment plan in general,

the appropriateness of specific types of treatment, and the need for adjunct

107
services must be examined. The pattern of drug use and the extent of drug

dependence have been found in previous research to be related to the

effectiveness of treatment in general, the effectiveness of specific types of

treatment, and a variety of treatment outcomes. To categorize client patterns of

drug use and the severity of dependence, assessment must consider the types

and amounts of substances used, the frequency of use of substances, and the

degree of dependence on those substances. The other domains of impairment/

dysfunction that should be assessed include:

• Co-occurring psychiatric problems and their severity

• Neurological or other cognitive impairment

• Basic functioning problems

-Physical health problems

-Social functioning problems

-Vocational and educational deficits

• Crime and criminal justice involvement

The nature and extent of the multiple problems can have important implications

for service needs for clients and potential outcomes. Summary measures of

impairment and dysfunction would therefore have great utility for the purposes

of client evaluation. The results from the TOPS and the ASI suggest that a

quantitative composite measure of severity does not summarize effectively the

nature and extent of multiple problems. The dimensions of the ASI essentially

are unrelated (McLellan et al. 1985), a result that was replicated with the TOPS

data. Table 4 shows one typology developed from the TOPS data that

considers drug use, psychiatric, criminal, and multiple impairments. This table

also illustrates the differing prevalence of impairments across the major types of

programs. Such a typology may be a more appropriate and clinically useful

method of describing and summarizing multiple problems.

This classification suggests that some types of clients likely will require more

extensive resources. From a cost-effectiveness perspective, it is critical to

assess the potential benefits from various allocations of resources. Minimally

impaired clients should require the fewest resources. Severely impaired clients

may require extensive resources whose costs far outweigh the benefits. The

matching of therapies to clients offers the most potential to moderately impaired

clients (McLellan et al. 1983). A conceptual model of impairment could provide

important data to inform clinical practice and the optimal allocation of resources,

Minimally impaired clients may need only basic drug abuse counseling,

108
TABLE 4. Typology of multiple problems in the year before admission

Outpatient

Methadone Residential Drug Free

Problem (%) (%) (%)

Drug abuse only 35.9 13.6 24.3

Drug abuse plus:

Three or more drug-related 13.4 11.2 11.6

problems

Suicidal indicators 7.6 5.6 11.6

Predatory crime 12.1 12.4 8.5

Multiple problems 30.6 57.6 44.7

(combinations of

the above)

Suicidal and 3+ drug

problems

(9.2)

Crime and 3+ drug

problems

(9.7)

Crime and suicidal (3.8)

Crime, suicidal, and (7.9)

3+ drug problems

(n=4,184)

SOURCE: Special analysis for TOPS

(10.2) (16.4)

(19.4) (8.3)

(5.5) (6.1)

(22.5) (13.9)

(n=2,891) (n=2,914)

whereas severely impaired clients may need long-term basic care and may not

benefit from habilitative or rehabilitative services. The major resource allocation

and matching decisions will involve those who can benefit most from specific

types of services.

109
CONCLUSION

The major types of publicly funded drug abuse treatment have been shown to

be effective, and benefit-cost ratios greater than 1 have been obtained for

outpatient methadone, long-term residential, and outpatient drug-free

modalities. Such results justify the overall investment in treatment but provide

little insight into ways to improve effectiveness and increase benefit-cost ratios.

New perspectives are necessary to move beyond this basic information.

If the investment in treatment is to produce a maximum return, multiple

approaches and improvements need to be considered in resource allocation.

Broader recruitment, more comprehensive assessment, improved services,

matching clients to services, increased retention, and an expanded continuum

of care need to be considered in terms of their contribution to outcomes. A

refined benefit-cost framework of clients and treatment should help provide

more precise estimates of these contributions. New frameworks need to

include consideration of the following:

• Stage in the treatment career of clients

• Components of treatment structure and process

• Typology of client impairment

Such disaggregation of the entity of “treatment” and its appropriate application

to clients of different types is essential. The specific elements and clienttreatment matches then can be allocated costs and benefits that should suggest

ways to prudently invest new monies for demand reduction. With these

expanded frameworks, alternative benefit-cost and cost-effectiveness

calculations can be made, and decisions about resource allocation can be

better specified.

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versus professional drug counselors: The progress of clients in treatment.

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Jarlais, DC.; Anderson, M.; Dole, V.P.; and Nyswander, M.E. Methadone

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Etiology, treatment, and 12-year follow-up outcomes, J Drug Issues

16(1):107-121, 1986.

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abstinence in a therapeutic community: Follow-up outcomes.

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therapeutic community treatment: A comparison of male and female drug

abusers. J Drug Educ 16(2):191-196, 1986.

AUTHORS

Robert L. Hubbard, Ph.D.

Program Director for Alcohol and Drug Abuse Research

Center for Social Research and Policy Analysis

Michael T. French, Ph.D.

Senior Economist

Health and Human Resource Economics

Research Triangle Institute

Research Triangle Park, NC 27709

113
Cost-Effectiveness of Drug Abuse

Treatment for Primary Prevention

of Acquired lmmunodeficiency

Syndrome: Epidemiologic

Considerations

Thomas M. Lampinen

INTRODUCTION

Since the first clinical reports of acquired immunodeficiency syndrome (AIDS)

among intravenous drug users (IVDUs) were published and confirmed (Masur

et al. 1981; Small et al. 1983), there has been Increasing recognition that IVDUs

represent a “second wave” of the human immunodeficiency virus type-l (HIV-l)

epidemic in the United States. Nationally, 226,000 (Hahn et al. 1989) to

335,000 (Booth 1968) IVDUs are estimated to be infected with HIV-1 already,

and more than 1 million are thought to be at risk (Schuster 1988).

Approximately 50 percent of the heterosexually acquired AIDS cases and 75

percent of AIDS cases among children are attributed to the intravenous (IV) use

of drugs by a sexual partner or parent, respectively (Hahn et al. 1989). In the

South Bronx, where the prevalence of IV drug use is high and heterosexual

spread of the virus has been documented, levels of HIV-1 infection among

young adults already approach those observed in central Africa (Drucker and

Vermund 1989).

Lifetime direct medical costs associated with AIDS currently average $40,000 to

$75,000 (Hellinger 1990; Seage et al. 1990), with an increasing trend in

Medicaid financing of HIV-related medical care (Green and Arno 1990). The

therapeutic use of antiviral agents to slow the progression of disease may

increase these costs modestly (Hellinger 1990; Scitovsky et al. 1990). Few

studies have compared the costs incurred by IVDUs with those incurred by

other groups diagnosed with AIDS. One recent report suggests that such costs

may indeed differ, reflecting IVDUs’ significantly decreased access to health

care services (Hidalgo et al. 1990).

114
In the absence of any medical interventions (e.g., vaccines), primary prevention

of HIV-1 infection among IVDUs through behavioral change is essential.

Toward this end, rapid expansion of drug treatment capacity has been

recommended by the Public Health Service (Coolfont Report 1988), the

National Academy of Sciences/Institute of Medicine (Institute of Medicine 1986),

the National Research Council (Turner et al. 1969), and the Presidential

Commission on the Human lmmunodeficiency Virus Epidemic (1988).

This chapter explores some of the epidemiologic and public health issues

involved in evaluating the cost-effectiveness of substance abuse treatment as

an AIDS prevention strategy. As a viral disease that is not uniformly distributed

among IVDUs in the United States and among subpopulations of IVDUs within

urban communities, what data should be used to allocate limited prevention

resources both nationally and locally? What outcome measures are appropriate

when comparing the cost-effectiveness of two treatment programs or modalities

in preventing HIV-1 infection? Finally, what proportion of AIDS prevention

monies are best allocated to drug treatment and in which circumstances? That

is, are there opportunity costs associated with funding drug treatment expansion

instead of alternative prevention strategies that target IVDUs (e.g., outreach

education, bleach distribution programs, and syringe exchange programs)?

RESOURCE ALLOCATION

Considerable geographic variation exists in the prevalence of HIV-1 among

IVDUs in the United States, ranging from 0 to 65 percent among entrants to

drug treatment facilities (Hahn et al. 1989). This suggests that certain

geographic areas might benefit from Federal AIDS prevention dollars more than

others. Drug treatment resources might be better spent in areas where

infection levels are still relatively low but the risk for acquiring HIV-1 infection is

high; less money might be spent in areas where HIV-1 infection apparently has

not yet been introduced among IVDUs. Are Federal AIDS prevention monies

(including those designated for expanded drug treatment capacity) currently

allocated to areas where they have the greatest potential for reducing the

numbers of new infections among IVDUs?

Typically, most Federal AIDS prevention dollars are designated for only those

Standard Metropolitan Statistical Areas with the highest cumulative incidence

rates of diagnosed AIDS cases. With regard to prevention of HIV-1 infection

among IVDUs, this is unfortunate for two reasons. First, the spectrum of

mortality attributable to HIV-1 infection among IVDUs is much greater than that

which meets the stringent diagnostic criteria for AIDS (Stoneburner et al. 1988;

Selwyn et al. 1989). In effect then, much of HIV-related disease among IVDUs

is not considered when resources are allocated nationally. Second, the latency

115
period between initial HIV-1 infection and the development of AIDS has been

estimated to be 10 or more years (Bacchetti and Moss 1969; Greatbatch and

Holmes 1989).

Because trends in the diagnosis of the end-stage disease cannot be used to

measure reliably current trends In new HIV-1 infections, it is inappropriate to

use them as the principal criteria for allocating limited drug treatment resources.

More appropriate criteria are needed, such as the results of serologic surveys

that assess the prevalence of HIV-1 Infection among IVDUs.

On a national scale, the current HIV-l surveillance effort among IVDUs needs

to be expanded significantly and modified to contribute to resource planning

efforts. The Centers for Disease Control conducts treatment-based HIV-1

serosurveys of IVDUs in fewer than 50 sites nationwide (Dondero et al. 1988;

Hahn et al. 1989). In contrast, no serosurveys are conducted in hundreds of

other towns with methadone programs and sizeable numbers of IVDUs.

In Illinois, for example, HIV-1 seroprevalence among IVDUs outside Chicago is

not assessed. No surveillance is conducted in smaller communities, including

those with methadone programs and sizeable numbers of IVDUs (e.g.,

Springfield, Peoria, Rockford, and Waukegan, IL, and East St. Louis, MO). In

these smaller communities, voluntary antibody testing sites are the sole source

for seroprevalence information, despite their known inadequacy for estimating

community infection rates (Dondero et al. 1988; Hull et al. 1988; Raymond

1988). Initiation of serologic surveillance is essential In these smaller

communities, because the spread of HIV-1 among IVDUs can be rapid once

introduced (DesJarlals and Friedman 1988).

In addition to expanded treatment-based sampling, sampling sites will have to

be added to the serologic surveillance system to monitor important

subpopulations of IVDUs and appropriately direct prevention resources. For

example, younger IVDUs with a shorter history of injectable drug use appear to

be underrepresented in Chicago treatment-based HIV-1 serosurveys (Lampinen

et al. 1989a). Specifically, IVDUs younger than 25 numbered so few in the first

1 P-month sample of treatment program entrants (25 out of 795) that stable

estimates of HIV-1 seroprevalence and an assessment of annual trends in this

younger group of IVDUs could not be calculated. In contrast, 17.1 percent (155

out of 906) of injectable drug users surveyed in the Cook County jail were

younger than 25.

Future serologic surveys will need to sample younger IVDUs, perhaps in jail or

prison, to direct AIDS prevention initiatives that target this subpopulation

(Vlahov et al. 1991). Additional recommendations for modifying the HIV-1

116
serologic surveillance system have been proposed by the National Academy of

Sciences: agencies considering the use of such data to make informed

resource allocation decisions would benefit from their review (Turner et al.

1989).

OUTCOME MEASURES FOR EVALUATING THE COST-EFFECTIVENESS

OF DRUG TREATMENT FOR AIDS PREVENTION

Several authors have noted a decreased risk for HIV-1 Infection among IVDUs

participating in methadone maintenance programs (Blix and Gronbladh 1988;

Brown et al. 1988, 1989; Hartell et al. 1988; Novick et al. 1986, 1986, 1989).

Can serologic testing of program participants be used to evaluate which

treatment programs or modalities are most cost-effective in preventing AIDS

among IVDUs?

It seems intuitively obvious that more successful drug treatment programs

should demonstrate lower rates of new HIV-1 infections among their clients than

programs that are less successful. Serologic evaluation of program clients is

objective, reliable, and inexpensive, and counseling guidelines have been

established. In theory, one could test clients serially and compare the risk for

becoming infected in different model programs or in different treatment

modalities.

Upon closer examination, however, the HIV-l serologic status of clients may not

be associated sufficiently with behavioral change to serve as a sensitive

outcome measure in cost-effectiveness evaluations. Some IVDUs enrolled in

methadone maintenance programs continue to inject drugs intermittently (Ball et

al. 1988; Chaisson et al. 1989; Ruben et al. 1989), and the risk for remission

and relapse between episodes of treatment is high (Lampinen et al. 1989b;

Robertson et al. 1989). Clients who continue to inject have the potential for

seriously confounding the cost-effectiveness evaluation of competing drug

abuse treatment programs or models.

An important factor that may confound the association between intermittent

needle sharing among IVDUs enrolled in a treatment program and their

personal risk for acquiring HIV-1 is the infectivity of their needle-sharing

partners. Clearly, one IVDU is at higher risk for acquiring HIV-1 from a single

needle-sharing episode with a highly infectious partner than another IVDU in a

competing program (or city) who frequently continues to share contaminated

equipment with individuals not yet infected with HIV-1.

The infectivity of a potential needle-sharing partner can be related to that

partners stage of HIV-1 disease or to antiviral therapy. During the course of

117
HIV-1 infection, the amount of infectious virus in the blood appears to be much

higher during two periods: the first few months after acquiring an infection and,

years later, in the late stages of disease (Baltimore and Feinberg 1989). In

contrast, needle-sharing partners who take antiviral medications may have

relatively low infectivity, because such medications appear to initially inhibit the

reproduction of the virus (Chaisson et al. 1988).

Periods of high and low infectivity have been shown repeatedly to have very

important Implications when modeling the spread of HIV-1 (Anderson et al.

1967; Ahlgren et al. 1990; May and Anderson 1987). Weinstein and colleagues

(1989) recently have extended these implications, suggesting that varying levels

of partner infectivity can seriously confound cost-effectiveness evaluations of

AIDS prevention programs.

The inability to draw clear causal associations between behavioral risk

reduction and serologic status underscores the importance of supplementing

HIV-1 serologic testing with valid and reliable measures of risk-taking behavior.

Considerable attention already has been paid to developing valid measures of

self-reported drug use, with and without drug screening (Rouse et al. 1985), but

few studies assessing the validity and reliability of more specific needle-sharing

surveys have been published (Kipke and Drucker 1989). Professional

refinement of survey instruments and interviewer techniques is indicated if costeffectiveness evaluations are to proceed. From an epidemiologic point of view

the comparison of programs or modalities by serologic testing alone appears

inappropriate; a combination of self-reported behavior, serologic testing, and

perhaps drug screening is preferable when conducting cost-effectiveness

evaluations.

ALTERNATIVE AIDS PREVENTION STRATEGIES AND THE OPPORTUNITY

COSTS ASSOCIATED WITH DRUG ABUSE TREATMENT APPROACHES

The prevention of AIDS among IVDUs is a public health issue. Drug treatment

is one approach to reducing new HIV-1 infections among IVDUs, but alternative

strategies also exist. These alternative strategies may be effective and

comparatively inexpensive: as such, any discussion of the cost-effectiveness of

drug treatment for AIDS prevention must address the possibility of opportunity

costs associated with a drug abuse treatment approach. Are there occasions

when drug abuse treatment has limited efficacy as an AIDS prevention

measure? What is the evidence that alternative strategies also may be

effective? What are the comparative costs of alternative strategies?

118
Limitations of Drug Treatment as an AIDS Prevention Measure

Despite the efficacy of methadone in reducing AIDS-related behaviors among

opiate addicts, it is important to acknowledge its significant limitations as an

AIDS control measure. As previously discussed, methadone treatment

modalities are opiate specific and do not eliminate the injection of other drugs

(e.g., cocaine and cyclizine) among clients of treatment programs: the risk of

relapse among program entrants is high; and methadone modalities do not

reduce the risk of HIV-1 infection among those subpopulations of IVDUs who

are unable or unwilling to enter treatment programs, especially recent initiates

to drug injection practices. Finally, the creation of new treatment facilities and

the expansion of existing programs is a process that typically requires a few

years to accomplish (Newmeyer 1989). For cities with intermediate rates of

HIV-1 seroprevalence, the time requirements for treatment expansion may

result in lost battles against HIV-1 contagion.

Chicago provides a useful case study. Only an estimated 2,045 formal drug

treatment slots are available to the estimated 70,000 to 90,000 IVDUs (Chicago

Department of Health 1989). A 25-percent increase in capacity using new

Federal and State dollars has begun, but in many cases, facilities are

experiencing difficulties with municipal zoning regulations and staff shortages

that limit their expansion (Chicago Department of Health 1989). Clearly,

additional approaches are required to reduce the risk of infection among the

estimated 96 percent of IVDUs who are unable to enter treatment.

A similar experience was reported in San Francisco. Moss and Chaisson

(1988) have described an attempt to screen large numbers of IVDUs early in

the course of an HIV-1 epidemic with the express aim of directing seropositive

IVDUs into drug treatment and moderating the epidemic’s impact. During the 3

years required to establish and expand programs, however, the number of

infected IVDUs doubled.

In those areas where the demand for publicly funded drug treatment slots

greatly exceeds the supply (or where only a small minority of IVDUs are

enrolled in treatment programs), alternative prevention strategies may be more

cost-effective than expansion of treatment facilities, keeping in mind the public

health goal of minimizing the numbers of new HIV-1 infections in the

community.

Some groups of IVDUs are unlikely to benefit at all from expanded treatment

program capacity. Recent initiates into injectable drug use-unlikely to enter

treatment for several years and at high risk for HIV-1 infection-are an

important example. Previous reports have noted that IVDUs typically become

119
infected with hepatitis B virus shortly after initiating injectable drug use (Alter et

al. 1990). More recently, a Baltimore study (Vlahov et al. 1990) found that 15.1

percent of IVDUs who had begun injecting drugs in the 18 months before

serologic evaluation were already infected with HIV-l. These data strongly

suggest that other AIDS prevention strategies must complement drug treatment,

both to control the epidemic among IVDUs not currently in treatment and to

protect IVDUs in treatment programs from HIV-1 infection in the event of

intermittent injection or relapse.

Alternative Risk-Reduction Strategies for IVDUe

For those IVDUs unable or unwilling to enter drug abuse treatment programs,

AIDS risk-reduction counselors emphasize that the best way to avoid getting

AIDS is to stop injecting drugs completely. They recommend the elimination of

needle sharing and provide explicit instructions for disinfecting contaminated

injection equipment.

To Increase the likelihood of behavior change, many AIDS prevention programs

include the distribution of bleach, which has been shown to be relatively

nontoxic (Froner et al. 1987) and an effective disinfectant in the laboratory

(Resnick et al. 1986) and in syringe disinfection simulations (Newmeyer et al.

1990). The distribution of bleach (in contrast to information dissemination

alone) is essential to increase levels of its use among IVDUs (Abdul-Quader et

al. 1990; M. Iguchi, personal communication, 1989).

Community-based outreach educators are effective in reaching IVDUs who

have no history of enrollment in drug abuse treatment programs. In Chicago,

more than 30 percent of IVDUs recruited into the AIDS Outreach Intervention

Project study reported no prior drug treatment. This has been observed

nationally as well: About 40 percent of the National AIDS Demonstration

Research IVDU sample, also recruited out of treatment settings, report no prior

history of drug abuse treatment (B. Brown, personal communication, 1990).

Outreach projects promote AIDS risk reduction among the considerable

proportion (Ball et al. 1988) of IVDUs who relapse following enrollment in

methadone treatment programs (table 1).

Many participants in education and bleach distribution programs have reported

reductions In the frequency of their drug injection and needle sharing, entry into

drug treatment programs, and Increases in their disinfection of shared injection

equipment (Centers for Disease Control 1989, 1990; Turner et al. 1989; Watters

et al. 1988). Evaluations of program effectiveness are still in progress (Centers

for Disease Control 1990); table 2 summarizes preliminary findings of

120
intervention programs in Miami, Chicago, Philadelphia, Houston, and San

Francisco.

TABLE 1. Percentage of current IV drug users self-reporting prior methadone

maintenance treatment

City Sample Size Prior Treatment (%)

Chicago 661 50.8

Baltimore 115 35.7

Denver 139 36.0

El Paso 92 54.3

San Francisco 741 28.2

Total 1,748 39.2

SOURCE: Lampinen et al. 1989b

Outreach education and bleach distribution have potential for preventing new

HIV-1 infections among IVDUs. In view of the lower direct costs of such

programs, drug treatment may contribute to the control of community-wide AIDS

epidemics, but when employed as the principal AIDS prevention strategy, it may

have associated opportunity costs.

This issue has been briefly addressed by Newmeyer (1989) in his discussion of

the cost-effectiveness of two alternative prevention strategies. Table 3

suggests that, even if a much smaller proportion than 25 percent of injectable

drug users adopt needle disinfection as a result of outreach educational efforts,

the cost-effectiveness of such an approach may be considerably greater than

methadone maintenance.

Newmeyer (1989) does not question the essential role of drug treatment in

controlling AIDS but whether AIDS prevention dollars for IVDUs are being used

most cost-effectively. Funding treatment program expansions at the expense of

significant outreach education initiatives is unlikely to be cost-effective

whenever the number of publicly funded drug treatment slots cannot meet

current demand or whenever only a small minority of current injecting drug

users are enrolled in treatment programs. In such instances the possible

opportunity costs associated with drug treatment strategies should be

considered.

121
TABLE 2. AIDS outreach education projects reporting IV drug use behaviors

at initial and first 6-month followup interviews

Baseline (%) 6-Month Reinterview (%)

Entered drug treatment

Miami (n=376) 14

Chicago (n=561) 25

Philadelphia (n=100) 32

Houston (n=415) 22

San Francisco (n=132) 35

Reported not sharing

drug injection equipment

with friends

Miami 53 74

Chicago 18 47

Philadelphia 30 62

Houston 47 88

San Francisco 39 88

Reported always using

bleach for cleaning

shared injection equipment

Miami 3 11

Chicago 10 23

Philadelphia 6 16

Houston 4 19

San Francisco 36 43

SOURCE: Centers for Disease Control 1990

SUMMARY

The prevention of AIDS has justified recent increases in drug abuse treatment

expenditures. Three of the epidemiologic considerations involved in assessing

the cost-effectiveness of drug treatment for primary prevention of AIDS among

IV drug users were discussed. First, the considerable geographic variation in

the prevalence of the virus that causes AIDS suggests that areas with relatively

122
TABLE 3. Estimated costs of two AIDS prevention strategies

Prevention Strategy

Methadone maintenance

Cost per year per client $1,600-$2,800

“Efficacy” 75%

Cost per prevented HIV-1 infection $2,130-$3,730

Community-based outreach education

Cost per year per client

“Efficacy”

Cost per prevented HIV-1 infection

$50

25-50%

$100-$200

SOURCE: Newmeyer 1989

low infection levels may be more cost-effective targets when allocating limited

drug abuse treatment resources. Expansions and modifications in the current

national HIV-1 serologic surveillance system will be needed to make informed

resource allocation decisions.

Second, when comparing the cost-effectiveness of two alternative treatment

modalities or programs, the number of new HIV-1 infections does not appear to

be an appropriate outcome measure. Serologic testing should be

supplemented with self-reported drug use behaviors, with or without drug

testing.

Finally, significant opportunity costs may be associated with employing drug

abuse treatment as the principal approach to primary prevention of HIV-1

infection among IVDUs, when alternative and complementary approaches are

also effective. Specifically, treatment expansion is unlikely to be cost-effective

when the demand for publicly funded treatment slots exceeds the number

available and in communities where only a small minority of IVDUs are enrolled

in treatment.

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ACKNOWLEDGMENT

This work was supported in part by National Institute on Drug Abuse grant DA05285.

AUTHOR

Thomas M. Lampinen

Research Specialist

AIDS Outreach Intervention Project

University of Illinois at Chicago School of Public Health (M/C 922)

Room 555

2121 West Taylor Street

Chicago, IL 60612

128
Policy-Relevant Research on Drug

Treatment

Dean R. Gerstein

INTRODUCTION

Over the past decade, much of the federally sponsored research portfolio

directed toward drug treatment has been driven by questions such as, What

brain structures and functions are compromised when cocaine, heroin, or

marijuana is consumed? What new and better technologies for addiction

treatment, particularly new medicines, can be discovered and tested in the

laboratory or research clinic? The results of such research ultimately may be

invaluable to public decisionmakers responsible for setting and implementing

policy in the treatment system. Currently, however, these lines of research tend

to have little bearing on questions faced by public policymakers; however,

this is not necessarily a sign of poor management. Science is inherently

unpredictable, and much knowledge that is useful to public policy has resulted

from research that followed its own path. The impossibility of predicting which

paths will end where makes it foolish to inhibit scientific dynamism by leashing it

too tightly to a detailed policy agenda.

Nevertheless, much useful knowledge has resulted from research that is

grounded in explicit policy questions, This chapter lays out the framework of

policy questions about drug treatment and outlines an agenda of research

issues and initiatives that appear most pertinent to help answer those

questions.

The following discussions have antecedents in a recent Institute of Medicine

(IOM) report on the evolution, effectiveness, and financing of drug treatment

(Gerstein and Harwood 1990a). The intention here is not to summarize the IOM

report (for a summary, see Gerstein and Harwood 1990b or Gerstein and Lewin

1990). Rather, this chapter begins with fundamental policy questions and

recommendations about drug treatment that are presented in the IOM report

(chapter 7, “Public Coverage,” pp. 220-272) and proceeds to consider some of

their research implications,

129
All the research implications of the specified policy questions are not treated

in-depth. First, research recommendations appropriate to each question are

outlined briefly. In subsequent sections more detailed points are chosen for

selective discussion, namely, studies of the societal cost of illness, treatmentseeking behavior, cost-effectiveness and cost-benefits of treatment, priority

populations, Federal and State roles, and financial mechanisms.

POLICY QUESTIONS: AN OUTLINE OF RELEVANT RESEARCH

Policy consists mostly of two elements: ends and means. The principal

questions about the ends of drug treatment policy in the United States,

according to the IOM report, are as follows:

What are the fundamental principles that justify continuing public financial

support of drug treatment?

What specific priorities should guide spending for public programs?

What is the optimal level of public spending to implement these priorities?

Although questions about the ends that guide policy tend to be general in form,

questions about the means tend to be particular to current circumstances.

Currently, these questions are as follows:

How should responsibilities be allocated among the different levels of

government and especially between the two levels that have the major

responsibilities for financing public treatment, the Federal Government and

the States?

Which financial mechanisms should be used to support treatment services?

The fundamental choice lies between two models: the insurance approach

and the direct service approach.

What kinds of controls, disciplines, and incentives should be used to ensure

appropriate and effective expenditure decisions?

Principles Underlying Public Support

According to the IOM report, three basic principles justify public support of drug

treatment, all deriving from long-established political traditions, The first

principle is that public policies should seek to reduce external social costs-in

particular those relating to crime, family role dysfunctions, and welfare

dependency. The second is that public policies should remove access barriers

130
arising from inadequate income. The third is that there should be a minimum or

greater probability of a positive response to treatment.

Sensitivity to the first principle, reducing the external costs borne by society,

motivates cost-of-illness (COI) studies, which have been helpful in legitimizing

action on drug problems. More attention needs to be paid to partitioning the

social cost elements that are linked specifically to treatment needs and issues.

There also should be greater exploitation of the methodological opportunities

inherent in such comprehensive studies. Finally, the “real-time” value of COI

studies for policy would be augmented greatly If a cost-sensitive, costinterpretable set of leading COI indicators could be assessed on an annual

basis.

The second principle is removing financial barriers to treatment. The

significance of such barriers in terms of treatment-seeking behavior is still

unclear. A research program to illuminate the role of purely financial constraints

in limiting access to treatment is needed, beginning with case studies and focus

group methods and leading to incorporation of key items into several relevant

large-scale surveys.

The third principle is that treatment should be limited to those individuals who

probably will respond positively to treatment. In practice, because prognosis is

subject to much uncertainty and because the final cost of treatment and the

outcome of treatment are so closely related to retention, this principle has not

received much attention. Individuals with firmer social supports at intake are

likely to be doing better at followup and also tend to draw proportionately less

on treatment resources; however, these individuals also probably generate the

least external social costs. Studies of treatment effectiveness, costs, and

benefits would give life to the principle of treating only those who can benefit,

even though only a relative handful of chronic nonbenefiters is likely to be

clearly identifiable.

Priorities for Public Support

Four priorities for public support are Identified by the IOM report. The first

priority is timely access to treatment. Program applicant waiting lists, the best

existing measure, are too heterogeneous to be meaningful. Research is

needed on the time course of treatment-seeking behavior, on the influence of

coercive factors and family history in affecting that course, and on which

program actions or other forms of public agency behavior are most important.

The second priority is treatment improvement. The major research need in this

area is to better understand caregiver behavior. What qualities make some

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counseling professionals more (or less) successful than others? Can these

qualities be taught or untaught? What organizational arrangements and

incentives generate better caregiving? More generally, a layered system of

services research is needed to understand performance variation among

programs.

The third priority is services to maternal populations-women who are pregnant

or raising children. Because there Is generally a clustering of service needs in

these populations, what is the most effective way to package these services?

Should there be a focus on putting different agencies in the same location, on

tightening referral networks by providing interfacility transportation services to

clients, on central case assignment, or on putting all service responsibilities in a

specialized drug treatment agency?

The final priority is criminal justice populations. Research needs to be

coordinated between the National Institute on Drug Abuse (NIDA) and criminal

justice research and service agencies such as the Bureau of Justice Statistics,

Bureau of Justice Assistance, National Institute of Justice, National Institute of

Corrections, and Bureau of Prisons, Major research designs should use

common definitions and items. Criminal justice institutions also provide good

possibilities for enhanced sample followup and full or quasi-experimental

control,

Optimal Levels of Expenditure

In theory, it is possible to define the right level of drug treatment expenditures

by analyzing the specific preferences of the population and the costs and

benefits of various policy options in terms of these preferences. However, data

requirements to estimate the theoretical coefficients exceed current capabilities,

and such econometric calculations do not correspond to the realities of

collective decision processes, In practice, the optimal approach can be

estimated only by surveying treatment needs in light of the previously reviewed

principles and priorities and then matching these needs against competing

budget initiatives in the political process,

Other health care and criminal justice expenditures are climbing steadily, and

they seem immune to cost-benefit considerations. The only explanation for this

disparity relative to drug treatment expenditures is the peculiar moral

interpretation of drug problems as an uncomfortable mixture of crime and

illness. A morally neutral calculus appears to be an attractive way to avoid this

discomfort, but avoiding it is not possible. Research should focus on questions

of improving effectiveness and managing costs, because these questions

provide the major bases for discussions of the treatment contribution to broader

policy goals.

132
Federal and State Roles

The relationship between Federal and State Governments in developing the

treatment system and the way it has affected the development of the system

has not been given adequate research attention, Intergovernmental

relationships within the Federal system are too important to be left to a few

experienced hands as arcane knowledge. Documentation and analytical

projects should focus on how accountability is best preserved and encouraged

in this complex, hierarchical system.

Mechanismo of Finance

There are two main ways for a third-party payer to finance services: (1) provide

grants or contracts to providers who will observe appropriate eligibility

standards for supported clients or (2) provide vouchers or certificates to clients

and let them choose freely among providers meeting appropriate licensing

standards, Most public drug treatment services are supported by grant or

contract awards. The differential effects of the two systems are uncertain.

More precisely, what effects would occur if fee-for-service Medicaid were more

widely used, as recommended by the IOM report?

lncentives

How can regulatory and funding environments reward good program

performance and punish poor program performance without rewarding

programs for excluding difficult cases and punishing them for taking their

share of such cases? An accounting function must be researched, analyzed,

built into the system, and continuously studied and upgraded to yield the best

combination of routine data collection, periodic independent inspection,

reporting, and feedback.

THE FUNCTIONS OF COST-OF-ILLNESS STUDIES

Individuals who meet diagnostic criteria for drug treatment (whether or not they

are interested in entering treatment) generally impose serious burdens on other

members of society. The harm to victims of violent crime, the damage to the

well-being and future prospects of the individual’s family, the risk of transmitting

hepatitis or human immunodeficiency virus infection, and other burdens are

called external costs. As a rule, programs to deal with specific social problems

are established when the sum of the social costs is demonstrably high enough

to warrant attention.

133
COI studies fill this demonstrative role. The purpose of COI studies is to

determine the value that illness subtracts from the productive potential of a

large social unit, such as a nation. However, the uses of COI studies extend to

four categories: political legitimation, research budget formation, substantive

research review, and problem surveillance.

Political Legitimation

Political legitimation reflects the fact that any demand for public services on a

broad scale must be translated into a recognized form of political discourse to

receive a response. COI studies translate a variety of statistical elements and

research findings, which vary in precision and lie in diverse realms of cost

accounting, Into money, the most common unit of national political discussion.

By expressing problems in financial terms, COI studies help to stimulate public

supply or purchase of those services.

Money is not the only term of political discussion. National decisionmakers also

count violent deaths, sometimes one at a time. A few shocking fatalities,

adequately publicized, may be worth billions of dollars in cost accounting.

Although COI studies are thus not the only factor in drawing political attention to

the drug problem, it would be a mistake to think that the focus on drug-related

deaths in recent years renders superfluous the COI legitimizing mechanism.

COI studies do have a serious defect as a legitimation mechanism for treatment

services: They assimilate all drug problems into the paradigm of illness. As the

IOM report documents (see chapter 2, pp. 40-57; also Courtwright 1991), drug

problems are viewed as criminal and medical in nature. A methodology is badly

needed that could begin to disaggregate the cost of drug use from the cost of

abuse and dependence. An estimate of how total drug consumption distributes

across these categories could be accomplished by appropriate analysis of

survey data. A further step would be to estimate how much greater the total

COI would be if no treatment were available, instead of the 1 million annual

admissions, and how much less the COI might be if more and better treatment

were delivered.

Research Budget Formation

The second area of application of COI estimation is research budget formation.

A research budget is a portfolio of investments. Intelligent portfolio managers

recognize that every investment bears some degree of risk, and this certainly

applies to scientific research projects. The principle of diversificationspreading the eggs across different baskets-is the method of choice to protect

against such risk. For national investment purposes, the major baskets of

134
health research are the various institutes of the Public Health Service with their

specific disease categories, including cancer, dental, heart/lung/blood,

neurological and communicative disorders and stroke, aging, and drug abuse.

(The Centers for Disease Control, National Center for Health Statistics, Agency

for Health Care Policy Research, etc., represent a different calculus.) The

question is: How many eggs-dollars-does each institutional basket deserve?

In the annual cycle of Federal appropriations, the institutes and their constituent

interests develop claims for future resources by employing two types of

expansionary arguments: the quantity of high-quality research that realistically

can be conducted and the relative importance of the illnesses on which each

institute conducts research. The first element generally is measured by the

number of qualified grant proposals left unfunded in the previous budget cycle

(especially disappointed are proposers who were senior, established

contributors or young, promising assistant professors). The second element is

measured by COI studies, Indeed, according to Rice and colleagues (this

volume), the first COI studies were constituted specifically to document that

certain diseases were chronically shortchanged in Public Health Service budget

requests.

This competitive use of COI numbers has gone virtually unremarked in the

science policy literature. There is a need to consider both the theoretical and

historical underpinnings for the use of COI analyses as strategic planning

instruments. Comparative review of COI studies is needed to standardize the

method of allocating research investments against the different cost accounts,

including the problem of chronic overaccounting for total illness costs, to which

the COI approach, in service to budget-expansion goals, lends itself.

Substantive Research Review

The third role of COI studies, substantive research review, is more directly

methodological. The first task of a COI study is to assess the literature on the

social and economic consequences of the illness and to assemble and assess

the statistical data systems that provide quantitative estimates of these

consequences. Moreover, because consequences such as job loss, disability,

or criminal activity are not exclusively the result of a specific illness but of

comorbid, collateral, or entirely unrelated processes, this review must consider

the broader literatures on such consequences and the etiologic role of the

illness in all these connections.

Those charged to perform COI studies are therefore in an excellent position, if

they do their work thoroughly, to identify deficiencies in health statistics and

other statistical data systems and to consider how these deficiencies might be

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remedied. The explicit use of COI study processes as leverage for

methodological improvements, such as standardization of items, calibration of

scaling procedures, or correlation of sampling frames in data collection efforts,

should be made a cardinal consideration in designing future COI studies.

Problem Surveillance

In none of the functions just mentioned is it essential that COI studies be highly

accurate, For purposes of legitimizing political concern, it does not matter

whether the drug problem involves $20 billion, $30 billion, or $60 billion; it is

more a question of the order of magnitude-less than $1 billion, $1 to $9 billion,

$10 to $99 billion, and so on. Precision is somewhat more important for the

purpose of research budget formation; in most cases the contrasts between

different diseases are in half-orders of magnitude or more. Finally, as an

exercise in scientific review, the contribution of COI studies is greater the less

precise the result, that is, the less accurate the result, the greater the value in

identifying where and how the data need to be improved.

The fourth task, ongoing problem surveillance, entails the possibility that COI

studies may be moderately precise, at least in terms of the stability of their

assumptions and errors over time. If this is the case, such studies would help

answer what is often the most critical and contentious policy question: Is the

problem getting worse or better? To do this, however, COI studies need to be

performed more often than once every 5 years and with a reporting lag

considerably less than the 4 to 5 years that has existed in the alcohol, drug, and

mental health field. An ongoing surveillance effort cannot and need not

routinely cover every item used in a comprehensive national COI study. It

should select leading indicators that correspond closely with major COI

elements. The occasional comprehensive studies can be used to recalibrate

and revise the indicator set. The “real-time” policy value of COI would be

augmented greatly if cost-sensitive, cost-interpretable leading indicator sets

could be assessed on an annual or more frequent basis,

RESEARCH ON TREATMENT-SEEKING BEHAVIOR

Many individuals who are interested in obtaining treatment seem to be

restrained from doing so by two factors: their own financial limitations and the

limited capacity of publicly supported programs. These are not the only factors

that affect treatment-seeking behavior; there are indications in the literature

about the significance of coercive factors and the short- and long-term role of

family history. But these indications are from an earlier generation of research

and must be validated and extended to current conditions. All the factors that

influence treatment-seeking behavior present important opportunities for

research and policy.

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Some people are too poor to afford the cost of treatment. Society has taken a

broad ethical position applicable to such circumstances-that there are certain

services, drug treatment arguably among them, that should not be denied to

anyone in need because the individual cannot pay for them. However, the

significance of funding considerations in drug treatment-seeking behavior is

unknown.

Much of the interest in research on money constraints is now directed toward

the extent and adequacy of insurance coverage (Woodward and Cartwright, this

volume). Insurance benefits are an important factor for most Americans, but

these are not the only private financial asset available to pay for treatment. To

better understand the role of money in treatment-seeking behavior, survey work

also is needed on the role of income, savings, liquidations, and formal and

informal credit lines. This research must begin with case studies on instances

in which public and private sources of similar treatments are available, in

parallel or serially (Anglin et al. 1989). Focus groups should be convened to

determine how such financial considerations enter the decisionmaking process

on treatment application and admission. Focus group members should include

intake personnel as well as individuals in treatment and current and potential

applicants. These results can be incorporated into the piloting of pertinent items

in several relevant surveys of treatment institutions and household-based and

other population samples.

The most recent estimate of the number of individuals for whom treatment is

delayed (or even denied) due to capacity limitations is from a survey conducted

by the National Association of State Alcohol and Drug Abuse Directors in

September 1989, which indicated that 66,000 individuals were awaiting

treatment admission. Although this seems to be a modest number from a

national perspective, this figure is equivalent to more than one-fourth of the total

daily enrollment in public drug treatment programs. Unfortunately, although

waiting lists are the best available indicator of the existence of unmet desire for

treatment, they are not meaningful for quantitative analysis. Drug treatment

waiting lists, unlike surgical appointment schedules or theater ticket lines, are

notoriously volatile. Programs that have waiting lists have found that they

attract even longer waiting lists when they are able to accelerate admissions as

a result of expanded capacity. Better measures of desire for treatment must be

developed, and there is a need to understand precisely how treatment program

actions and other public agency actions affect treatment-seeking behavior.

STUDIES OF TREATMENT COSTS, EFFICIENCY, AND EFFECTIVENESS

The frequency of requests for studies of the cost-effectiveness and costbenefits (CE/CB) of drug treatment seems to be caused by the desire to

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minimize expenditures and maximize return on the dollar. However, this

economic explanation is incomplete. Consider the contrast with other major

social expenditures. Although concern about health care costs is rising, many

health services are provided without worrying about the cost in areas such as

cancer, heart disease, nursing care for the permanently feeble, end-stage renal

disease (the only diagnosis with a population-wide Medicare entitlement), and

many other serious conditions. Cost controls become a factor, if at all, at the

level of access-Will the person be treated at all, based on eligibility criteria or

availability of beds or clinician time? The major decision unit is the hospital-day:

in or out?

In other social policy domains, the question of CE/CB is seldom broached. Are

prisons cost-beneficial? Are courts cost-effective? How about colleges and

universities? This is not to say that cost considerations never arise in these

domains or that resources are not allocated with some consideration of how to

economize in their expenditure. However, one does not hear a recurrent

demand in these areas for quantitative research that justifies cost levels in

terms of measured results of particular expenditures.

The demand for CE/CB measures in drug treatment programs represents

something deeper than a desire for efficiency. Underlying it is an uneasiness

about the moral qualities of people in treatment and questions about some of

the people who are providing the treatment. For those in treatment there is the

question of the degree to which the illness has been chosen by them rather

than visited upon them. Why should the public be asked to help pay for the

consequences of their choices? If it is pointed out that alcoholics are not

denied treatment for liver cirrhosis and other gastrointestinal ailments, nor

smokers denied treatment for lung cancer and coronary heart disease, and that

these, too, are the results of choices, the response is that alcohol and cigarettes

are legal, and cocaine, heroin, and marijuana are not. This is not a medical

distinction, but a moral one.

For providers, the question is: If the illness being treated has been chosen,

then is treatment really necessary to revise that choice? These questions

reverberate particularly for private-sector providers that advertise their services

far more aggressively than do other health care service providers. The high

cost of certain cases, particularly of treating troubled adolescents in psychiatric

hospitals, has been widely and skeptically publicized. All drug treatment

providers are harmed by such skepticism.

There is no escaping the demand for CE/CB findings; however, recognizing the

moral dimensions behind the questions helps to explain why they are so

insistent and why the answers are so often overlooked or brushed aside. It is

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essential that treatment-oriented research (whether oriented to preclinical

studies, clinical trials, or program evaluation) collect data, however crude they

might be, on the costs of delivering the interventions being studied. Research

also should determine the effects of interventions on different types of

admissions and after treatment is initiated. Only if the framework is built into

research programs at every level is there likely to be accurate accounting for

different elements within broad program types, Especially significant is the

need to look at the CE/CB of mechanisms such as following up on intake

contacts to try to decrease initial attrition and concentrating resources on those

who show signs of dropping out of treatment.

Research findings over the past 20 years have documented large variations in

program performance, and there is consistent correlation between time spent in

treatment and outcome. However, the evidence regarding the specific

components of drug treatment that make it effective and attractive is based only

on a scattering of careful studies of methadone programs, the consensus

judgment of experienced clinicians, and organizational common sense. Core

questions on the differences among the various modalities of public treatment

are, What client and program factors influence treatment retention, efficacy, and

relapse after treatment? How can these factors be better managed? What are

the relations of treatment performance (i.e., differential outcomes, taking initial

client characteristics into account), the content and organization of treatment

(specific site arrangements, service offerings, therapeutic approaches, staffing

practices), and the costs of treatment?

The competence, quality, and continuity of individual caregivers are likely to be

critical elements in explaining the differential effectiveness of treatment

programs. There are persuasive reasons to think that some personal

characteristics, learned skills, and procedures followed by individual drug

counselors and other clinicians contribute to measurable differences in clients’

performance. Treatment professionals usually can detect or recognize these

qualities, but studies are needed to characterize the critical elements more

objectively, measure their relative importance, and define and test improvement

strategies.

It is also critical to study more people who do not enter treatment, using

assessment instruments comparable to those used in treatment-based studies,

and including assessment of treatment-seeking behavior and motives.

Although early dropouts for whom adequate measures were obtained are a

good comparison group for multivariate study, it is imperative that untreated

controls be studied to reduce the margins of doubt around nonexperimental

results.

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Despite the difficulties of maintaining the integrity of controlled experiments in

treatment programs, these studies provide the most indisputable evidence

about comparative treatment effects, and efforts to conduct them should be

strongly encouraged. A more detailed understanding of treatment processes

through ethnographic and case study methods also is needed. This work is not

only informative but also forms the basis for the design and interpretation of

survey instruments.

Some of the most compelling results of treatment research have come from

large longitudinal studies involving thousands of clients: the Drug Abuse

Reporting Program, which included a 12-year followup (Simpson and Friend

1988), the Treatment Outcome Prospective Study (TOPS) (Hubbard et al.

1989), and the Drug Abuse Treatment Outcome Study, now under way.

Although some earlier findings such as the importance of time spent in

treatment probably will hold up in the face of changing drug markets, others

may not. Certainly, intervals of 10 years between major treatment followup

studies are far too long. There Is enough variation across time in the character

of drug epidemiology to require a more continuous sampling of treatment

admissions.

In summary, a layered system of program evaluation is needed. Certain

information (a “minimum data set” including admission and discharge status)

should be collected for every client. More detailed information should be coded

at admission and obtained at followup (whether before or after discharge) on

carefully selected study panels-which should not exclude early dropouts or

those who began but did not complete the admissions process-at 1-year, 3-

year, and 10-year Intervals after initial contact. New study panels composed of

3-year entry cohorts should begin at intervals no greater than 5 years.

REACHING PRIORITY POPULATIONS: YOUNG MOTHERS AND CRIMINAL

JUSTICE CASES

The IOM report identifies two groups as priorities for attention by the treatment

system: young mothers (either pregnant or raising children) and individuals

(predominantly young men) who are in prison, on probation, or on parole.

The responses of adult males 20 to 40 years old, who are the majority of

individuals in treatment, dominate treatment research statistics. Major research

findings on the effectiveness of different modalities and elements of treatment

seem to apply roughly as well to women with young children as they do to the

more prevalent demographic groups (Hubbard et al. 1989). Yet the significance

of childbearing and childrearing women is great in terms of the future benefits of

present treatment (or the future costs of present nontreatment).

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It seems clear from earlier studies that women in treatment who are pregnant or

have young children are especially likely to bring complex needs to the

treatment system (Beschner et al. 1981; Reed et al. 1982), but there are few

programs with appropriately tailored services, especially for pregnant women.

Reaching more pregnant women seems to require active and expensive

outreach, an expenditure that adds substantially to the costs of drug treatment,

prenatal care, and other services. Although no study has examined specifically

the number of expectant mothers In drug treatment, applying the roughly 10-

percent annual fertility rate for women demographically similar to women

currently in treatment indicates that about 30,000 expectant women receive

some drug treatment each year. The IOM report estimated that 105,000

pregnant women a year need treatment.

Because generally there Is a collection of service needs in these families, what

is the best way to address them? Should there be a focus on contiguity, putting

different service agencies in the same location; on tighter referral through

communication protocols and transportation services; on central case

assignment; or on building specialized drug treatment agencies that incorporate

the typically needed services internally? These questions require comparative

case studies focusing on enabling conditions, relative costs, and effectiveness

of alternative approaches.

In 1985 about 25 percent of public-tier clients in 14 States were under probation

or parole supervision. Extrapolated to the national level, this percentage

translates into a daily census of 55,000 community-based criminal justice

clients. In addition, 30,000 to 50,000 prison inmates were in treatment,

although these estimates include less specialized counseling, education, and

self-help group meetings. When rates of flowthrough treatment are taken into

account, these figures indicate a 10- to 20-percent rate of treatment among

criminal justice clients who need treatment.

These individuals constitute the group whose imposition of high external costs

represents the raison d’être of the public tier. A central lesson of research to

date is that treatment, far from being antithetical to the criminal justice system,

is complementary to it, sharing its principal goals and offering a resource that

may permit more efficient use of enforcement, correctional, and judicial facilities

and resources.

Collaborative and coordinating arrangements with the National Institute of

Justice, the Bureau of Justice Statistics, the National Institute of Corrections,

and other relevant agencies in the Department of Justice and other Federal

departments should be extended. More extensive relationships would

encourage technical improvements such as the inclusion of items to facilitate

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synthesis with data from criminal justice populations in epidemiological and

treatment surveys. For example, treatment applicants should be surveyed to

determine the number and type of emergency room admissions and arrests

they have undergone during the year before treatment. This survey would build

baseline data for outcomes research and provide calibrations with respect to the

Drug Abuse Warning Network and Drug Use Forecasting data systems. It is

worth noting that the criminal justice system provides resources for good

sample followup (Vaillant 1988; Anglin 1988) and quasi-experimental control

(Falkin et al. 1990) that may improve the results of treatment research.

FEDERAL AND STATE ROLES

The high point of centralized Federal command of the drug treatment system

occurred during the early 1970s the period of the Special Action Office for Drug

Abuse Prevention (SAODAP) (Courtwright 1991; Besteman 1991). SAODAP

negotiated directly with local treatment providers, specified the nature of the

treatments to be delivered, set reimbursement rates based on those

specifications, provided technical assistance to program managers, and

organized and delivered clinical and management training to treatment staff. It

also created a nationally standardized client-oriented data acquisition process

to monitor the performance of treatment programs.

As the rapid growth of the treatment system outstripped SAODAP’s capacity to

maintain oversight, responsibility for administering Federal funding and for

covering any shortfalls in financial support was turned over largely to other

authorities, predominantly single-state agencies, By 1981 nearly 90 percent of

Federal support to community-based treatment was routed through the State

agencies,

The Omnibus Budget Reconciliation Act of 1981 consolidated State control of

the national treatment system. All community-based categorical funding from

the Federal level was combined into a block grant to each State to cover

alcohol, drug, and mental health services, virtually giving States sovereign

responsibility for the shape and vitality of the public drug treatment system.

This responsibility included deciding how much drug treatment would be

provided out of the combination of alcohol, drug, and mental health services

funds and State appropriations, allocating monies among programs and

localities, maintaining or revising treatment protocols and staffing and other

requirements, monitoring program performance, delivering technical assistance

and training services, and setting reimbursement rates.

Federally managed data systems that had monitored treatment were

discontinued, leaving only a semblance of national information about how

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treatment dollars were being spent and to what effect, For example, there was

a 5-year gap in conducting the national survey of treatment providers; the

national TOPS closed prematurely; and the client-oriented data acquisition

process was terminated, although a dozen or so States elected to retain

elements of that system and provide data summaries to NIDA. Between 1986

and 1990 there was a major expansion of Federal treatment funding but little

change in Federal or State roles.

The IOM report expresses serious doubts that the block grant system of

automatic spending formulas is the best way to use Federal authority under the

current circumstances. In lieu of fixed formulas for the allocation of funds

received by the States, the report recommends that State agencies be required

to submit plans that analyze the conjunctions and mismatches among the most

current epidemiological information and known treatment capabilities. It further

recommends that the States propose annual spending patterns that reflect this

information. Finally, It recommends that performance data be collected to

indicate whether actual spending details departed from the plan, and if so, why,

with analysis, explanation, and adjustment in the subsequent plan. An

independent analysis of each State’s performance with respect to its planning

goals and control of resources would have to be developed and submitted in a

report to Congress on an annual or biannual basis.

Whatever the fate of these particular recommendations to rationalize the system

with appropriate research and management information, the organizational

history of drug treatment policy and program development is important and

should not be relegated to the personal knowledge of a few “old hands” whose

objectivity is conditioned by their particular experiences. The Department of

Defense supports studies in contemporary and historical military organizations

and considers those studies necessary to its mission. The Department of State

maintains a program of regional studies in diplomatic historiography. The

National Science Foundation provides programmatic support to studies on the

sociology and history of science. The National Institute on Alcohol Abuse and

Alcoholism has supported conferences and ongoing research on the history of

alcohol problems. Considered in this context, there has not been adequate

research attention paid to the relation between the Federal and State

Governments in developing the treatment system and the way it has affected

the development of the system. There needs to be a program of documentary

and analytical studies on intergovernmental relations, focusing on the question

of how accountability is best preserved and encouraged.

FINANCIAL MECHANISMS, CONTROLS, AND INCENTIVES

There are two ways for a third-party payer to finance health and social services:

provide grants or contracts to providers (with eligibility standards for their

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clients) or provide vouchers or certificates to clients and let them choose among

licensed providers. Most public support for drug treatment services is via grants

and contracts. The major reasons to seek a greater role for public insurance,

particularly Medicaid, are that public insurance (1) has already proven to be a

useful revenue source for drug treatment in some States (particularly those with

expansive eligibility standards), (2) helps to “mainstream” and hence legitimize

drug treatment, and (3) sets an example of coverage for private insurance

(mostly because of the Medicaid program’s emphasis on providing maternal

and child health care). The limits on Medicaid reimbursement rates for specific

services have made this system look increasingly like a direct service grant

arrangement, because a small fraction of the providers (“Medicaid hospitals”

and “Medicaid doctors”) are furnishing the majority of the reimbursed care.

The presumptive advantage of an insurance system is consumer freedom of

choice, but between low reimbursement rates and the further problem of zoning

limitations that constrain new drug treatment programs from opening and older

ones from expanding their capacity, this advantage may be entirely

hypothetical. Therefore, what would change if, as recommended by the IOM

committee, there was substantial movement toward greater use of Medicaid to

support drug treatment? The States where this already is happening should

furnish ready lessons, and the expansion of benefits eligibility in the 1990

budget provides a further opportunity to learn.

Beyond financial considerations, there is not enough knowledge about the “not

in my back yard” problem in siting community drug treatment programs. There

is currently a NIDA-sponsored market research project (Technical Assistance

and Training Corporation 1989) to create technical assistance materials to

overcome this treatment barrier. Research support for definitive studies of

program site effects such as effects on local real estate values and criminal

victimization rates would provide a better foundation for such work.

Whatever form of financing is used, the IOM report advocates more rigorous

and universal utilization management. Utilization management describes

arrangements to define access to effective treatment while keeping costs at

efficient levels (Gray and Field 1989). Good utilization management works to

ensure that a fully appropriate and needed range of services is used and that

service components are coordinated. The fundamental principle of such

management is that access to and utilization of care be controlled and

managed on a case basis by “neutral gatekeepers” or central intake personnel

(although the central intake function may be dispersed geographically). The

IOM report recommends that, whatever the form of financing, client

assessment, referral, and monitoring of progress in treatment be reviewed or

performed independently of the treatment provider. The major concern is the

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use of high-cost treatment when lower cost alternatives could be as effective, a

hazard attached principally to acute-care hospital inpatient services.

The scientific basis of drug treatment utilization management is rudimentary; of

particular importance Is the need to refine clinical judgment about the probability

of the client responding positively to specific forms of treatment. As the most

important and immediately needed requirement, the IOM report recommends

that all drug treatment programs receiving public support be required to

participate in a client-oriented data system that reports client characteristics,

retention, and progress indicators at admission, during treatment, at discharge,

and (on a reasonable sampling basis) at one or more followup points. There

should be periodic independent investigations on a sampling basis of the quality

and accuracy of these data systems, and they should be designed to dovetail

with ongoing services research and data collection in other government

agencies and units concerned with drug problems.

A great deal of policy development is based on the belief that external

regulations and data requirements can shape the way that treatment programs

deliver services. This undoubtedly is valid to some degree, but a research

program is needed to examine such incentive effects. Without a focused

research effort, there will not be an adequate basis for knowing how regulatory

and funding environments can operate to reward good program performance

and punish poor performance without making categorical mistakes like

rewarding programs for excluding clients who are most in need of help and

punishing programs that take more than their share of hard cases.

CONCLUSION

The services research program outlined in the beginning of this chapter and

partially described in the later sections should help over a period of several

years to illuminate policy concerns about the drug treatment system and

improve the system. Of course, no program of policy-directed research, no

matter how sensible or wise, is going to successfully answer every question

addressed. Neither will all policy-relevant research findings arise exclusively

from policy-directed research unless all other types are unwisely suppressed.

The Federal research program on drug treatment should define its objectives

and actively manage its portfolio of grants, contracts, and cooperative

agreements according to an overall vision of the policy issues, while remaining

open to serendipity, second thoughts, and the occasional need for a completely

fresh look at the agenda.

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Anglin, M.D. The efficacy of civil commitment in treating narcotic addiction. In:

Leukefeld, C.G., and Tims, F.M., eds. Compulsory Treatment of Drug

Abuse: Research and Clinical Practice. National Institute on Drug Abuse

Research Monograph 86. DHHS Pub. No. (ADM)89-1578. Washington, DC:

Supt. of Docs., US. Govt. Print. Off., 1988. pp. 8-34.

Anglin, M.D.; Speckart, G.S.; Booth, M.W.; and Ryan, T.M. Consequences and

costs of shutting off methadone. Addict Behav 14:307-326, 1989.

Beschner, G.M.; Reed, B.G.; and Mondanaro, J., eds. Treatment Services for

Drug Dependent Women. Vol. 1. DHHS Pub. No. (ADM)81-1177.

Washington, DC: Supt. of Docs., U.S. Govt. Print. Off., 1981,

Besteman, K.J. Federal leadership in building the national drug treatment

system. In: Gerstein, D.R., and Harwood, H.J., eds. Treating Drug

Problems. Vol. 2. Washington, DC: National Academy Press, 1991. pp.

63-88.

Courtwright, D.T. A century of American narcotics policy. In: Gerstein, D.R.,

and Harwood, H.J., eds. Treating Drug Problems. Vol. 2. Washington, DC:

National Academy Press, 1991. pp. 1-62.

Falkin, G.P.; Wexler, H.K.; and Lipton, D.S. Drug treatment in state prisons. in:

Gerstein, D.R., and Harwood, H.J., eds. Treating Drug Problems. Vol. 2.

Washington, DC: National Academy Press, 1991. pp. 89-132.

Gerstein, D.R., and Harwood, H.J., eds. Treating Drug Problems. Vol. 1,

Washington, DC: National Academy Press, 1990a.

Gerstein, D.R., and Harwood, H.J., eds. Treating Drug Problems. (Summary.)

Washington, DC: National Academy Press, 1990b.

Gerstein, D.R., and Lewin, L.S. Special report: Treating drug problems.

N Engl J Med 323:844-848, 1990.

Gray, B.H., and Field, M.J., eds. Controlling Costs and Changing Patient Care?

The Role of Utilization Management. Washington, DC: National Academy

Press, 1989.

Hubbard, R.L.; Marsden, M.E.; Rachal, J.V.; Harwood, H.J.; Cavanaugh, E.R.;

and Ginzburg, H.M. Drug Abuse Treatment: A National Study of

Effectiveness. Chapel Hill, NC: University of North Carolina Press, 1989.

Reed, B.G.; Beschner, G.M.; and Mondanaro, J., eds. Treatment Services for

Drug Dependent Women. Vol. 2. DHHS Pub. No. (ADM)87-1219.

Washington, DC: Supt. of Docs., US. Govt. Print, Off., 1982.

Simpson, D.D., and Friend, H.J. Legal status and long-term outcomes for

addicts in the DARP followup project. In: Leukefeld, C.G., and Tims, F.M.,

eds. Compulsory Treatment of Drug Abuse: Research and Clinical Practice.

National Institute on Drug Abuse Research Monograph 86. DHHS Pub. No.

(ADM)89-1578. Washington, DC: Supt. of Docs., U.S. Govt. Print, Off.,

1988. pp. 81-98.

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Technical Assistance and Training Corporation. “Overcoming Barriers to Drug

Abuse Treatment: Market Research Report.” Report submitted to the

National Institute on Drug Abuse. Washington, DC: Technical Assistance

and Training Corporation, 1989.

Vaillant, G.E. What can long-term follow-up teach us about relapse and

prevention of relapse in addiction? Br J Addict 83:1147-1157, 1988.

AUTHOR

Dean R. Gerstein

Director

Washington Office

National Opinion Research Center

University of Chicago

Suite 500

1350 Connecticut Avenue, N.W.

Washington, DC 20038

147
Community-Based Drug Treatment

Reimbursement: Progress and

Barriers

Benjamin C. Duggar

INTRODUCTION

In this chapter a “community-based” provider is defined as any noninstitutional

provider located in the community where its user population resides.

Community-based providers generally provide services on an outpatient basis

to patients at locations close to where the patients reside. The treatment

received by residents of halfway houses and small residential treatment

facilities may be considered to be community-based, depending primarily on

their location and noninstitutional classification.

Twenty years ago any discussion of financing of community-based and hospitalbased drug abuse treatment would have been largely limited to that provided

through Federal grants. Fifteen years ago third-party reimbursements were a

minuscule component of the budgets of community-based providers but a

significant and fast-growing component for the institutional providers. This trend

was being watched closely until the advent of the block grants to States for drug

abuse in 1981 when information on the extent and mix of sources of funding

became more difficult to obtain. Five years ago a discussion of public and

private sector issues on alcohol and drug abuse began with apologies for the

lack of hard, comprehensive data (Jacob 1985), but the report went on to point

out that there were signs of an increasing flow of reimbursements for alcohol

and other drug abuse treatment, most of it flowing to hospitals.

The situation with respect to the availability of comprehensive data is not much

better today, but the positive signs of continuing improvement in the flow of

third-party funding continue for community- and hospital-based drug treatment

services. Furthermore, there are several reasons for an increasingly optimistic

picture of the prospects for third-party reimbursement for drug abuse treatment,

particularly for community-based service providers.

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This chapter describes some of the indicators of improved third-party

reimbursements for community-based drug abuse treatment and outlines

barriers to expansion of third-party coverage. Then several examples of

current developments that support a generally optimistic perspective on further

expansion in third-party reimbursement are outlined. This overview is followed

by an outline of gaps in our knowledge that limit rational policymaking regarding

coverage of drug abuse treatment options and in devising appropriate

reimbursement systems. The chapter also includes an example of current

research with a State Medicaid program that illustrates some of the

methodological problems in drug abuse treatment financing research.

INDICATORS OF IMPROVED THIRD-PARTY REIMBURSEMENT

Third-party reimbursement for drug abuse treatment has been limited

historically through several avenues:

Denial of coverage for treatment on the basis that drug abuse is a selfinflicted condition rather than a disease

Limitations as to eligible providers of drug abuse treatment, restricting the

covered services to those offered by hospitals

Requirements of large cost-sharing by the insured and limitations permitting

only nominal annual or lifetime utilization and reimbursed costs

Comprehensive and detailed information on the extent to which many privatesector health insurance plans provide reimbursement for drug abuse has been

limited. Insurance firms tend to combine information on alcohol and drug abuse

coverage, limitations on coverage, and utilization reports under the general

rubric of “substance abuse.” Employers also have selected differing ways to

deal with various aspects of drug abuse treatment such that obtaining data that

can be compared or aggregated across employers is difficult.

The 1988 Bureau of Labor Statistics (BLS) survey of employee benefits in

medium and large firms found, for example, that 50 percent of the employees of

such firms are covered by employee assistance programs (EAPs), which

increasingly are being used to manage referral for alcohol and other drug abuse

treatment, provide utilization review, and directly provide limited counseling to

employees and family members. Some employers also have established

special programs outside their basic health benefits plan that cover health

promotion, prevention, and behavioral modification regarding smoking,

substance abuse, and other high-risk behavior. Thus, for example, the Wyatt

Company’s annual group benefits survey, which covers large numbers of

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employers and which previously distinguished drug abuse treatment from

alcohol abuse treatment as a covered benefit, now gives only combined

information for alcohol and drug abuse (Wyatt Company 1989).

Despite these limitations, the Wyatt Company survey results for 1986 compared

with those for 1968 can be used to infer progress in drug abuse treatment

coverage. In 1986, 68 percent of responding employers reported coverage of

drug abuse compared to 67 percent offering coverage for alcohol treatment

(Wyatt Company 1987). The 1988 survey reported that 76 percent of

employers covered both alcohol and drug abuse treatment. The changes in the

Wyatt data from 1986 to 1988 are consistent with those reported from the BLS

survey of employee benefits. BLS reported that 74 percent of employees had

coverage for drug abuse, while 80 percent of employees had alcohol treatment

coverage in 1988 (Bureau of Labor Statistics 1989). The 1989 BLS survey

found that the coverage for drug abuse treatment had jumped to 88 percent of

employees of medium to large firms (Bureau of Labor Statistics 1990).

Why the rapid expansion of coverage for drug abuse under private health

insurance and related plans? Are the changes cosmetic, or do coverages and

reimbursements provide truly useful benefits? Neither of these national surveys

provide the detail needed to assess the extent to which such coverage extends

to community-based treatment, nor do they provide any detail on

reimbursement methodology or amounts. They do indicate that limitations

apply to most drug abuse treatment coverages and that these limitations tend to

be more restrictive than those that apply to treatment for most common

diseases and conditions.

Some specific examples suggest that private insurance benefits also are being

extended to community-based treatment. Blue Cross and Blue Shield of the

National Capital Area, for example, has extended coverage for drug abuse

rehabilitation to treatment in a hospital or “other approved treatment facility.” A

residential treatment facility or a freestanding drug abuse clinic licensed by a

State will qualify for benefits, the reimbursement amounts being based on the

reasonable charges for such a facility, subject to caps on amounts and

utilization. In April 1987 Blue Cross and Blue Shield of the National Capital

Area revised several coverage limitations, including separating out the caps on

utilization and costs for mental health vs. alcohol and drug, expanding

reimbursement coverage to 80 percent of the allowable charge rather than 50

percent, and extending the stop-loss on out-of-pocket expenditure to include

drug and alcohol.

In the public sector, Medicaid agencies increasingly are being directed by their

State legislatures to expand benefits where the additional Medicaid payments

150
will substitute for existing State subsidies. This enlightened self-interest by the

States brings additional Federal dollars into the State through the Federal

Financial Participation (FFP) in Medicaid payments for services that are

allowable under Federal guidelines and the approved State plan. For many

States this has led to the States providing Medicaid coverage of drug abuse

treatment in community-based settings to Medicaid recipients. Currently, the

Federal guidelines allow but do not require States to cover freestanding drug

abuse outpatient clinic services. However, payments for nonhospital inpatient

care in residential treatment facilities for drug abuse do not qualify for FFP and

therefore often are excluded from Medicaid coverage.

Pennsylvania Medicaid, for example, reimbursed 192 freestanding drug and

alcohol clinics about $8.5 million in fiscal year 1988 for the treatments received

by 19,000 recipients. These reimbursements, averaging about $25 per paid

claim, brought about $4.25 million in FFP into the State. Although the costs to

the Pennsylvania Medical Assistance (MA) program include more than $4

million for these payments, it is likely that other State and county programs

would have had to pay the full $8.5 million without this Medicaid coverage.

During this same year Medicaid paid for about 7,500 hospital inpatient

detoxification admissions and 1,000 hospital inpatient rehabilitation cases for

substance abuse.

State Medicaid reimbursement to community-based providers of drug abuse

treatment is invariably linked to State licensure. This, in turn, provides a

rationale for private insurance plans also to recognize these providers. The

insurance industry looks to the licensing process to provide a necessary degree

of protection to the consumer and to the actuarial soundness of the cost-benefit

estimates. Historically, the reluctance of Medicaid and Medicare (especially

Medicare) to reimburse community-based substance abuse treatment providers

has been inferred to mean that they are somehow neither legitimate nor costeffective, and this, in turn, caused many insurance companies also to resist

extending reimbursement. Today, however, it is the private employers and

insurers who are leading in extending reimbursement to community-based

providers of drug abuse treatment, with Medicaid following not far behind and

Medicare still at the starting gate.

The change in private-sector coverage of drug abuse treatment in a variety of

settings has been brought about largely by a combination of factors. The

proliferation of EAPs and managed-care programs is believed to account for

much of this progress. EAPs and various prepaid plans have contracted

selectively with community-based providers, bringing credibility and, through

utilization review, some assurances of appropriateness and quality of services.

151
CHANGES IN EMPLOYER ATTITUDES

Health insurance plans are designed to meet the requirements of the

marketplace. Thus, private insurance firms offer plans with those provisions

that their clients demand. If a large employer does not want to cover drug

abuse treatment and such coverage is not mandated for insurance sold within

that State, an insurance firm will offer to provide a plan with this exclusion.

Conversely, if employers want drug abuse treatment covered, plans will be

marketed to them with such coverage. Employer motivation to demand

coverage of drug abuse treatment is complex, reflecting consideration of

employee attitudes, costs, where it fits into the benefit package, competitive

pressures, perceptions as to the effectiveness of drug treatment programs, the

extent of the problem among employees and their dependence, and the indirect

costs of drug abuse that already are being experienced.

Until recently it generally was agreed that a comprehensive drug abuse

treatment package similar to other benefits in a liberal health plan would

produce a sharp rise in premiums. The actuaries who estimate the expected

costs and risks associated with new benefits would ascribe a high cost unless a

variety of cost-sharing, limitations on benefits, and limitations on providers were

included. For example, a recent study used the 1981 and 1984 BLS surveys to

compute an estimate of an 8.8-percent premium increase for the addition of

substance abuse coverage to a comprehensive family health benefits plan

(Gabel and Jensen 1989). For health plans that offer substance abuse

coverage, it is not difficult to determine the proportion of payments that go to

organized substance abuse treatment programs. Normally, however, some of

these costs would be offset to reflect actual treatment for complications and

related conditions by traditional medical care providers before the addition of

the new drug treatment benefit. The reservations of actuaries and the

computations included in the Gabel and Jensen study illustrate the lack of

knowledge as to the size of the offsets and whether employers and insurance

companies already may be paying most of the costs for an effective drug

treatment program in other ways.

Over the past few years most large employers have had it brought to their

attention that the costs of substance abuse are large and that they probably

already are paying some of these costs through adverse effects on productivity,

turnover, absenteeism, and on- and off-the-job safety and in utilization of

traditional health benefits for complications and second-order health effects.

The implementation in March 1989 of the Drug-Free Workplace Act, which

requires that Government contractors adopt drug-free workplace policies, has

been associated with proliferation of other changes in employer provision of

drug abuse prevention and treatment services support. Policies and programs

152
dealing with the identification of drug abusers generally are implemented

together with programs to ensure that those with drug abuse problems will have

access to drug abuse counseling and referral for treatment. It is hypothesized

that some of the recent increases in employee benefits coverage of substance

abuse treatment is in response to Federal requirements concerning drugs and

the workplace (General Accounting Office 1989).

BARRIERS TO REIMBURSEMENT

The barriers to coverage of drug abuse treatment and to the reimbursement for

community-based drug abuse treatment are many and varied. The first hurdle

begins with the public and private schism between calls for punishment of those

who use illicit drugs and the argument for treatment of drug abuse as a chronic

disease (regardless of the treatment provider). This issue has polarized many

opinions, particularly when dealing with those incarcerated for criminality related

to their drug abuse or when it comes to the substance abuser who happens to

be a pregnant woman. The second barrier is cost control. If drug abuse

treatment is covered, what will it cost and will the premiums for health insurance

or publicly funded programs still be affordable? Here the managed-care

programs, particularly those operating within the constraints of a capitation fee,

have provided clear evidence of controllable costs. These are significant costs,

to be sure, but they appear to range from about 3 to 12 percent of the costs of a

comprehensive health plan, depending on cost-sharing, caps, and the covered

population characteristics. Furthermore, if one assumes an offset effect on nondrug-related care, the net long-term costs may be negligible or even negative.

The next hurdle is that of treatment effectiveness and quality assurance, which

is an issue of how to ensure accountability. Because drug abuse treatment

may continue for protracted periods and seems to rely heavily on Interpersonal

aspects for effectiveness and because its proponents often use subjective

outcome measures, there is much skepticism about treatment efficacy within

the health insurance industry. Third-party payers are wary of funding care for

which it is hard to recognize and control for quality and medical necessity.

Drug abuse treatment coverage arguments often revolve around the

effectiveness of differing treatment models for individuals with differing

problems. Who will decide which settings and modalities are appropriate?

Once placed in treatment, who sets the treatment objectives? If the relationship

between process of care and outcome is weak, then treatment objectives (the

desired outcomes) cannot be used as a rational basis for prescribing treatment

process. If the relationship of process and outcome is strong, the measure of

one is a surrogate for the measure of the other. For some drug abusers there

153
may be a lack of consensus as to exactly what the outcomes of treatment

reallstically should be. The clinician may look to achievement of short-term

treatment goals (e.g., reduced symptoms of dependence, improved self-image)

as the outcome he or she will provide. The treatment effectiveness researcher

may seek drug use abstinence and improved social functioning as the outcome,

measures that are difficult to collect reliably and may require long-term followup

studies. The economist may focus on reduction in costs and utilization of health

care resources and improvements in other measures, such as employment, as

the types of outcomes that should be ensured if reimbursement for the

treatment is to be provided.

There are many questions about drug and alcohol abuse treatment

effectiveness, particularly when there are severe psychiatric complications or

major somatic illnesses. Can community-based treatment sources deal with

these combinations? Are the patient variables as Important as the treatment

variables in determining the outcomes? The Consolidated Standards Manual,

1987, published by the Joint Commission for Accreditation of Healthcare

Organizations, clearly indicates that individualized assessments and

prescription of treatment responsive to those needs are essential to the

provision of competent care. Moreover, the treatment plan must treat all

impairments identified in the initial assessment, must be regularly reviewed and

adjusted if clinical problems persist, must provide for referrals, and must include

a complete discharge plan and evidence of followthrough. Given that many

drug abusers have an array of problems, who should be responsible for

coordination of care? Can existing drug treatment providers fill this role? Who

will do it better-the institution-based or the community-based provider? Will

they work with other organizations charged with such a role by the payer?

Even for uncomplicated drug abuse cases, knowledge of treatment

effectiveness is limited due to the problems of doing clinical trials with these

patients (for example, high patlent attrition and problems in ensuring provider

compliance represent major methodological problems). Some work has been

done, but often the results are not available until after public interest in the

problem has peaked and begun to diminish. With respect to opioid addiction

treatment, for example, long-term outcomes do not appear to differ among the

major treatment modalities or settings (Simpson and Sells 1982). Although this

may be partially an artifact of selection bias and difficulty in measuring longterm outcome, more work is needed. At the same time the emergence of crack

and cocaine as the leading reasons for admission for treatment raises the

question of when it will be known with some degree of assurance what does

and does not work for treating crack and cocaine users.

154
EXAMPLES OF RESEARCH ON PENNSYLVANIA MEDICAID COVERAGE

AND REIMBURSEMENT OF DRUG ABUSE TREATMENT

Pennsylvania Medicaid began reimbursing freestanding drug and alcohol clinics

in 1974. However, from 1976 until recently the reimbursement rate remained

fixed for counseling services. Because the reimbursement rate for therapeutic

sessions was the same for hospital outpatient departments or freestanding

clinics, most of the hospitals have not pursued this business, and it is

dominated by the freestanding clinics in Pennsylvania.

Concerned about MA costs, Pennsylvania decided In the early 1980s to

experiment with other forms of reimbursement arrangements. In 1985 the

Commonwealth implemented diagnosis-related group (DRG) reimbursements

for hospital inpatient care for MA recipients. In 1986 the Pennsylvania MA

program contracted with an operator of health maintenance organizations

(HMOs) to establish and operate a health-insuring organization (HIO) called

HealthPASS. The HIO covers six health districts in Philadelphia, with

mandatory enrollment of most MA recipients who reside in those districts (about

90,000 are enrolled at any given time). The contractor is paid a capitation

premium for arranging and paying for most Medicaid-covered benefits.

Outpatient mental health and substance abuse treatment were excluded from

the capitation and continue to be reimbursed directly by the MA program on a

fee-for-service basis, while costs of hospital inpatient mental health and

substance abuse treatment are the responsibility of HealthPASS. Cost savings

were expected to accrue to the State because it would pay the HIO contractor

only 90 percent of the expected adjusted per capita costs for enrolled

recipients. The HIO, in turn, contracted with primary care physicians (PCPs) on

a capitated basis to provide primary care and to serve as gatekeepers for

referrals for specialist care. Of interest in the present context were the

arrangements for the coverage of alcohol, drug abuse, and mental health

(ADM) care.

Originally, the HIO contractor requested that all ADM services be included in the

capitation package. However, because of the involvement of other groups,

such as the courts for commitments, and because the outpatient ADM services

system already contained some characteristics of case management, it was

decided to exclude these services (the same was done for traditional HMO

contractors within the MA program). The HIO contractor, however, successfully

argued for inclusion of the inpatient portion of ADM care because the HIO case

management system was expected to achieve substantial savings on rates of

admission and average length of stay. At that time Pennsylvania Medicaid did

not cover residential treatment facilities. Furthermore, the MA program was in

the process of implementing hospital payments for inpatient stays using a DRG

155
rate. Also, reimbursement rates for outpatient treatment were well below the

usual, customary, and reasonable rate for the private sector (in 1989 the

Medicaid payment for therapeutic sessions was at the rate of $25 per hour). It

was anticipated that the PCPs and the ADM case managers within the

community would communicate and coordinate the provision of comprehensive

care to substance abuse and mental health patients.

Findings from the evaluation of the first 2 years of the HIO operations are

available (Solon Consulting Group and Center for Health Policy Studies 1989;

Solon Consulting Group and Center for Demographic Studies 1990). Although

the evaluations that have been completed to date were performed strictly to

meet the Federal requirement for continuing the waiver, they provide some

information relating to the substance abuse treatment costs and utilization

questions. It is clear that the savings and care improvement objectives for ADM

services that were anticipated when the responsibility was divided between the

HIO and the substance abuse treatment system in Philadelphia were not

achieved. First, the inpatient hospital care did not decrease. Second, the

PCPs and the ADM case managers did not communicate. Third, the HIO was

prevented from contracting with subacute care facilities, such as residential

treatment centers, for inpatient substance abuse treatment.

The HIO contractor underestimated the hospitalization rate for the enrollees and

overestimated their ability to control it. Because most such admissions were

emergency rather than elective admissions, it was not possible to reduce

admissions substantially, although length of stay was open to some control.

The HIO negotiated to reimburse hospitals on a per diem basis rather than a

DRG rate because it was expected that the HlO’s utilization review and ability to

pay for “program exceptions” to allow early discharge would result in a reduced

length of stay. In retrospect, the HIO did achieve some reductions in hospital

utilization but with an Increase in the unit price it paid. Moreover, the PCPs

often did not know that an enrollee on their panel was being treated for

substance abuse until there was a hospital admission. Because of

confidentiality concerns the fact that Medicaid was paying a drug and alcohol

clinic to treat an HIO enrollee was not communicated to the PCP. Thus,

coordination among case managers responsible for differing aspects of care for

the same patient was fragmented or nonexistent. Finally, when the HIO

identified and attempted to contract with some residential treatment facilities,

the Health Care Financing Administration took exception to use within a waiver

program of providers not recognized by the State Medicaid program, and the

practice was stopped.

Grade-of-membership analytic techniques were used to analyze comparisons

between HIO and non-HIO MA recipients identified as drug and/or alcohol

158
treatment patients. Table 1 and figure 1 Indicate that “adjusted” hospital

utilization rates and costs by comparable drug and alcohol abusers were

reduced slightly for HIO vs. the comparable Medicaid fee-for-service recipients

in Philadelphia. On the other hand, total outpatient services costs were

substantially higher for the HIO enrollees (figure 2). A more extensive study

funded by the National Institute on Drug Abuse is under way to try to confirm

and understand these findings (Contract No. 271-89-8519 with the Center for

Health Policy Studies [CHPS], Columbia, MD).

TABLE 1. Hospital utilization measures for the drug and alcohol abuser

subpopulation of all Medicaid recipients, Philadelphia County,

March 1987-August 1088

Case-Mix Adjusted Groupsa

Problem Young Drug Sick Entire

Child Adult Abuser Alcoholic Subpopulatlon

Median hospital

length of stay

HIO enroliees

Non-HIO

18.61 5.72 5.13 7.73 530

18.37 5.88 7.85 7.17 7.01

Probability of a

hospital admission

HIO enrollees 28.1 85.5 37.7 58.3 82.1

Non-HIO 45.1 83.3 48.4 87.1 88.8

aCase mix adjusted groups within the drug and alcohol abuser subpopulation were developed

using the grade-of-membership technique.

SOURCE: Solon ConsuIting Group and Center for Demographic Studies 1990

The CHPS Is testing a series of hypotheses about the effects of the economic

Incentives that PCPs had during the first 30 months of the HIO. The 21 -month

period before HIO startup will be used to provide a more powerful research

design with before/after measurements for experimental and control groups.

Because the HIO and PCPs do not pay for outpatient substance abuse

treatment and because there is considerable evidence that substance abusers

utilize higher rates of medical care services, there should be a strong incentive

for PCPs to identify and refer substance abusers to community-based treatment

providers. This, in turn, is hypothesized to lead to reduced hospital use for

substance abuse and substantial savings in other nonsubstance abuse

treatment health care costs (the cost offset).

157
FIGURE 1. HIO and non-HIO drug and alcohol subpopulation hospital costs per day of exposure for case-mix

adjusted groups

SOURCE: Solon Consulting Group and Center for Health Policy Studies 1989
FIGURE 2. HIO and non-HIO drug and alcohol subpopulation outpatient costs per day of exposure for case-mix

adjusted groups

SOURCE: Solon Consulting Group and Center for Health Policy Studies 1989
The study team is assembling a longitudinal file of all MA recipients who resided

in Philadelphia county at any time from January 1985 to March 1989. The

longitudinal file contains all eligibility file data and all medical services and

institutional paid claims. Identifying drug abusers depends on the availability of

diagnoses on these paid claims. Table 2 lists the algorithms used to define a

drug abuse case. As is common in this type of research, several data quality

problems have been encountered, particularly with the payment records

provided by the HIO. For many payment records, no diagnosis appears or only

a single diagnosis is listed. HIO payment records do not contain any

procedures codes. Therefore, a very conservative technique has been used to

identify drug abuse cases.

TABLE 2. Algorithms and ICD-9-CM codes to be used to identify drug

abusers

Step 1. identify MA recipients with a principal diagnosis of drug abuse.

Any of the following codes as a principal diagnosis for a drug and alcohol clinic,

hospital, or physician service (excluding anesthesiologist, radiologist, and

pathologist claims) indicate a definite case of drug abuse. Scan all medical

invoice principal diagnosis fields against the following list.

Code Description Qualification of Use

292 Drug psychoses Fourth digit must be 0, 1, 8, or 9.

Ignore fifth digits.

304 Drug dependence Any fourth digit. Ignore fifth

digits, except for 3. If 3,

accept with an “other” diagnosis of

V57.89.

305 Nondependent

drug abuse

Exclude if fourth digit is 0 or 1,

Note: If there is an acceptable

fourth digit and the fifth digit is 3,

V57.89 must be present.

Step 2. Identify MA recipients provided only rehabilitation for drug abuse.

If V57.89 is the principal diagnosis and an “other” diagnosis indicative of drug

abuse (any acceptable diagnosis used in step 1 above, ignoring all fifth digits,

including 3), consider it a drug rehabilitation case.

160
Step 3. Identify MA recipients treated for selected drug poisonings as the

principal diagnosis.

Scan Invoices for the following diagnoses in the principal diagnosis fields:

Code Description Qualification of Use

965.0 Opiates/related

narcotics

Any fifth digit.

967 Sedatives and Fourth digit must be 0, 1, 2, 3, 4, 5,

hypnotics or 6.

968.5

969

970

Cocaine

Psychotropic agents

Central nervous

system (CNS)

stimulants

Any fourth digit. Fourth digit

must be 0, 1, or 8.

987.4

989.8

Freon

Glue/other

nonmedicinal

For each “hit,” either of the following contingencies must apply or else ignore:

Contingency based on presence of one of the following “other” diagnoses:

a. Any acceptable drug diagnosis as listed in step 1 above.

b. V57.89

Step 4. Identify MA Recipients treated for complications attributed to drug

abuse.

The following codes appearing as a principal diagnosis for a service by a drug

and alcohol clinic, hospital, or physician services (except ancillary service

referral physicians) indicate a definite case of drug abuse.

Code Description Qualification of Use

648.3 Complication of

pregnancy due to

drug dependence

Any fifth digit.

161
Step 5. Identify MA recipients with secondary diagnoses indicating drug

abuse.

Scan all “other” diagnosis fields for any of the diagnoses listed in step 1 or 4 as

principal diagnoses. All “hits” on claims from provider drug and alcohol clinics,

hospitals, and PCP or “treating” physicians indicate drug abuse cases.

Step 6. Identify MA recipients with diagnosis/E-code combinations indicating

drug abuse.

Scan all “other” diagnosis fields for any of the following E-codes. If found, one

of the following diagnoses also must be present to indicate this is a drug abuse

case (ignore fifth digits for these diagnoses): 357.6, 648.4, 655.5.

E-Code Description of Substance

E935.0

E935.1

E935.2

E937

E938

Heroin

Methadone

Other opiates and narcotics

Sedatives and hypnotics (include all fourth digits except 9)

Other CNS depressants and anesthetics (include all fourth

digits)

E939 Psychotropic agents (include all fourth digits)

E940 CNS stimulants (include all fourth digits)

Once all drug abusers who can be identified have been so labeled, all paid

claims for these cases will be retrieved and the patterns of utilization and costs

of care to Medicaid and the HIO analyzed.

Concurrent with the implementation of the present retrospective study based on

paid claims, the Commonwealth of Pennsylvania has launched an expanded

program to provide for all aspects of drug abuse prevention, treatment, and

control. In 1988 the Pennsylvania Legislature enacted and the Governor signed

into law the legislation known as Act 152, which will phase in Medicaid

reimbursement of nonhospital inpatient substance abuse treatment as one part

of what is known as the Penn-Free program. Residential treatment facilities will

become part of a case-managed continuum of care available to MA recipients,

The first step for phasing in this coverage was to authorize the HIO and the

several HMOs with Medicaid contracts to begin in January 1989 to contract with

residential treatment facilities. The second step took effect in January 1990

when single-county agencies in seven counties were authorized to negotiate

162
rates and begin to place MA recipients in nonhospital inpatient settings for casemanaged care. All such facilities were to be State licensed. The last phase,

statewide implementation of reimbursement for residential care settings, was

scheduled to begin in July 1991, It is of interest to note that the legislation also

provided for a concurrent evaluation of each phase as it is implemented to

provide prompt feedback on the costs.

CONCLUSIONS

1.

2.

3.

4.

Federal and State reimbursement of community-based drug treatment

providers are intertwined. Although all States have used block grant funds

to support community-based providers, eligibility of these providers to be

reimbursed under State Medicaid programs varies, with only one State

covering nonhospital residential settings, Federal Medicaid laws do not

provide FFP for reimbursement of nonhospital residential treatment

programs except under specific waiver programs. Medicare does not

recognize community-based outpatient or nonhospital residential drug

treatment providers.

Private employers and third-party payers have greatly expanded coverage

of drug abuse treatment over the past 5 years and have included a variety

of outpatient and residential community-based programs as eligible

providers,

Many questions and some skepticism remain over the efficacy of drug

abuse treatment. Services research outcome studies are needed urgently,

particularly for cocaine and crack abusers who are detected and referred

through workplace programs. Cost-offset studies also are needed urgently

for supporting coverage of cocaine and crack abuse treatment.

Use of Medicaid Management Information System capabilities to track all

health services utilization by cohorts of drug abusers with access to

differing treatment programs represents a relatively untapped outcome and

cost-offset research opportunity.

REFERENCES

Bureau of Labor Statistics, Employee Benefits in Medium and Large Firms,

1988. U.S. Department of Labor. Bulletin 2336. Washington, DC: Supt. of

Docs., US. Govt. Print. Off., 1989.

Bureau of Labor Statistics. Employee benefits focus on family concerns in

1989. News. USDL-90-10. Washington, DC: U.S. Department of Labor,

1990.

163
Gabel, J.R., and Jensen, G.A. The price of state mandated benefits. Inquiry

26:419-431, 1989.

General Accounting Office. Drug Testing: Management Problems and Legal

Challenges Facing DOT’s lndustry Programs. GAO/RCED-90-31.

Gaithersburg, MD: General Accounting Office, 1989.

Jacob, O. Public and Private Sector Issues on Alcohol and Other Drug Abuse:

A Special Report with Recommendations. Final report prepared for the

Alcohol, Drug Abuse, and Mental Health Administration, October 1985.

Simpson, D.D., and Sells, S.B. Evaluation of Drug Abuse Treatment

Effectiveness: Summary of the DARP Follow-Up Research. National

Institute on Drug Abuse Treatment Research Report. DHHS Pub. No.

(ADM)82-1209. Washington, DC: Supt. of Docs., U.S. Govt. Print. Off.,

1982.

Solon Consulting Group and Center for Health Policy Studies. Final Report:

Health PASS External Evaluation. Silver Spring, MD, 1989.

Solon Consulting Group and Center for Demographic Studies. Final Report

Supplement: HealthPASS External Evaluation. Silver Spring, MD, 1990.

Wyatt Company. 1986 Group Benefits Survey. Washington, DC: Research

and Information Center, 1987.

Wyatt Company. 1988 Group Benefits Survey. Washington, DC: Research

and information Center, 1989.

AUTHOR

Benjamin C. Duggar, Sc.D.

Senior Vice President

Center for Health Policy Studies

6700 Patuxent Woods Drive

Columbia, MD 21046

164
Financing Treatment for Substance

Abuse

Mark V. Pauly

INTRODUCTION

This chapter has two objectives: (1) to provide some general observations on

the current state of financing treatment for substance abuse in the United

States and (2) to summarize some critical economic considerations related to

judging the adequacy of that financing and predicting its future course.

FINANCING THE DUAL SYSTEM

The critical feature of the current treatment system is its dual character. The

publicly financed treatment system for low-income people exists side by side

with a private, largely insurance-financed system for people who are not poor.

To a considerable extent, these two systems are parallel and do not overlap.

The only overlap occurs when some treatment firms provide services to public

and private clients, although this is relatively uncommon.

The two systems are not only separate but also unequal. The public system

experiences excess demand, treats clients with relatively brief, low-cost

interventions, and expects low success rates. The private system has plenty of

capacity, emphasizes high-cost residential or inpatient treatment methods, and

promises success for most of its clients.

Both systems, however, suffer from a fundamental problem: Neither can show

with certainty that the services they provide are effective. Some circumstantial

evidence, which varies considerably in quality depending on the type of

addiction, shows that people who receive treatment do better than people who

do not. It is surely the case that people who stay in treatment do better than

those who do not, but the relationship of cause and effect in this phenomenon is

unclear. Even when treatment works, there is no doubt that its effectiveness

varies for people with different kinds of problems, yet precise knowledge of how

to match problems with treatment is lacking.

165
The consequence of this uncertainty is fundamental: External observerswhether insurance company, employer, politician, or voter-have a difficult time

judging whether they are getting value for the money put into treatment

programs, They have even more difficulty determining whether the care a

particular person received was as effective as it could be.

The most obvious research topic, therefore, would be that of determining the

effectiveness, in the sense of effects on work performance, absenteeism, or

overall level of functioning, of various types of treatments. A related question is

a positive one: How do decisions on coverage and treatment, in the sense of

the willingness to commit resources, vary with the quality of the evidence on

effectiveness? Worded slightly differently, do public or private decisions on

financing seem to reflect information, accurate or not, on the benefits to be

obtained from treatment? Do voters and politicians refuse to approve and

insurers refuse to finance benefits for obviously effective care?

If beliefs about effectiveness between the public and private sectors turn out to

be similar, why are the programs so different? Perhaps a lower level of effect

(but higher effectiveness) is desired by the public sector, or perhaps the value

attached to effectiveness is smaller. The substantial variation across

geographic areas in the number of affected persons, the income distribution of

substance abusers, and the affluence of taxpayers suggest that variation in the

level of public support might be explainable.

A related issue concerns spillover and substitution between the two treatment

systems. The spillover question asks how the quantity or style of treatment in

the private system influences the public system and vice versa. The

substitution effect concerns the use of the public system by people who would

otherwise have used and paid for the private system. To some extent,

substitution is possible for out-of-pocket payments. A privately insured person

usually will not receive public care. However, the availability of such care may

discourage the provision of private insurance; it becomes easier to fire the

employee and then hire him or her back if treatment works. This may seem

unlikely but could occur.

At a more fundamental level, the reason public funds are spent on substance

abuse treatment is that, presumably, successful treatment provides spillover

benefits to the taxpayers who must pay for the treatment. External benefits in

the form of lower crime, a more aesthetically pleasing community, lower public

health costs for addicts and their families, and lower welfare taxes deserve to

be documented. There are other benefits as well, primarily connected with

capital market imperfections. A neighborhood crippled by drug abuse and its

consequences may not be able to raise the money to invest in treatment and

166
control, but the benefits, even the direct economic benefits of an investment in

the neighborhood, may be substantial. In addition, the individual who returns to

a more productive life not only pays more taxes (and so benefits others) but

also benefits from a profitable investment.

Ail these factors are part of sophisticated cost-benefit analysis. The results

have financing implications in that methods of distributing the cost, which

parallel the distribution of net benefit and therefore facilitate its achievement,

can be found. For example, are there ways of making de facto loans to

communities or individuals for treatment, to be paid according to a fixed

schedule if treatment is effective? Strange as it sounds, if the net benefit from

treatment is as great as the cost-effectiveness work suggests, investing in

treatment of drug addicts should be a highly profitable investment.

One issue is the role of migration in affecting treatment expenditure. Low

outflow and low inflow would be expected to be associated with high levels of

support. If a community’s treatment program attracts people with problems who

leave when cured, these “external benefits” may discourage expenditure.

PUBLIC FINANCING OF SUBSTANCE ABUSE TREATMENT IN A FEDERAL

SYSTEM

The current arrangement for financing public treatment for substance abuse

involves all levels of government. The Federal Government provides some

block grants, greatly reduced in real value and restrictiveness over the past

decade. States provide most of the resources for treatment, whereas some

cities and counties fund specific programs or facilities. Some treatment-how

much is not precisely known-is furnished under the Medicaid program.

What impact does the allocation of roles and responsibilities to various levels of

government have on the form and support for public treatment? What should

the governmental configuration be? it is by no means obvious that a fully

federalized program would increase levels of support or be the most appropriate

configuration. To be sure, a generously funded Federal program, by definition,

would improve matters in the opinion of advocates of care, but that generosity is

by no means ensured. If the rationale for public support is based primarily on

externalities, the ideal configuration of government would appear to be a

Federal system. Such a system would allow local citizens where the problem is

concentrated and who therefore have (other things being equal) greater

willingness to pay for prevention and treatment to express that willingness and

to choose the form of program most suited to their needs. Federal subsidy, in

some type of matching program, expresses the concern that others in areas

167
with less severe problems nevertheless may feel some concern about pockets

of severe need. Federal supplementation also deals with the fact that, in reality,

all things are not equal; some (though by no means all) communities with more

severe problems may be low (or average) income, and therefore deserving of

some additional support. Fiscally motivated migration-of either beneficiaries

or taxpayers-limits the desirable extent of federalism.

The capital market imperfection rationales have less obvious implications for

governmental structure. In an ideal world, the optimal pattern of investment

would vary only with local input costs, not with governmental structure. If

treatment was more costly in one locality than in another, and the return (e.g., in

the form of enhanced productivity) was the same, treatment should be less

intensively provided in the high-cost location, In principle, any level of

government could do the optimal thing. Perhaps it would be more difficult for

the Federal Government to vary programs with local needs, but it also would be

more difficult for local government to capture the benefits for a successful

investment if workers migrate.

Another issue relates to the form of production and ownership of providers of

services to tax-financed clients. It is an old practice in public economics to

distinguish between public provision and public production (Musgrave 1959).

Externalities and market failures frequently call for public provision of services in

the sense that resources are raised via taxation (rather than the market) and

decisions on how much and what to buy are made collectively (rather than by

individual consumers). Those services then could be produced either by

publicly or privately owned firms,

The primary rationale for public production is the alleged difficulty of monitoring

the quality or type of service being financed with public funds. The theoretical

question is whether it is easier (or cheaper) to monitor a regulated private firm

than to monitor a public bureaucracy. A sophisticated theory currently is being

developed on the question of “privatization,” The current wide differential

between privately produced and publicly produced treatment services suggests

that a useful test application might be provided here. The critical descriptive

empirical question would be whether there are differences in quality, efficiency,

or “style” of services by ownership, given equal resources.

A related issue concerns the likely supply response to increased public

resources for treatment (should such resources become available). Even if the

financing is present, will the people be there? Would expansion of treatment

dilute the resource intensity of treatment? This question raises the issue of the

appropriate level of resource intensity. Although it is generally believed that

drug abuse treatment needs to be resource intensive (in contrast, for example,

168
to alcoholism treatment), the tradeoff between the extensive and intensive

margins has not been well studied. Would dollars be better spent providing

intensive treatment to a few crack addicts or an extensive outreach effort to

provide some counseling to a large number? In economic jargon, how quickly

do diminishing returns set in?

Moreover, there is also fear that the facilities and trained personnel may not be

available even if the financing is. The history of the medical care sector is one

of amazingly rapid supply response to jumps in demand-whether the demand

is for renal dialysis or home health care-as Iong as licensure rules do not

inhibit. The growth of private-sector substance abuse treatment facilities also

suggests that there are few impediments, but documenting supply response is

surely worthwhile.

PRIVATE-SECTOR FINANCING

In many ways private-sector financing raises the same issues as public

financing. Effective treatments should pay for themselves, and there should be

a way of distributing the cost across those who benefit that satisfies everyone.

One question is whether the net benefit can be captured in the context of typical

private employment-based group insurance. Suppose effective treatment is

paid for by private health insurance. The incidence of the cost of this insurance

is presumably on wages, but it seems unlikely that the wages of those who

benefit can be reduced differentially. Instead, the wages of ail workers in a firm

potentially would fall, including the wages of those who have no alcohol-related

problems. Financing such coverage raises problems with the existing work

force. A more appropriate way of viewing the problem may be in terms of the

marginal worker. if, for example, p percent of newly hired workers are expected

to need treatment for substance abuse problems, then the benefit cost per

worker would be pX, where X is the cost of treatment. Wages therefore would

fail by pX. If firms correctly anticipate attracting a smaller percentage, they can

offer higher money wages. One issue is whether a firm can maintain a lower

percentage. Another issue is whether adverse selection will occur. Workers

with no alcoholism problems will be attracted to firms with no treatment

programs. If workers with problems prefer treatment, they will prefer the plan

that offers a benefit, raising the possibility of adverse selection.

Probably the most important missing link in the analysis of insurance financing

is the absence of a model of private demand for treatment. In addressing the

demand for or value of insurance, one needs to know what the demand for

treatment is and how insurance will affect it. Even if addiction is caused by a

169
rational demand process, one still must explain why costly treatment is

demanded as opposed to expecting addicts to stop (Becker and Murphy 1988).

Understanding the private demand for treatment is critical for judging whether

insurance coverage is warranted. If the desire for treatment is random,

insurance coverage of treatment makes sense as an insurance benefit for riskaverse people but will not affect access. Access effects require that insurance

coverage affects demand, that is, that there is “moral hazard.” If treatment has

a large cost offset, the likelihood that coverage of treatment will lower total

premium costs depends on the price elasticity of demand for treatment. The

higher the demand elasticity (i.e., the greater the moral hazard), the better the

outcome (Pauly and Held 1990). If some will use (and pay for) effective

treatment whether or not insurance covers it, whereas, others will seek

treatment only if it is covered, the amount by which coverage pays off depends

on the proportion of these two groups. If the number who would pay regardless

is relatively large and the number who would be induced to use care by

insurance coverage is relatively small, most of any coverage (and its associated

loading and administration costs) is wasted on transfers to people who would

have been users anyway. Likewise, if the bulk of people with substance abuse

problems will not use care even if it is covered, providing coverage does not do

any harm, but it does not do a great deal of good either.

As already suggested, the existence, size, and form of cost offsets may be

important influences on private financing decisions. Setter documentation of

offsets caused by treatment, or by coverage for treatment, is needed (Holder

1987). In this connection, studies in which people (or populations) are assigned

exogenously to different levels of insurance coverage and the resulting impact

on use of services and cost offsets is monitored is a way to avoid problems of

human subjects and generate information on effectiveness rather than efficacy.

Some experimentation along these lines has been initiated by some health

maintenance organizations and Medicaid programs, but much more should be

done (Freeborn and Hayami 1981).

A final critical Issue in the demand for treatment concerns the impact on

demand of greater treatment intensity, especially as represented by inpatient

detoxification or rehabilitative treatment relative to outpatient treatment. The

possibility that these are effective lower cost alternatives that can be substituted

for high-cost treatments is well documented. For a person who already has

elected to seek treatment, an insurer’s choosing the set of controls that leads to

the lower cost appropriate setting is known as economizing.

However, the availability of treatment in high-cost but attractive or convenient

sites possibly may increase the demand for treatment. The high-amenity

170
residential facility may not be medically necessary once a person has entered

treatment and may not be more effective but may help to induce agreement to

be treated. Denial may cause a person to refuse any treatment but the

ostensibly more “medical” treatment offered in a hospital. Even the presence of

second-guessing and required proof by case managers may discourage some

people from seeking treatment.

Although inappropriate substitutions surely occur, it would be worthwhile to

research whether the presence of such high-cost but hassle-free financing

arrangements may increase the demand for treatment.

EMPLOYMENT-RELATED INSURANCE COVERAGE

Insurance coverage for substance abuse treatment is provided increasingly as

part of an employer’s total compensation package (Morrissey and Jensen

1988). Because payments of insurance premiums by the employer to the

insurer are excluded from both the employer’s and the employee’s taxable

income, there is already a fairly strong subsidy to such coverage. In general,

we need better knowledge of how this market works.

One critical issue is the role of the tax subsidy in affecting decisions (of

employer, employee, and union) to include substance abuse coverage in the

group’s insurance policy. The subsidy is at a higher rate for higher income

workers but varies across workers as local tax rates and family income vary.

What is the impact of this subsidy, or of the price of insurance in general, on the

demand for substance abuse coverage? What accounts for variations across

firms in the generosity of the coverage of the insurance package?

The presence of generous benefits for types of care alleged to be inappropriate

and expensive in typical health insurance policies requires some explanation.

Mandates (discussed below) are one reason, but coverage took that form even

in the absence of mandates. Why did people voluntarily choose “inefficient”

coverage? Is the tax subsidy responsible, or was there provider influence?

More to the point, why is coverage moving more rapidly into a more restrictive

managed-care model in some places rather than others? Why are some

insurers leading the way while others hold back? Is it that the former had worse

problems, or did they find better solutions more feasible?

One interesting explanation is the role of employee turnover on the demand for

substance abuse insurance. If turnover is naturally high and if there is a future

cost offset, then one might expect coverage to be lower, unless the employee

can capture the benefit of lower future health costs in the form of higher wages.

If turnover does affect coverage, that will be evidence for cost offsets.

171
Is the employment-related health insurance market for substance abuse

coverage In need of regulatlon? Regulation usually takes the form of

mandating the presence and type of substance abuse coverage (and

chiropractic and acupuncture services as well). State mandates have some

important gaps. They do not apply to firms that are self-insured, and they do

not apply to firms that provide no health insurance. Jensen (1988) concludes

that mandated coverage will have little effect for larger firms but will constrain

the coverage choices of smaller firms.

Given the rapidly increasing costs for substance abuse, it is possible that

mandating benefits decreases the number of employee groups that choose to

obtain coverage. The State of Virginia recently passed a law exempting small

employers from State mandates for coverage of (among other things) drug

dependency. What effect will such a law have?

More generally, the basis (if any) in welfare economics for mandated coverage

needs to be worked out. At one level, the push for mandating coverage of all

types appears to be based on the economic fallacy that employers and insurers

(rather than employees or, perhaps, consumers of products) will bear the cost

of required coverage. Focusing on a rapidly growing part of total premiums

whose presence varies considerably across firms might help to determine who

does pay.

Do mandates represent hidden taxes (in the sense of compulsory payments for

public purposes)? If so, what are those public purposes or rationales? One

would be consumer ignorance-an attempt to overcome buyer misperception of

a low value of such coverage. Given the well-informed buyers in the group

insurance market, this seems unlikely to be true, but it might have some validity

for the small group market, There is a need to investigate this matter.

A more cogent argument views mandates as a way of dealing with the

inefficient choice that arises from employee turnover. However, the ideal

solution then is not a mandate but rather a turnover-related subsidy to choose

types of coverage with strong future cost offsets. Measurement of how large

this subsidy should be would be worthwhile. Absent a subsidy, mandating

coverage may induce some firms to cut benefits of other types, switch to selfinsurance, or drop group health insurance entirely. What impact does

mandated coverage have on the demand for insurance?

A final set of questions regarding private coverage of substance abuse

treatment concerns trends in costs and management strategies. It is widely

believed that growth in substance abuse costs (including adolescent costs) has

fueled some employers’ concerns about health insurance premiums. A clear

172
overall picture does not exist, and an analysis of the impact on overall cost with

the possibility that some growth may represent a transfer of services formerly

labeled “medical” or “mental health” has yet to be performed. Likewise,

managed care for substance abuse benefits has been growing along with the

benefits but with few data and less analysis of effectiveness or of which

employee groups choose which management strategies.

It would be administratively simpler and would improve market transparency

greatly if substance abuse benefits were covered with the same deductibles,

coinsurance, and stop-loss provisions as other insurances. But what would

such coverage imply to cost and use? The answer depends on the relative

degree of moral hazard for different services.

CONCLUSION

A comprehensive financing policy for drug abuse treatment, both public and

private, suffers from a scarcity of believable information on effectiveness and

benefits. For the most rapidly growing forms of substance abuse, cocaine and

crack, there is the least reliable information. Research on finance should be

sensitive to this imprecision and should view most of what goes on in the

market as an attempt to cope with it.

REFERENCES

Becker, G., and Murphy, K. A theory of rational addiction. J Political Economy

98:875-700, 1988.

Freeborn, D., and Hayami, D. Effect of coverage on use of an HMO alcoholism

treatment program. Am J Public Health 71:1133-1143, 1981.

Holder, H. Alcoholism treatment and potential lost savings. Med Care 259:52-

71, 1987.

Jensen, G., The Effects of Stated Mandated Insurance Benefits on Employers.

Governor’s Commission on Health Plan Regulation Reform, State of

Minnesota, 1988.

Morrissey, M., and Jensen, G. Employer-sponsored insurance coverage for

alcoholism and drug abuse treatment. J Stud Alcohol 49:458-481, 1988.

Musgrave, R.A. The Theory of Public Finance. New York: MacGraw-Hill,

1959.

Pauly, M., and Held, P.J. Benign moral hazard and the cost-effectiveness

analysis of insurance coverage. J Health Economics 9(4):447-482, 1990.

173
AUTHOR

Mark V. Pauly, Ph.D.

Professor

Department of Health Care Systems

University of Pennsylvania

3641 Locust Walk Center

Philadelphia, PA 19104

174
Forecasting the Cost of Drug Abuse

Treatment Coverage in Private Health

Insurance

Thomas G. McGuire and Barbara F. Shatkln

INTRODUCTION

The usual paradigm for employment-based health insurance views insurance as

a fringe benefit, with the firm’s objective being to minimize compensation costs

given the worker utility determined in the labor market, An implication of this is

that worker preferences for the form and extent of coverage dictate the structure

of insurance, and standard models of “optimal insurance” can be applied to this

issue. This usual paradigm is inadequate in the case of workplace Insurance

for drug abuse treatment. Insurance coverage for drug abuse treatment costs is

only one part of an employer’s policy toward drug abuse. Testing, sanctions,

and in-house programs, such as Employee Assistance Plans (EAP), make up

other important elements of workplace policy. in descriptive models of

employers’ choice of coverage and in prescriptive models addressing public

policy issues, insurance should be viewed as a part of workplace policy, with

risk coverage, incentives to use appropriate care, deterrence, and worker/job

sorting issues all part of the analysis (McGuire et al. 1990).

This chapter focuses on the seemingly more simple question of the cost of

health insurance coverage for drug abuse treatment. Although this question is

a direct one, there are many difficulties in providing a clear answer. Some of

these would arise in any discussion of insurance for a new service or disorder,

such as the possibility that coverage for a new diagnosis would lead to

reclassification from closely related diagnoses. Other difficulties, primarily

related to selection issues, emerge from the unique position of drug abuse in

workplace policy. The chapter focuses more on the problems and limitations of

existing methods for estimating costs than on solutions to the problem of

estimating costs, This unfortunately reflects the authors’ judgment about the

present state of the field.

The cost of insurance coverage for drug abuse treatment is important for both

private and public policy. Private employers obviously have an immediate

175
interest in the cost of any fringe benefit. Public interest in costs of private health

insurance has been enhanced because of a concern about the heavy regulatory

burden imposed, particularly on small employers, by State and Federal laws

attempting to finance social goals without raising taxes by imposing

requirements on private insurance.

State regulation of insurance coverage through mandates has been an

important influence on alcohol and other drug abuse and mental health

coverage available to employees and dependents, As States and the Federal

Government turn attention to the uninsured, all mandated benefits have been

put under close scrutiny. Regulations that increase the cost of purchased

health insurance may work against the goal of universal coverage and increase

the financial burden of new State regulations requiring employers to offer

insurance to workers. Small employers are at the center of this debate. With

respect to coverage for drug abuse treatment, small employers are the ones

that would be most affected by mandate legislation. On the other hand, almost

half the working uninsured are employed in firms with fewer than 25 employees

(ICF, Inc. 1987). Public policy toward insurance must choose between

encouraging coverage for more people or more services. The cost of specified

coverages, including drug treatment, is a key factor in the decision.

PRIVATE HEALTH INSURANCE COVERAGE FOR DRUG ABUSE

TREATMENT

Data reported here on work-based health insurance benefits for drug abuse

come from Bureau of Labor Statistics (BLS) surveys, as well as privately

conducted surveys of private industry. The BLS (1989) Employee Benefits

Survey is the only nationally representative random sample survey investigating

group health insurance coverage for drug abuse offered by private,

nonagricultural, medium- and large-size U.S. establishments. The 1988 survey

was expanded to include a larger percentage of service workers and workers in

smaller firms than in previous years’ surveys.

Private health insurance coverage for drug abuse is now a common feature of

health insurance plans for full-time U.S. workers. BLS surveys have

documented a rapid increase over the past decade in the addition of drug

abuse coverage to health insurance benefits offered by U.S. employers. In

1983 and 1985, 43 and 61 percent of full-time workers in medium and large

firms, respectively, had drug abuse benefits (Morrisey and Jensen 1988). By

1988, 90 percent of all full-time workers had health insurance, and 74 percent

had drug abuse coverage (Bureau of Labor Statistics 1989).

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Establishment size is the main determinant of drug abuse coverage, with firms

employing 2,500 or more workers most likely to provide coverage. In 1985,

establishments in the Western United States were most likely to offer coverage,

while those in the South were least likely. The transportation industry offered

drug abuse coverage to the highest percentage of employees (75.5 percent),

and the wholesale trade industry covered the lowest proportion (44.1 percent).

Workers with self-insurance plans were only slightly less likely (4 percentage

points) to have drug abuse coverage than other employees (56.4 percent).

Drug abuse coverage typically is subject to cost limits and rarely is comparable

to coverage for other illnesses. Data for 1988 indicate that among individuals

with drug abuse coverage, only 4 percent had their treatment costs covered in

full. Nineteen percent had drug abuse coverage that was subject to internal

limits only (i.e., a deductible or copayment placed on an individual category of

care, such as hospitalization); 3 percent were subject to overall limits only (i.e.,

a limit on the total drug abuse benefit); and 48 percent were subject to both

internal and overall limits. Ninety-six percent of all individuals with some drug

abuse treatment benefit were covered for inpatient detoxification, 77 percent for

inpatient rehabilitation, and 81 percent for outpatient care.

Coverage for drug abuse treatment shows some variation across the three

categories of workers surveyed, with production and service workers being

slightly less likely to have coverage than professional and administrative

workers or technical and clerical workers. Production and service workers were

also slightly less likely to be covered for inpatient care and slightly more likely to

have both internal and overall limits.

A health care benefits survey of 1,600 employers conducted by a benefits

research firm found that with regard to substance abuse coverage (drug abuse

was not specifically investigated), limitation of benefits and preemployment

substance abuse screening were more typical than utilization review (UR) cost

management techniques (A. Foster Higgins, Inc. 1988). Substance abuse

coverage was managed separately from mental health care coverage in

approximately hatf the plans surveyed, and 88 percent of employers placed

some type of limit on inpatient treatment for substance abuse. It was common

for firms to limit coverage and to limit coverage in more than one way: 56

percent limited the number of days per inpatient episode (most common

number of days was 30), 48 percent limited the total number of inpatient

episodes per year or per lifetime (most common number of episodes was 2),

30 percent limited the amount payable per lifetime, and 23 percent limited the

amount payable per year.

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A survey of chief executive officers of Fortune 1000 companies, all State

governors, and the mayors of 64 of the largest U.S. cities (n=265), as well as

human resource directors of these same organizations, provides insight into

employer behavior regarding drug abuse-related health insurance and health

costs, although drug abuse is not disaggregated from substance abuse in this

research (Mercer Meidinger Hansen, Inc. 1988). Only about one-third of

employers surveyed reported monitoring health insurance claims, one-quarter

had preferred provider arrangements with substance abuse treatment facilities,

and only one-third of preferred provider organizations assumed any risk for

performance or guaranteed cost savings to employers as a result of utilization

management. Only one-third used UR to manage substance abuse treatment

costs. Of those using UR, approximately four-fifths used the same organization

reviewing their regular medical utilization. One-half of the human resource

directors surveyed had not requested UR groups or claims payers to

disaggregate substance abuse claims from other medical claims.

Health maintenance organizations (HMOs) generally do not cover substance

abuse treatment on a par with other treatment. Results from a 1986 national

survey of mental health and substance abuse services within HMOs indicate

that although two-thirds of the HMOs surveyed had alcohol and drug abuse

benefits, 31 percent had only detoxification and emergency drug abuse

coverage (Levin et al. 1988). The median benefits for alcohol and other drug

abuse coverage were 20 outpatient visits and 30 inpatient days. Forty-eight

percent also had multiple or supplemental alcohol or other drug abuse benefits,

In summary, about three-quarters of all full-time US. workers have health

insurance plans providing drug abuse coverage. Workplace size is the main

determinant of such coverage. Drug abuse coverage generally is subject to

greater restrictions than coverage for other illnesses. Private surveys suggest

that firms typically do not use sophisticated health cost management techniques

and appear to adopt a strategy of limiting benefits to control costs.

PROBLEMS IN PREDICTING THE COST OF COVERAGE FOR DRUG

ABUSE TREATMENT

Two fundamental problems plague the task of forecasting the costs of drug

abuse treatment in private health insurance. Prediction of health insurance

costs must be based on experience. Changing patterns of drug use and

treatment mean some sources of data that can be used in other parts of health

care will be of limited or no use in the drug abuse treatment field. This is

referred to here as a “changing baseline.” The second fundamental problem is

that the relationship between drug abuse treatment and other diagnoses and

treatments is complicated and poorly understood. This issue has numerous

178
parts, including comorbidity issues, offsets, masking, and others, It is referred

to here as the limits of “partial analysis.” After discussing these two problems,

we will consider whether some recent research studying how premiums are

affected by the presence of drug abuse treatment coverage is a potential

solution to these problems.

A Changing Baseline

A great deal of research In health services has been concerned with the

question of how demand or expenditures are affected by insurance coverage.

The Health Insurance Experiment (HIE), conducted by researchers at the Rand

Corporation in the mid-1970s (Keeler et al. 1986), is the best known study, but

there have been hundreds of others. This research yields two types of

information, both of interest to the problem of forecasting cost: information on

the position of the demand curve for treatment and information on the

responsiveness of demand to changes in coverage.

The second type of information can be commented on quickly. We are aware of

no study that examines the response of drug abuse treatment use to insurance

coverage. On the basis of the experience in mental health, one would suspect

that the overall demand response may be quite large and that the form of

treatment provided would be responsive to the structure of the benefit.

However, these are just speculations at this point.

Research on the position of the demand curve would require study of the

patterns of use for defined insured populations. This research is essential to

establishing a baseline of utilization patterns. There are serious problems in

using available data. Drug abuse and drug abuse treatment have been

increasing greatly over the past several years, and older data may be of little

help in indicating present patterns of use.

Published results from the Rand HIE contain no information about drug abuse

treatment and clearly show that, unless patterns of treated prevalence are from

recent data, they will not be of much use. Coverage in the HIE was provided for

drug abuse treatment equivalent to other medical services, but the treatment

was apparently so rare in the mid-1970s that it was not observed in a nationally

representative group of about 4,000 persons followed for 3 to 5 years (Keeler et

al. 1986).

Costs of hospital treatment for mental health are defined broadly in Keeler and

colleagues (1986) to include substance abuse care. Keeler and colleagues

(1986, p. 39) count four types of admissions as “psychiatric”: (1) a “pure”

psychiatric admission, with mental health treatment provided for a mental health

179
problem: (2) an admission where psychiatric treatment was provided for

substance abuse; (3) an admission where medical treatment was provided for a

substance abuse-related problem: and (4) a medical admission that probably

had a psychiatric problem as one of the reasons for admission (e.g., an

admission with a discharge diagnosis of both depression and chronic

obstructive pulmonary disease).

The distribution of admissions across these four categories is contained in

table 1. (These hospitalizations made up slightly more than half of the mental

health costs in the HIE.) Categories 2 and 3, admissions related to substance

abuse, make up a notable share of the total. However, the insignificance of

drug treatment costs is indicated when, making the same observation about the

importance of categories 2 and 3, Keeler and coworkers (1986, p. 42) remark

that half the admissions included “alcoholism.” Drug abuse treatment occurring

in outpatient settings was not indicated. However, some drug abuse treatment

may have been taking place, but If so, it was reported as something else.

Recognizing this does not help with the problem of the irrelevance of older data.

TABLE 1. Psychiatric and substance abuse hospitalizations in the Rand HIE

Type Number Percent Rate Per 1,000

1. Pure psychiatric 58 50.0 2.96

2. Psychiatric treatment

for substance abuse

37 31.8 1.89

3. Medical treatment for

substance abuse-related

problem

19 16.3 0.97

4. Medical treatment with

psychiatric diagnosis

2 1.7 0.10

Total 116 100.0 5.91

NOTE: Discharge diagnoses classified as mental health hospitalization were

in the following ranges of HICDA(2): 290-319.0, 792.6, 783.4, 770.2,

and 0-Y85.9.

SOURCE: Keeler et al. 1986, p. 43

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Data from more recent periods show a much different pattern of use. One

company’s use is presented here for purposes of comparison. These data are

from insurance claims from approximately 135,000 employees and dependents

of a single manufacturing company enrolled in a conventional insured plan for a

2-year period. Coverage for alcohol, drug abuse, and mental illness (ADM)

conditions included complete inpatient coverage (with a per episode length-ofstay ceiling), partial hospitalization, and $1,000 of ambulatory coverage per

person per year.

Data on the treatment costs for alcohol abuse diagnoses and all mental

disorders diagnoses are included in tables 2 and 3. Disease categories were

defined by International Classification of Diseases (ICD)-9 discharge diagnoses;

mental illness disorders were defined by ICD-9 discharge diagnoses between

(290) and (319). Diagnoses are reported to the four-digit level to show detail.

Table 2 contains information about hospitalizations. The direct cost of ADM

disorders is 23 percent of all hospitalization costs. Drug abuse treatments are a

significant share of the ADM costs. For this P-year period, drug abuse

treatment was 15.3 percent of the ADM hospital costs and 3.5 percent of all

hospital costs. Shatkin (1990) uses recent data from the same employer to

examine the health care use of children whose parents are diagnosed with

psychiatric and substance abuse disorders. These other sources of costs can

add to the total dollars spent on ADM disorders.

Outpatient facility costs, including partial hospitalization program costs, are

contained in table 3. These constitute a much smaller share of the total.

Physician office claims for this population contain limited diagnostic information;

therefore, it is not possible to separate the components of ADM costs. These

are not reported here.

Patterns of treatment for drug abuse certainly are changing rapidly and probably

exhibit unusually large cross-sectional variation, In this context, it is best to

have recent and, ideally, plan-specific baseline data on which to make forecasts

about changes in costs and use with an insurance plan change. Models based

on “nationally representative data,” with patterns of use that are several years

old, may be useful in simulating insurance effects for general health care

(Buchanan et al., in press), but they are unlikely to be useful in the drug abuse

treatment field.

The Inadequacy of a “Partial” Cost Analysis

If the Rand HIE went into the field today and could give us current data on the

patterns of drug abuse treatment costs for a representative sample from the

181
US. population, would our problems be solved? Unfortunately, “what if

questions regarding institution of or changes in drug abuse treatment coverage

still would be hard to answer.

TABLE 2. Cost of inpatient ADM care for a private corporation, January 1985

through December 1986

ICD-9 Number of Hospital Physician Total

Code Diagnoses Episodes Payment Payment Payment

291.9 Alcohol psychoses 230 434,001 64,654 498,655

303.0 Acute alcohol lntoxication 634 1,610,941 147,575 1,758,516

303.9 Alcohol dependence 2,301 8,837,651 507,925 9,345,576

305.0 Alcohol abuse 16 68,888 4,541 73,429

292.0

292.1

292.8

197 278,022 42,277 320,299

4 10,085 2,554 12,639

2 18,687 1,792 20,479

292.9

Drug withdrawal syndrome

Drug paranoid state

Other drug-Induced

mental disorders

Drug mental disorders-NOSa

9 57,685 10,518 68,201

304.0

304.1

304.2

304.3

304.4

304.5

304.6

304.7

304.8

304.9

305.5

305.6

305.9

Opioid-type dependence 534

Barbituate dependence 14

Cocaine dependence 838

Cannabis dependence 84

Amphetamine dependence 2

Hallucinogen dependence 3

Drug dependence 1

Opioid/other drug dependence 133

Combined drug dependence 15

Drug dependence/NOS 103

Cannabls abuse 1

Opioid abuse 13

Cocaine abuse 31

Drug abuse NECb/NOSa

1 9

1,690,418

56,046

2,958,786

197,211

4,286

2,577

837

428,435

43,433

323,357

1,360

19,711

42,651

43,418

103,922

3,188

160,670

2,353

997

215

33,211

3,879

26,799

847

3,105

7,380

4,943

1,794,340

59,234

3,119,456

199,564

5,283

2,792

837

461,646

47,312

350,156

2,007

22,816

50,031

48,361

All alcohol disorders 11,676,176

All drug disorders 6,585,453

All other mental disordersc

24,909,448

Total mental disorders (290-319) 43,171,077

All lnpatient costs 185,891,174

aNot otherwise specified

bNot elsewhere classifiable

c

lncludes all diagnoses 290-319, exclusive of substance abuse diagnoses specifically ldentified

In above list

SOURCE: Authors’ calculations

182
TABLE 3. Cost of outpatient ADM care for a private corporation, January

1985 through December 1986

ICD-9 Number of Hospital Physician Total

Code Diagnosia Episodea Payment Payment Payment

291.0 Alcohol psychoses 25 9,089 926 10,015

303.0 Acute alcohol lntoxication 260 38,972 2,900 41,872

303.9 Alcohol dependence 9,247 1,208,540 78,837 1,287,377

305.0 Alcohol abuse 39 9,500 719 10,219

304.0 Opioid-type dependence 2,657

304.1 Barbltuate dependence 18

304.2 Cocaine dependence

304.3 Cannabls dependence

304.4 Amphetamlne dependence

304.5 Hallucinogen dependence

304.6 Drug dependence

304.7 Opioid/other drug dependence

304.8 Combined drug dependence

304.9 Drug dependence/NOS

305.1 Tobacco use disorder/abuse

305.2 Cannabls abuse

305.5 Opioid abuse

305.6 Cocaine abuse

305.9 Drug abuse NECb/NOSa

834

153

2

3

8

437,176 40,636

2,644 0

89,977 7,055

13,599 150

37

87

116

2

3

2

7

17

353

819

2,009

4,581

8,931

36,182

171

553

871

1,361

1,912

0

0

0

217

0

329

0

0

0

134

147

477,812

2,644

97,032

13,749

353

819

2,009

4,798

8,931

36,511

171

553

871

1,495

2,059

All alcohol disorders 1,349,483

All drug abuse disorders 649,807

All other mental disordersc

723,093

Total mental disorders (290-319) 2,722,383

All outpatient costs 60,442,925

aNot otherwise specified

bNot elsewhere classifiable

c

lncludee all diagnoses 290-319, exclusive of substance abuse diagnosea specifically ldentified

In above list

SOURCE: Authors' calculations

Consider a simple version of the type of question that might be of interest.

What would be the cost of introducing drug abuse treatment for a given

population with an existing and known pattern of insurance claims and

uncovered services? The difficulties in answering this question stem from

not knowing the answers to related questions: How many people are being

diagnosed and treated for drug use but are labeled as something else? How

many people have coaddictions or related psychiatric problems that are being

treated? Would costs for these persons not change, increase, or decrease with

funding of specialized drug abuse treatment services?

183
The clinical problems of drug abuse, alcohol abuse, and psychiatric disorder

clearly overlap. For example, in a study of individuals treated for alcoholism in

the mid-1980s Walsh and coworkers (1989) found that 40 percent of the

alcoholics being treated at the EAP had used cocaine in the previous 6 months.

Gawin and Ellinwood (1988) contend that regular use of high doses of cocaine

leads to acute psychiatric complications. These overlaps suggest that the costs

of net drug abuse treatment are less than the gross costs of expenditures on

drug abuse treatment because treatment would occur under an associated

condition if the drug abuse treatment coverage was not in place.

The issue of masking has a similar effect. Even if there are no clinically related

conditions, treatment for drug abuse may occur under another diagnosis. If

drug abuse treatment was covered, then drug abuse treatment costs would

appear, but these would not be net costs,

A final interrelation between drug abuse treatment and other costs is via the socalled “offset effect” in which treatment for a drug-related condition reduces

costs for the treatment of other illnesses by having a generally positive effect on

the person’s health. It is certainly plausible that elimination of setf-destructive

patterns of behavior could lead to general savings in across-the-board health

care costs, and some evidence suggests that there could be quite a large

effect. In an analysis of the costs and benefits of a drug testing program at

Georgia Power, Southern Electrical International, Inc. (1989) found that the

medical insurance costs of individuals testing positive for drugs were many

times higher than the costs of similar employees not testing positive. In the

alcohol field, research on offset effects in nonexperimental settings leads to

results consistent with the existence of some effect (Holder 1987).

In summary, the real (or “real” according to reported data) relation of drug

abuse and drug abuse treatment to other disorders and their treatment

indicates that the full costs of including treatment for drug abuse in an insurance

plan are less than the gross costs of drug abuse treatment after the benefit is in

place. Some of these conditions would have been treated anyway, and if there

were any offset, other medical costs also would be reduced.

Are “Premium Regressions” an Answer?

Some recent research on insurance costs has focused on the impact of

regulation and mandatory inclusion of “marginal” coverages, such as ADM

benefits, on plan costs. Jensen and Morrisey (1990, summarized in Gabel and

Jensen 1989) use “premium regressions” to estimate the marginal effect on

total insured costs of various benefit provisions, including some from the mental

health and substance abuse area. A premium regression can take account of

184
the direct and indirect effects of a benefit change. In the case of home health

care, for example, use of this covered service might substitute for inpatient

hospital care in ways that would be hard to measure except at the level of the

total premium. Jensen and Morrisey use data on 9,000 plans from large

employers from 1981 to 1984 to estimate the marginal effect on premiums of a

number of plan features. They control for characteristics of the plan group in

the form of variables for percent males, percent nonwhites, region of the

country, and the form of insurance contract. Although these data are not

particularly recent and therefore do not address the first problem discussed

above, more recent results from the BLS survey are now available. Because it

is concerned directly with the total insured costs of a benefit feature, the

premium regression method would seem to solve the problem with partial

analysis.

For the three ADM benefit variables (among seven) used in the regression,

coverage for substance abuse increased family premium 8.8 percent,

psychiatric hospital stays increased family premium 12.8 percent, and

psychologists’ visits increased family premium 11.8 percent. These findings are

of course highly implausible. It is inconceivable, especially in the early 1980s

that these selective features of a mental health benefit, over and above more

standard coverage such as psychiatrist visits and hospitalization in general

hospitals, could increase premiums by 33.4 percent.

The problem is one of empirical specification, and the difficulties are so

fundamental that it is unlikely that premium regressions ever will be much help.

Although the authors refer to their empirical method as a “hedonic price”

equation (an equation that uses the character of the product to determine its

price), another way to view what Jensen and Morrisey (1990) have done Is to

regard the dependent variable as a quantity index of average demand, specified

as a function of population covered and coverage features. Seen in this way,

serious drawbacks of their approach are evident: (1) Population characteristics

and regional variables typically dominate health care expenditure regressions.

They have few variables positioning the demand curve; their equation is without

even an age measure, probably the most important single variable. (2) There is

no control for adverse selection. (3) As acknowledged by the authors, by

choice of a few plan characteristics, it is likely that these characteristics proxy

the presence of a generous plan overall. The authors may be mistakenly

attributing the effect of many plan design features to the singled-out variables.

(4) There is no distinction between the cost-shifting effect of coverage and the

demand-response effect In terms of impact on premiums. (5) Finally, coverages

are measured in a simple “yes-or-no” form.

185
If mandated ADM coverage increased insurance costs, it could be expected

that such mandates would lead some firms, particularly small firms, to decline to

offer Insurance at all. Jensen and Gabel (1989, results summarized in Gabel

and Jensen [1989]), studied health insurance provision in response to State

insurance regulation in a sample of 1,320 small businesses in 1985. The

decision to offer insurance was modeled as a function of workforce composition,

corporate form and size of the employer, and nine measures of State regulation.

The strongest negative effects on a firm’s decision were found for the existence

of a continuation of coverage rule (t=2.7), premium taxes (t=1.7), and risk-pool

taxes (t=1.6), all forms of regulation that impose costs without increasing

benefits to the firms’ employees. This study is particularly valuable because the

empirical work distinguishes different forms of State regulation. Continuation of

coverage provisions does provide a kind of insurance to workers against job

loss. The cost of this regulation to the employers may be much less than its

value to the workers if workers have other options after employment

termination, such as a spouse’s coverage or Medicaid. Interestingly, mandated

benefits did not seem to decrease the likelihood of coverage. Counts of the

total number and of recently enacted mandates had small but insignificant

negative effects (t statistics of 0.4 and 1.0, respectively). Jensen and Gabel

added separate mandate indicators for substance abuse and mental health

care because these are the mandates that, according to the authors,

“businesses often complain about.” Although no estimated coefficient of the

four measures was statistically significant, on balance the presence of these

mandates increased the likelihood of insurance. The four measures and their

signs and significance were a mandate for psychologists’ services (-, t=0.7),

inpatient mental health coverage (+, t=0.1), alcoholism treatment (+, t=0.1), and

drug abuse treatment (+, t=1.6).

On the basis of these results, an important distinction appears to exist between

State regulations that are mainly cost-increasing without directly benefiting the

firm and workers, such as taxes to finance risk pools, and regulations that

impose costs but confer benefits, such as a mandated coverage law. Jensen

and Gabel (1989, p. 18) unfortunately lump these together in a general

condemnation of mandates by saying that “Mandates enacted between 1983

and 1985 together with those mandates most often complained about by

employers account for 16 percent of noncoverage among small businesses.”

This effect is due almost exclusively to continuation of coverage provisions and

premium taxes, not mandated benefit provisions, according to their own work.

Although mandated ADM benefits may increase costs and discourage small

employers from offering health insurance (bearing on the tradeoff between

targeting insurance regulation to increase the number of persons covered vs.

depth of coverage), the Jensen and Gabel work provides no evidence for such

an impact.

186
IMPLICATIONS FOR RESEARCH

Given the changing epidemiology of drug abuse and the changing technology of

drug abuse treatment, it is important for decisions about private insurance to be

based on recent data. Research reports from national samples must be

supplemented with plan-level information from employers, insurers, or others

with accessible experience. The Federal employees’ plans may be one

possible resource for such data. By observing differences in patterns of care

provided to enrollees with different payment systems, information may be

gathered about the nature of supply response to alternative payment systems.

If there were changes in plan coverages, demand response may be studied as

well. Studies of this form should pay attention to use across the whole ADM

area in light of the potential for a change in drug abuse coverage or payment to

affect patterns of use or diagnosis in the psychiatric or alcohol treatment area.

Although recent data on patterns of use are certainly helpful, it still will be

worthwhile to review experience in drug abuse treatment costs to date. In

addition to information about treatment users and the costs, forms, and sites of

treatment, this review should be alert to the relation of drug abuse treatment to

other ADM treatments.

Drug abuse coverage policy is likely to be a target for public policy in the form of

insurance mandates or other employer regulation. Why do some employers

voluntarily adopt certain policies or components of health insurance coverage?

What determines the differences in employer policies toward drug abuse? It

needs to be recognized in this investigation that drug abuse treatment coverage

decisions are part of a set of policies adopted by an employer. What effects is

regulation likely to have on costs, coverage, and patterns of treatment?

REFERENCES

A. Foster Higgins, Inc. Foster Higgins Health Care Benefits Survey. Princeton,

NJ: A. Foster Higgins, Inc., 1988. pp. 19-20.

Buchanan, J.L.; Keeler, E.B.; Rolph, J.E.; and Holmer, M.R. Simulating health

expenditures under alternative insurance plans. Management Sci, in press.

Bureau of Labor Statistics. Employee Benefits in Medium and Large Firms,

1988. Bulletin 2326. Washington, DC: Supt. of Docs., U.S. Govt. Print. Off.,

1989.

Gabel, J.R., and Jensen, G.A. The price of state mandated benefits. Inquiry

26:419-431, 1989.

Gawin, F.H., and Ellinwood, E.H. Cocaine and other stimulants: Actions,

abuse, and treatment. N Engl J Med 318:1173-1182, 1988.

187
Holder, H. Alcoholism treatment and potential health care cost savings. Med

Care 25:52-71, 1987.

ICF, Inc. “Health Care Coverage and Costs in Small and Large Businesses.”

Report prepared for the US. Small Business Administration, 1987.

Jensen, G.A., and Gabel, J.R. “State Mandated Benefits and the Small Firm’s

Decision to Offer Insurance.” March 1989.

Jensen, G.A., and Morrisey, M.A. Group health insurance: A hedonic

approach. Rev Econ Stat 72(1):38-44, 1990.

Keeler, E.B.; Wells, K.B.; Manning, W.G.; Rumpel, J.D.; and Hanley, J.M. The

Demand for Episodes of Mental Health Services. R-3432-NIMH. Santa

Monica, CA: The Rand Corporation, 1986.

Levin, B.L.; Glasser, J.H.; and Jaffee, C.L. National trends in coverage and

utilization of mental health, alcohol, and substance abuse services within

managed health care systems, Am J Public Health 78(9):1222-1223, 1988.

McGuire, T.G.; Ruhm, C.J.; and Shatkin, B.F. Defining the Public Interest in

Workplace Drug Abuse Policy. Boston: Boston University, 1990.

Mercer Meidinger Hansen, Inc. Substance Abuse in the Workplace.

Conducted for Marsh and McLennan Companies, Inc. New York: Mercer

Meidinger Hansen, Inc., 1988.

Morrisey, M.A., and Jensen, G.A. Employer-sponsored insurance coverage for

alcoholism and drug abuse treatments. J Stud Alcohol 49(5):456-461, 1988.

Shatkin, B. “Health Care Utilization of Children of Alcoholics.” Ph.D.

dissertation, Brandels University, 1990.

Southern Electrical International, Inc. Cost-Benefit Analysis of Georgia Power

Company’s Workplace Drug Testing Program. Prepared for the Office of

Workplace Initiatives, National Institute on Drug Abuse. Contract No. 271-

87-8204. Atlanta, GA, 1989.

Walsh, D.; Hingson, R.W.; Merrigan, D.M.; Cupples, L.A.; Levenson, S.M.; and

Coffman, G.A. “Associations Between Alcohol and Cocaine Use in a Sample

of Problem-Drinking Employees.” Unpublished manuscript, Boston

University, 1989.

AUTHORS

Thomas G. McGuire, Ph.D.

Professor

Barbara F. Shatkin, Ph.D.

Research Associate

Department of Economics

Boston University

Suite 555

188
270 Bay State Road

Boston, MA 02215

189
Health Insurance Coverage Questions,

Public Health Surveys, and Drug

Abuse

William S. Cartwright and Albert M. Woodward

INTRODUCTION

The National Institute on Drug Abuse (NIDA) and other governmental agencies

are interested in the extent of health insurance coverage, prevalence of alcohol

and other drug abuse and mental health coverage, and access to drug

treatment services. NIDA conducts the annual National Household Survey on

Drug Abuse (NHSDA), which measures the prevalence of alcohol and other

drug use in the United States. Previously the survey has not been an important

source of information on drug treatment, health service use, or health insurance

coverage.

This chapter reviews coverage questions contained in national health insurance

surveys and proposes a set of questions to be added to the NHSDA. The

proposed questions are relatively few in recognition that the focus of the NIDA

survey is on national prevalence rates for alcohol and other drug use. These

questions are consistent with those of the existing national health insurance

surveys to facilitate comparison among populations on the subjects of access

and coverage.

The NHSDA is an obvious choice to include a set of questions on health

Insurance coverage and access to drug treatment services, because it provides

the potential for obtaining nationally representative data on utilization of

treatment and insurance coverage. The survey structure and process provide

confidentiality of individual participation and anonymity of the person’s response

to questions of drug use. Because the survey asks questions about behavior

that may be illegal, confidentiality and anonymity must be ensured.

At least four other issues need to be resolved in addition to the special

requirements of confidentiality and anonymity: (1) who in the household is most

knowledgeable about the health insurance coverage of the person being

190
interviewed, an especially difficult issue if that person is an adolescent; (2) how

to ask about specific alcohol and other drug abuse coverage, because most

interviewees are unlikely to know unless they have tried to use this coverage;

(3) how to ask if the respondent needed, sought, and obtained treatment, and if

so, was the treatment covered by health insurance; and (4) what period of

coverage should be asked about. These issues will influence the content of the

questions on coverage and treatment and their placement in the survey.

The chapter begins with a brief review of the 1985 and 1988 NHSDA and then

briefly reviews issues and questions from national health insurance surveys.

The chapter concludes with a list of questions and reasons for their selection.

NATIONAL HOUSEHOLD SURVEY ON DRUG ABUSE

The NHSDA (National Institute on Drug Abuse 1989) measures the prevalence

of alcohol and other drug use in the continental U.S. population for ages 12 and

older for 1988. In each household, the composition and demographic

characteristics are determined for all members, and a random selection is made

to interview one, two, or none. The survey ensures adequate sample sizes to

stratify by four age groups (12-17, 18-25, 26-34, and 35+) and three racial/

ethnic groups (Hispanic in origin, regardless of race; white, non-Hispanic; and

black, non-Hispanic). The survey is designed statistically to obtain responses

from a significant number of adolescents ages 12 to 17. In 1988 these

represented 3,095 out of 8,814 sampled persons and about 10 percent of the

total projected U.S. population. The survey reports national frequency

distributions and rates about the following illicit drugs: marijuana, cocaine

(including crack), crack (separately), inhalants, hallucinogens (including

phencyclidine [PCP]), psychotherapeutic drugs (nonmedical use), and heroin.

The survey also reports on the use of the licit drugs alcohol and nicotine

(cigarettes and smokeless tobacco).

The interview process is designed to maximize confidentiality of participation

and anonymity of response. Identifying information is separated from survey

response. The interviewer never has access to the individual’s response,

because in those segments of the interview involving sensitive questions, cards

are shown and answer sheets marked to questions read aloud by the

interviewer. The participant seals the answer sheet in a postage-paid envelope

and mails it to the firm hired by NIDA to tabulate the responses.

Information on treatment is not sought in each survey year and, when collected,

appears to be underreported. In 1985 Treatment Answer Sheet #14 was

added, which collected information on whether the individual sought help to

stop smoking (TR-1), treatment for drinking (TR-2), or treatment for drug use

191
(TR-3). If the response was “yes,” then the individual was asked to circle the

places where treatment was received (TR-4). Later the individual was asked if

he or she had received treatment in the past 12 months. The National

Household Survey on Drug Abuse: Main Findings 1985 report (National

Institute on Drug Abuse 1988) did not show information on the treatment

questions. In the 1988 survey, this treatment answer sheet was not present;

however, a few questions on nondrug treatment were asked in the health

section of the survey.

OTHER HOUSEHOLD SURVEYS

Current Population Survey

Statistics from the Current Population Survey (CPS) are used to determine the

unemployment rate and other labor force characteristics. The subject matter of

the survey presents survey designers with an opportunity to include questions

about health insurance. Beginning in 1980, every March the Census Bureau

asked questions about health insurance for the previous calendar year. The

sample for 1987 comprised about 60,000 households and about 156,000

individuals, which was representative of the 244 million in the noninstitutional

population. The size of this sample, the timeliness, the demographic

characteristics, the income, and the health insurance information have made

this survey an important source of policy analysis on the question of the number

of uninsured in the U.S. population.

The questions were changed in March 1988 to probe for the presence of health

insurance from an absent parent or anyone outside of the household. In the

1988 CPS, the respondent was asked which member in the household had a

health insurance plan and if each person in the household age 15 and older

was covered by the plan. Information was requested on children 14 years and

younger to find out if they were covered by someone not present in the

household. Children younger than 15 are not interviewed because the usual

respondent is an adult in the household. These changes in the questions had

two effects: (1) Complete comparisons between 1979 and 1986 cannot be

made with the years after 1986 and (2) the level of coverage was greater than

had been reported in 1979-1986 (i.e., reported coverage was biased

downward). The result of these changes in the survey led to a reduction of

previous CPS estimates of the number who were reported “uninsured” from 37

million to 31 million (Moyers 1989).

The health insurance questions are placed in the Income Supplement at the

end of the CPS. About half of those interviewed in March are interviewed again

the following March. Questions probe for information on Medicaid, Medicare,

192
Civilian Health and Medical Program of the Uniformed Services (CHAMPUS),

Veterans Administration (VA) or military health care, and coverage by a private

health insurance plan. Respondents also are asked if the health insurance plan

came through an employer or union and whether it was a premium subsidy.

There are 12 health insurance questions in the survey. Overall, nonresponse

rates have been from 10 to 15.5 percent for the survey as a whole, and

imputations are made for missing data on coverage. One unasked question of

great importance is the presence of alcohol and other drug abuse treatment

coverage in the plans of those that are covered.

Kronlck (1989) conducted a study with 1988 CPS data for the Office of

Technology Assessment. He found that in 1987, 10- to 18-year-old adolescents

without health insurance numbered 4.6 million, or about 15 percent of this age

group. This was a lower estimate than those of previous years, due to question

wording changes introduced in the 1988 CPS. This group of adolescents

overlaps in age the group of adolescents 12 and older that is in the NHSDA.

Swartz (1985) maintains that the CPS respondents answer the question in

terms of a “point-in-time” rather than the previous year’s coverage. Kronick

argues that this is overstated and notes that there are several anomalous

findings in some groups if Swartz’s conjecture is true. For example, insurance

status is more closely aligned with employment status during the previous year

rather than employment status in the survey month. Second, the 1987 National

Medical Expenditure Survey (NMES) has preliminary first-round “point

estimates” of uninsured people that are 6 million higher than the 1988 CPS

estimate. The lower CPS estimate is consistent with a survey in which some

coverage during the year results in a positive response to the coverage

question. Kronick maintains that question wording is the principal reason for the

lower level of insurance coverage in the CPS.

Public Health Surveys

National Medical Expenditure Survey. The 1987 NMES is an important

source of information concerning household insurance coverage (Edwards and

Edwards 1989; Edwards and Berlin 1989). The survey targets the U.S. civilian

noninstitutional and institutional populations. In the 1987 NMES, approximately

14,090 households represented the civilian noninstitutional population of the

United States, and 2,000 households represented of Native Americans and

Alaska Natives. In the institutional component, information about 11,000

individuals in nursing and personal care homes and facilities for the mentally

retarded was collected for 1987. The data permit analysis of private health care

insurance coverage and benefits, public programs, and long-term care.

193
Besides a household survey done in five waves, a health insurance plans

survey was conducted to obtain detailed information concerning the extent of

coverage, benefits, and premium costs.

The principal goal of the 1987 NMES was to determine the extent of and gaps

in coverage for the entire calendar year and to allow linkage between health

insurance coverage and employers. For each private plan reported, the source

of the plan was obtained and compared with the employer roster. The design of

two precursor surveys, the 1977 National Medical Care Expenditure Survey

(NMCES) (Bonham and Corder 1981) and the 1980 National Medical Care

Utilization and Expenditure Survey (NMCUES) (Bonham 1983), permitted a

point of measurement only at the time of the interview dates in the survey.

Information in the first round represents a beginning point for the 1987 data

collection; thus, it represents a point estimate for coverage.

About 70 items were probed that related to the public and private coverage of

all individuals in the household. In the first wave, information was obtained on

the health insurance status of all household members at the time of interview for

Medicare and CHAMPUS/CHAMPVA. (CHAMPVA covers disabled veterans

and their dependents and survivors.) Questions were answered by a

knowledgeable respondent in the household. Medicaid, other public medical

assistance, and private insurance coverage information was collected to obtain

continuous coverage information for the year. Benefit and coverage data were

collected from such sources as employer, business, union, other group, or

insurance company plans for all persons in the household. Information on

coverage of an adolescent through an absent parent’s policy also was

collected.

In the health insurance plans survey, respondents were asked directly if the

plan includes a drug abuse treatment benefit, an alcohol abuse treatment

benefit, and/or a mental health benefit. The first wave of the survey has been

published without the detailed health insurance plans information, scheduled to

be available in 1991. The questions on alcohol and other drug abuse coverage

is in section L, Chemical Dependency (p. 25) on Basic Coverage (Hospital and

Medical):

1. Are benefits provided for the treatment of chemical dependency?

2. Are benefits provided for:

a. Inpatient alcoholism treatment?

b. Outpatient alcoholism treatment?

194
3. Are benefits provided for:

a. Inpatient drug dependency treatment?

b. Outpatient drug dependency treatment?

These same questions are asked in the section concerning major medical

insurance coverage (p. 71) (National Center for Health Statistics 1987).

National Medical Care Utilization and Expenditure Survey. The 1980

NMCUES previously mentioned collected household data on the

noninstitutional population. Individuals in the survey were interviewed five times

at approximately 3-month intervals. About 6,000 randomly selected households

(17,600 individuals) and a State Medicaid component of 4,000 households

(13,400 individuals) were drawn from the eligibility roles of California, Michigan,

New York, and Texas. Health insurance coverage data were obtained in the

core interview and included Medicare, Medicaid, CHAMPUS/CHAMPVA, Indian

Health Service, and private coverage. Because health insurance was in the

core questionnaire, changes in coverage over time could be monitored. If an

individual was not covered, a reason was probed. Alcohol or other drug abuse

was not a topic of the survey.

National Health lnterview Survey. The National Health Interview Survey

(NHIS) collects information on acute health conditions, episodes of persons

injured, restrictions in activity due to chronic conditions, self-assessed health

status, use of medical services, and demographic characteristics of the

respondents. The Bureau of the Census conducts the survey for the National

Center for Health Statistics (NCHS), interviewing each week randomly selected

samples that are representative of civilian noninstitutional persons. In 1987,

122,859 persons in 47,240 households were interviewed. Only 4.7 percent of

those individuals randomly selected did not participate in the survey. In 1985

the NHIS initiated the following major changes:

• Reduce the number of primary sampling locations from 376 to 198 to

improve sampling efficiency

• Oversampled the number of black persons to improve the precision of

statistics

• Made the sample more comparable to other NCHS surveys

• Based the population universe on revisions to the decennial census for

followup surveys

195
Information is collected from responsible family members residing in the

household. Proxy responses are accepted for all children and others not

present at the time of the interview or incapable of responding.

The 1989 NHIS has a supplement that collected information about health

insurance status at the time of the survey. Questions were asked concerning

Medicare, Medicaid, military and veterans programs, and private health

insurance coverage. If there was participation in a private plan, data were

collected on whether it was a health maintenance organization obtained through

an employer or union, and whether coverage extends to hospital expenses,

doctor’s or surgeon’s bills, dental services, prescription drugs outside of the

hospital, and mental health or alcohol and other drug abuse services. The

reason for not carrying health insurance is asked. Information concerning

receipt of welfare under the Aid to Families with Dependent Children or

Supplemental Security Income programs (a measure of Medicaid eligibility) also

is collected. One series of questions asks if an individual was laid off during the

past 12 months, if private insurance coverage was lost, and if so, whether some

other private or public insurance was obtained during the job loss,

The 1989 survey also has a supplement on mental health in which the

respondent is asked whether anyone in the family had an alcohol or other drug

abuse disorder in the past year. This question is the only one on alcohol or

other drug problems among the national health and health insurance surveys.

It is not possible to match insurance coverage at the current time with the

possible alcohol or other drug problem in the past year. Because confidentiality

and anonymity are not handled the same as the NIDA National Household

Survey on Drug Abuse, the response rate to this question may not be as high

as that for questions on the NIDA survey.

Other Surveys. Several other national surveys inquire about the presence of

insurance. The 1977 NMCES, like the 1987 NMES and the 1980 NMCUES,

collected data on health insurance status. These three surveys allow the

determination of insurance status at various times in a given year. In contrast,

the NHIS asks about insurance coverage at the time of the interview. These

both contrast with the CPS, which asks about coverage during the previous

year.

The Bureau of the Census conducted a Survey of Income and Program

Participation (SIPP) to provide statistical information on income and social

welfare program changes over time for persons and households. The first

interviews of the first wave of SIPP were conducted in October 1983 (Frankel

1985). Persons interviewed were surveyed about their income and related

topics once every 4 months for approximately 2 1/2 years. Questions about

196
Medicaid, Medicare, and health insurance coverage were asked in the section

on noncash benefits. No questions were asked about drug use.

Conducted In fall 1986, the Robert Wood Johnson Access Survey of 10,130

noninstitutional persons estimated the proportion of uninsured persons to be 10

percent (Freeman et al. 1990). Adults were interviewed directly and children

younger than 17 through proxy interviews with parents or guardians. Questions

were asked about health status, access to and use of services, demographic

characteristics, and insurance coverage. The survey reported on access to

health services and the odds of workers being uninsured, but it neither collected

nor reported information on drug use.

RECOMMENDATIONS FOR THE HOUSEHOLD SURVEY ON DRUG ABUSE

No detailed knowledge exists of the demand for health insurance coverage for

drug treatment. The distribution of expenditures on health services of those

who seek or have undergone treatment for drug problems is unknown. The

adequacy of health insurance in providing access to drug treatment services is

also unknown. Two unanswered questions are, To what extent are benefits

available and used for the treatment of drug problems? and How does the

population with drug problems differ from the rest of the population in terms of

its need for coverage? Finally, the extent to which cost sharing and

copayments are part of rational decisionmaking in benefit coverage is unknown.

That is, to what extent do the out-of-pocket expenditures influence the utilization

of drug treatment services?

Adding questions on insurance coverage to the NIDA National Household

Survey on Drug Abuse will permit the analysis of the demand for insurance of

drug treatment services. This survey provides the most comprehensive

information on use of drugs among the US. household population. Other

surveys, such as the NHIS or the NMES, provide detailed insurance information

but little information on drug use. Furthermore, comparisons of coverage

reported by the NIDA survey and of the more detailed information from other

surveys will permit a more comprehensive characterization of the demand

response for drug users vs. the rest of the population.

The analysis of health insurance coverage may be extended along several

lines, First, from the NIDA survey, public or private health insurance coverage

may be examined over the various treatment modalities. Second, within the

private insurance market, the NMES will permit a study of the proportion of

insurance with mental health or alcohol or other drug abuse coverage when

health insurance plan data become available in 1991. Third, the employee

benefits survey of 1989 (US. Department of Labor 1989), conducted by the

197
Bureau of Labor Statistics, also has information concerning alcohol and other

drug abuse treatment benefits. Fourth, the CPS will have questions concerning

health insurance coverage and workplace alcohol and other drug prevention

programs. Also, the NHIS contains information on both coverage and alcohol

and other drug abuse disorders, Thus, by examining all these surveys, a

clearer picture will emerge of the extent and adequacy of alcohol and other drug

abuse coverage in health insurance in the United States. As previously

discussed, the technical nature of questions about alcohol and other drug

abuse and health insurance coverage requires the use of all these surveys.

The confidentiality and anonymity requirements of the survey limit the phrasing

of questions concerning coverage and treatment. The fundamental unit of

analysis is the person, not the household, because in epidemiologic studies,

rates of disease are measured with respect to persons in a defined population

at risk. This also limits the way that questions concerning coverage and

treatment may be asked.

The first issue is the source of health insurance coverage. The policyholder

within the family may obtain health insurance coverage through the employer,

from a union, from the Federal and/or State Government, or through individual

purchase. For an individual family member, insurance may be obtained from

one’s employer or the spouse’s employer. Dependents may be covered on

either spouse’s policy or may be covered by a parent who is not present in the

home. As previously discussed, questions must be worded carefully to avoid

some of the pitfalls in interpreting insurance coverage that analysts have

discovered in past CPSs.

Asking adolescents questions about sources of payment may not yield highquality information for this group but is an issue worthy of investigation. Youth

who are 18 years and older may know whether they have health insurance

coverage. Numerous household studies sponsored by the Public Health

Service have shown that individuals know their coverage status. Such

household studies attempt to obtain information on the insurance status of

every member of the household and the source of that coverage. This would

not be practical in the NIDA survey because individuals are picked randomly

rather than selected on the basis of their knowledge of the household members’

health insurance coverage.

There Is a question of whether individuals understand their health insurance

coverage, that is, how divergent their perception of benefit coverage and

provisions for copayment are from the actual coverage and copayments. Waldo

and colleagues (1982) found that as more specific information concerning

health insurance characteristics was asked in a national household survey,

198
reporting bias occurred. Alcohol and other drug abuse coverage may not be

well understood because it is one of many coverages and, thus, subject to

reporting bias. To obtain better information, the NMES has a separate followup

survey on the health insurance plans to determine plan characteristics, and

alcohol and other drug abuse coverage questions occur In this part of the

NMES. Asking the respondent of the NIDA survey for permission to contact the

employer to survey the health plan Is not feasible because of the appearance of

potential violation of confidentiality to the respondent. As a second-best

alternative, the respondent can be asked about the availability of alcohol or

other drug abuse or mental health coverage. The respondent is likely to know

the coverage for alcohol or other drug treatment if he or she has sought

treatment. By changing to an employer or insurance provider as the sampling

unit, information on alcohol or other drug abuse coverage may be obtained

(e.g., the Employer Benefits Survey). Unfortunately, this information does not

allow the examination of health outcomes.

The requirement of confidentiality and the fundamental unit of analysis (the

person) also affect questions on treatment and personal income. Drug

treatment questions cannot be added to a survey during the screening process

of the household, because such questions would compromise the confidentiality

requirement and destroy the viability of the whole survey. Treatment for drug

abuse is important information because it cannot be divorced from health

insurance reimbursement, The probability, intensity, and adequacy of treatment

may hinge on the dual presence of health insurance and benefits for alcohol or

other drug abuse. However, data on treatment, although collected in prior NIDA

surveys, have been of secondary importance to high-quality, epidemiologic

information.

To a lesser degree, personal income and household Income are important in

assessing access to treatment, especially in the presence of insurance

coverage. The ability to pay out-of-pocket treatment expenses is connected

intimately to income, even if there is coverage. In an epidemiologic survey such

as the NIDA survey, income questions usually are asked at the end of the

interview because the income question has the potential to terminate the

interview prematurely. Household income cannot be estimated, because only

personal income is obtained in the NIDA survey. Adolescents are usually not in

a position to answer household income questions. In these circumstances the

best action is to continue to ask for total personal income, recognizing the

possible lack of validity for adolescents.

The final issue is what period of time should the respondent be asked about.

The coverage questions can ask about several periods: (1) a point in time,

such as the time of interview; (2) a period of time, such as the past year; and

199
(3) several points in time in a panel study approach. One could ask for

coverage as of the time of the interview or in terms of some previous coverage.

In addition, one must decide if any coverage in the period is relevant or whether

one is most interested in coverage that lasts for the whole period. Obtaining

information about the duration of health insurance is difficult because of

problems related to recall, as has been noted for the CPS. The SIPP allows the

duration of coverage to be measured by asking individuals questions regarding

their coverage at several different points in time. In this way, the changes of

eligibility and participation of coverage may be discerned over the duration of

the survey waves. This is particularly important in analyzing Medicaid where

eligibility of Medicaid beneficiaries can change within a year’s time. The

necessity of adding only a few questions narrows the question of duration to

that of the CPS.

The March CPS and the 1987 NMES are the two most important surveys for

national analysis of health insurance coverage. The NMES is too detailed to

permit adaptation of the questions to the NHSDA. The shorter CPS

questionnaire will be more feasible to implement. Furthermore, the CPS can

provide weights to project the data in future years. The CPS should be used for

its questions on insurance coverage. The health insurance questions might be

placed either In the beginning for the initial screening of the household or in the

last section, called “statistical information,” as a second-best alternative.

The health insurance questions should follow the CPS, questions 74 and 75.

These questions could be asked at the beginning of the interview during the

initial screening of the household to determine insurance coverage for each

member of the household. Alternatively, these could be asked at the end of the

survey in the statistical section for each member of the household. This is

disadvantageous because the respondents are less likely to know about

coverage than the person being interviewed in the screening process.

Obtaining valid information about specific alcohol or other drug abuse benefits

will be difficult. Like the questions on whether there is insurance coverage,

these questions could be asked during the screening process. The specific

questions are based on those of the CPS.

In the previous discussion, alcohol and other drug treatment and source of

payment were shown to be linked; thus, they would naturally appear in a

confidential answer sheet. Treatment by modality and setting must be asked so

that it can be linked to the type of coverage (e.g., public treatment paid for by

Medicaid). The treatment modalities and settings asked about in the questions

are taken from several NIDA epidemiologic surveys. Finally, a question on

access to treatment must be asked to determine the effect of health insurance

200
coverage. This question should be placed with the confidential questions in the

survey. An access question in this section serves to corroborate coverage

information obtained in the screening process.

Table 1 presents suggested questions.

TABLE 1. Health insurance coverage questions

A. Many government programs provide medical care or help pay medical bills.

Please circle the programs from which (PERSON) received coverage

during 1990:

1. Medicaid

2. Medicare

3. CHAMPUS, VA, or military

B. During 1990, was (PERSON) covered by a health insurance plan other

than Medicare, Medicaid, or military health insurance? Yes___ No___

If the answers to Questions A and B indicate no coverage, the interviewer can

skip Question #C.

C. Did (PERSON’S) health insurance plan include coverage for any of the

following:

___Alcohol abuse

___Other drug abuse

___Mental health

Confidential Questions

The following questions must be placed in a confidential answer sheet because

of their sensitivity.

D. During 1990, did you receive treatment for a drug problem? Yes___No___

E. During 1990, in which of the places listed have you received treatment for

your drug use? (Circle the number of each of those places.)

201
Hospital inpatient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......1

Residential .................................................................................. 2

Outpatient detoxification/drug maintenance ............................................ 3

Outpatient drug free .................................................................................... 4

Partial hospitalization

(Day program or intensive ambulatory services)........................................................ 5

Self-help group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Other (specify).................................................................................. 7

F. During the past year, were you referred to drug treatment through an

Employee Assistance Program or other employee nonhealth insurance

program?

Yes_ No_

G. During 1990, have you ever been denied benefits for a drug abuse

treatment claim because:

Not covered by the plan

Already used up all the benefits available in the plan

Not applicable, fully covered

REFERENCES

Bonham, G.S. Procedures and Questionnaires of the National Medical Care

Utilization and Expenditure Survey. Series A, Methodological Report No. 1.

National Center for Health Statistics. DHHS Pub. No. 83-20001.

Washington, DC: Supt. of Docs., U.S. Govt. Print. Off., 1983.

Bonham, G.S., and Corder, L.S. NMCES Household Interview Instruments.

Washington, DC: National Center on Health Services Research, 1981.

Edwards, W., and Berlin, M. Questionnaires and Data Collection Methods for

the Household Survey and the Survey of American Indians and Alaska

Natives. National Medical Expenditure Survey, Methods 2. National Center

for Health Services Research and Health Care Technology Assessment.

DHHS Pub. No. (PHS)89-3450. Rockville, MD: Public Health Service, 1989.

202
Edwards, W., and Edwards, B. Questionnaires and Data Collection Methods for

the Institutional Population Component. National Medical Expenditure

Survey, Methods 1. National Center for Health Services Research and

Health Care Technology Assessment. DHHS Pub. No. (PHS)89-3440.

Rockville, MD: Public Health Service, 1989.

Frankel, D. A summary of the content of the 1984 panel of the Survey of

Income and Program Participation. SlPP Working Paper. Series No. 8504.

Washington, DC: US. Bureau of the Census, 1985.

Freeman, H.E.; Aiken, L.H.; Blendon, R.J.; and Corey, C.R. Uninsured workingage adults: Characteristics and consequences. Health Ser Res 24(6):811-

823, 1990.

Kronick, R. Adolescent Insurance Status: Analyses of Trends in Coverage and

Preliminary Estimates of an Employer Mandate and Medicaid Expansion on

the Uninsured Background Paper. Washington, DC: U.S. Congress, Office

of Technology Assessment, 1989.

Moyers, M.E. A revised look at the number of uninsured Americans. Health Aff

8(2):102-110, 1989.

National Center for Health Statistics. Booklet Description Maintenance System,

1987.

National Institute on Drug Abuse. National Household Survey on Drug Abuse:

Main Findings 1985. DHHS Pub. No. (ADM)88-1586. Washington, DC:

Supt. of Docs., US. Govt. Print. Off., 1988.

National Institute on Drug Abuse. National Household Survey on Drug Abuse:

Population Estimates. 1988. DHHS Pub. No. (ADM)89-1636. Washington,

DC: Supt. of Docs., US. Govt. Print. Off., 1989.

Swartz, K. Interpreting the Estimates From Four National Surveys of the

Number of People Without Health Insurance: A Project Summary Report.

Washington, DC: The Urban Institute, 1985.

US. Department of Labor. Employee Benefits in Medium and Large Firms,

1988. Bulletin 2336. Washington, DC: Bureau of Labor Statistics, 1989.

Waldo, D.C.; Horgan, C.M.; and Cafferata, G.L. Consumer Knowledge of

Health Insurance Coverage. Proceedings of the Fourth Conference on

Health Survey Research Methods. Washington, DC: National Center for

Health Services Research and the National Center for Health Statistics,

1982.

AUTHORS

William S. Cartwright, Ph.D.

Public Health Analyst

Albert M. Woodward, Ph.D.

Public Health Analyst

203
Financing and Services Research Branch

Division of Applied Research

National Institute on Drug Abuse

Parklawn Building, Room 9A-42

5600 Fishers Lane

Rockville, MD 20657

204
Recommendations

William S. Cartwright and James M. Kaple

INTRODUCTION

After formal presentations and discussion of the papers, members of the

technical review convened into three groups to prepare recommendations in the

areas of economic costs, cost-effectiveness, and financing. Members also were

encouraged to move to other groups to make contributions across other areas.

The members of the technical review then reconvened, at large, and reported

on the recommendations made in the small groups. Each area received

discussion by the full group, and participants developed an outline of the

recommendations that are presented below.

ECONOMIC COST RESEARCH

The members of the technical review recommended as an overarching goal that

existing surveys be examined and modified where necessary to capture

improved economic data to inform services research.

1.

2.

3.

4.

5.

Methodological problems of small target populations in a large survey

population should be overcome through better screening and

oversampling.

The National Household Survey on Drug Abuse should obtain more

complete information on individual and household socioeconomic status,

including better income and labor force participation data.

The National Health Interview Survey should continue to include health

status, service use, and insurance coverage on alcohol and other drug

abuse and mental health (ADM) problems/conditions.

Public use tapes should be made available more quickly following

surveys and disseminated more widely.

The National Health and Nutrition Examination Survey should be studied

for possible addition of drug testing questions.

205
6.

7.

6.

9.

10.

11.

There should be a minimum data set of questions that should be asked

on all surveys in the same way, including source of payment,

comorbidity data (surveys of single disorders may be misleading if

comorbidity is not obtained), and onset, duration, and symptoms of

disorders.

Questions of income should specify better household and individual

earnings and add transfer and other unearned income payments.

Research should be done on the possibility of adding questions

concerning disorders among all people in the household (not just the

interviewee).

The Drug Abuse Warning Network should be expanded to include some

cost data.

The results of the Drug Services Research Survey should be used to

improve the current National Drug Abuse Treatment Unit Survey.

Special supplements to the National Longitudinal Surveys should

continue to be conducted, and findings should be made known,

The technical review established a second overarching recommendation that

more health services research should be done on specific areas for economic

costs.

12.

13.

14.

15.

16.

Research should be conducted on defining and measuring the full costs

of drug abuse and treatment.

Research should be conducted on hidden costs that up to now have not

been studied.

Research should be conducted on following a population at risk or in

treatment over time to identify long-term costs (and outcomes).

Research should be conducted on costs and utilization of services

funded under the block grants programs covering ADM disorders.

Regional services research centers should be established to promote

data collection and analysis at the local level on topics for which national

data collection may not be appropriate.

206
17. Research should be conducted on improving diagnostic measures of

disorders such as those in the Diagnostic and Statistical Manual of

Mental Disorders and the International Classification of Diseases.

18. A research grant program on services research, including economic cost

analysis, should be established.

COST-EFFECTIVENESS RESEARCH

Cost-effectiveness of alternative approaches to drug abuse services is a critical

research focus. It must be determined if resources devoted to alternative

treatment options result in efficient drug abuse programs and services. Costeffectiveness research requires comparison of outcomes and associated costs

for alternative ways of providing drug abuse services. The technical review

group focused their recommendations on six areas of concern.

19.

20.

21.

22.

23.

Services research should be stimulated to answer several recruitment

questions: In what ways can the treatment referral system be improved

to more appropriately match client needs with available treatment

services? Can outreach programs make contact with persons who have

no history of treatment but would avail themselves if an appropriate

referral were made? Can assessments aid in the identification of clients

at high risk for leaving treatment programs prematurely?

Treatment goals should be studied to answer several questions. What is

the impact of different goals of treatment outcome? What are the

differences to be inferred from monitoring behavioral change vs.

permanent lifestyle and cognitive behavioral development and recovery?

Services should be examined more broadly. What are the individual and

combined effects of components of treatment and services? How are

clients referred to health and other services in the community?

Treatment career also should be studied to examine the potential effects

of a treatment episode. How does a particular treatment episode

function in a person’s life? Does treatment accelerate maturing out of

drug addiction? If cost-containment acts to reduce effectiveness, do

short-term savings increase subsequent long-term costs?

A variety of methodological studies should be initiated to improve

services research in general and cost-effectiveness in particular. The

quality and utility of current approaches to study effectiveness and cost207
effectiveness need to be assessed and improved. Particular attention is

directed to the following:

Diagnostic techniques: readiness, need, and service

Cost accounting systems

Treatment and service definitions and content

Measurement of outcome and translation into dollar terms

24. A three-level approach to methodology is proposed in the following

areas:

Minimum data set for program management, treatment planning,

and accounting

Common core set of measures and procedures across research

studies

lndepth examination of issues that can be replicated in appropriate

studies

In addition, participants recommended services research in the following areas:

25.

26.

27.

28.

29.

Develop common-use instruments, methodologies, and procedures.

Conduct continuing efforts to assess and improve quality and utility of

research approaches. Research centers of excellence would be a focus

for this process.

Emphasize collaborative field trials for issues and approaches.

Demonstration efforts should be coordinated to facilitate central

evaluation using state-of-the-art methodology with sufficient sample size

and combination of treatments to provide conclusive evidence of relative

cost-effectiveness.

Establish a services research clearinghouse to disseminate information

on instruments, methodologies, protocols, and findings.

Regional centers should coordinate with State and private systems to

disseminate and develop research and evaluation efforts.

208
FINANCING RESEARCH

Public support for the supply of drug treatment services leads to several

research topics in the financing area:

30.

31.

32.

33.

What are the sources of funds for suppliers in the public system?

How sensitive are suppliers to changes in sources and levels of these

funds? What if reimbursement were enhanced? What changes could be

expected? Would the intensity and type of services or number of clients

change?

How would response vary in the short and long runs? The long run

involves issues of technology choice, capacity, and entry and exit.

What are costs for existing programs? How do these vary? What are

possible units of payment? What is known about production

relationships?

The demand for treatment services financed through public means creates a

need for several questions to be explored.

34. What is the nature of the persons using publicly supported drug

treatment services?

35. What is the mix of service need/demand on other public programs such

as criminal justice, welfare, housing, income support, and public health?

38. How does the need/demand for services vary by any relevant personal

characteristic such as income and nature of drug abuse?

37. Does the pattern of public service use suggest problems and/or possible

restructuring?

Both privately financed and publicly supported drug treatment services raise

many similar questions, but privately financed services also offer unique

questions for consideration.

38. What is the nature of the persons using private drug abuse treatment

services?

39. How does the need/demand for private services vary by any relevant

personal characteristic such as income and nature of drug abuse?

209
40. Does the pattern of private service use suggest problems and/or

possible restructuring?

41. How do licensing and regulatory issues affect private supply?

42. How does a change in the reimbursement system affect both private and

public supply? The group pointed to the Philadelphia Medicaid Health

Insuring Organization as a good example of a study that involved

reimbursement and private/public supply issues.

The demand for drug treatment services, predominantly privately financed, is

linked to the various distributions of payment and reimbursement policies.

Some important recommendations for further study include:

43.

44.

45.

46.

47.

48.

49.

It is necessary to link the insurance market with the labor market in

understanding demand for treatment and insurance for drug abuse

services as well as in examining the full set of employer strategies with

respect to drug abuse services.

What market failures are possible rationales for public intervention, and

what is the impetus for regulation of insurance or testing?

What are the effects of insurance regulation, sanctions, and testing on

firms and labor markets?

What is the experience with the costs of drug abuse treatment

coverage?

The Federal employee insurance plans are a possible database with

longitudinal capabilities for studying financing issues,

There are many natural experiments created by regulatory differences.

Private employees may be induced into participating in other

experiments.

The process by which demand for insurance and demand for treatment

are determined needs to be better understood. Is moral hazard good or

bad? What is the process of help-seeking in drug abuse treatment?

How is demand for insurance generated?

210
There are also two other areas of interest.

50. State governments, as they adopt various policies toward drug abuse

treatment financing, can be made a subject of study. What are the

factors associated with various State policy choices?

51. What is the role of managed care in payment for drug abuse services?

What are its effects?

AUTHORS

William S. Cartwright, Ph.D.

Public Health Analyst

James M. Kaple, Ph.D.

Associate Director for Services Research

Financing and Services Research Branch

Division of Applied Research

National Institute on Drug Abuse

Parklawn Building, Room 9A-42

5600 Fishers Lane

Rockville, MD 20857

211
While limited supplies last, single copies of the monographs may be obtained

free of charge from the National Clearinghouse for Alcohol and Drug

Information (NCADI). Please contact NCADI also for information about

availability of coming issues and other publications of the National institute on

Drug Abuse relevant to drug abuse research.

Additional copies may be purchased from the U.S. Government Printing Office

(GPO) and/or the National Technical Information Service (NTIS) as indicated.

NTIS prices are for paper copy; add $3 handling charge for each order.

Microfiche copies are also available from NTIS. Prices from either source are

subject to change.

Addresses are:

NCADI

National Clearinghouse for Alcohol and Drug information

P.O. Box 2345

Rockville, MD 20852

(301) 468-2600

(800) 729-6686

GPO

Superintendent of Documents

US. Government Printing Office

Washington, DC 20402

(202) 275-2981

NTIS

National Technical Information Service

U.S. Department of Commerce

Springfield, VA 22161

(703) 487-4650

For information on availability of NIDA Research Monographs 1 through 24

(1975-1979) and others not listed, write to NIDA, Community and Professional

Education Branch, Room 10A-54, 5600 Fishers Lane, Rockville, MD 20857.

212
25 BEHAVIORAL ANALYSIS AND TREATMENT OF SUBSTANCE ABUSE.

Norman A. Krasnegor, Ph.D., ed.

GPO out of stock NCADI out of stock

NTIS PB #80-112428/AS $31

26 THE BEHAVIORAL ASPECTS OF SMOKING. Norman A. Krasnegor,

Ph.D., ed. (reprint from 1979 Surgeon General’s Report on Smoking and

Health)

GPO out of stock NTIS PB #80-118755/AS $23

30 THEORIES ON DRUG ABUSE: SELECTED CONTEMPORARY

PERSPECTIVES. Dan J. Lettieri, Ph.D.; Mollie Sayers; and Helen W. Pearson,

eds.

GPO out of stock NCADI out of stock

Not available from NTIS

31 MARIJUANA RESEARCH FINDINGS: 1980. Robert C. Petersen, Ph.D.,

ed.

GPO out of stock NTIS PB #80-215171/AS $31

32 GC/MS ASSAYS FOR ABUSED DRUGS IN BODY FLUIDS. Rodger L.

Foltz, Ph.D.; Allison F. Fentiman, Jr., Ph.D.; and Ruth B. Foltz, eds.

GPO out of stock NCADI out of stock

NTIS PB #81-133746/AS $31

36 NEW APPROACHES TO TREATMENT OF CHRONIC PAIN: A REVIEW

OF MULTIDISCIPLINARY PAIN CLINICS AND PAIN CENTERS. Lorenz K.Y.

Ng, M.D., ed.

GPO out of stock NCADI out of stock

NTIS PB #81-240913/AS $31

37 BEHAVIORAL PHARMACOLOGY OF HUMAN DRUG DEPENDENCE.

Travis Thompson, Ph.D., and Chris E. Johanson, Ph.D., eds.

GPO out of stock NCADI out of stock

NTIS PB #82-136961/AS $39

38 DRUG ABUSE AND THE AMERICAN ADOLESCENT. Dan J. Lettieri,

Ph.D., and Jacqueline P. Ludford, M.S., eds. A RAUS Review Report.

GPO out of stock NCADI out of stock

NTIS PB #82-148198/AS $23

213
40 ADOLESCENT MARIJUANA ABUSERS AND THEIR FAMILIES. Herbert

Hendin, MD; Ann Pollinger, Ph.D.; Richard Ulman, Ph.D.; and Arthur Carr,

Ph.D., eds.

GPO out of stock NCADI out of stock

NTIS PB #82-133117/AS $23

42 THE ANALYSIS OF CANNABINOIDS IN BIOLOGICAL FLUIDS. Richard

L. Hawks, Ph.D., ed.

GPO out of stock NTIS PB #83-136044/AS $23

44 MARIJUANA EFFECTS ON THE ENDOCRINE AND REPRODUCTIVE

SYSTEMS. Monique C. Braude, Ph.D., and Jacqueline P. Ludford, M.S., eds.

A RAUS Review Report.

GPO out of stock NCADI out of stock

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45 CONTEMPORARY RESEARCH IN PAIN AND ANALGESIA, 1983. Roger

M. Brown, Ph.D.; Theodore M. Pinkert, M.D., J.D.; and Jacqueline P. Ludford,

MS. eds. A RAUS Review Report.

GPO out of stock NCADI out of stock

NTIS PB #84-184670/AS $17

46 BEHAVIORAL INTERVENTION TECHNIQUES IN DRUG ABUSE

TREATMENT. John Grabowski, Ph.D.; Maxine L. Stitzer, Ph.D.; and Jack E.

Henningfield, Ph.D., eds.

GPO out of stock NCADI out of stock

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47 PREVENTING ADOLESCENT DRUG ABUSE: INTERVENTION

STRATEGIES. Thomas J. Glynn, Ph.D.; Carl G. Leukefeld, D.S.W.; and

Jacqueline P. Ludford, M.S., eds. A RAUS Review Report.

GPO out of stock NCADI out of stock

NTIS PB #85-159663/AS $31

48 MEASUREMENT IN THE ANALYSIS AND TREATMENT OF SMOKING

BEHAVIOR. John Grabowski, Ph.D., and Catherine Bell, M.S., eds.

GPO out of stock NCADI out of stock

NTIS PB #84-145184/AS $23

50 COCAINE: PHARMACOLOGY, EFFECTS, AND TREATMENT OF

ABUSE. John Grabowski, Ph.D., ed.

GPO Stock #017-024-01214-9 $4 NTIS PB #85-150381/AS $23

214
51 DRUG ABUSE TREATMENT EVALUATION: STRATEGIES, PROGRESS,

AND PROSPECTS. Frank M. Tims, Ph.D., ed.

GPO out of stock NTIS PB #85-150365/AS $23

52 TESTING DRUGS FOR PHYSICAL DEPENDENCE POTENTIAL AND

ABUSE LIABILITY. Joseph V. Brady, Ph.D., and Scott E. Lukas, Ph.D., eds.

GPO out of stock NTIS PB #85-150373/AS $23

53 PHARMACOLOGICAL ADJUNCTS IN SMOKING CESSATION. John

Grabowski, Ph.D., and Sharon M. Hall, Ph.D., eds.

GPO out of stock NCADI out of stock

NTIS PB #89-123186/AS $23

54 MECHANISMS OF TOLERANCE AND DEPENDENCE. Charles Wm.

Sharp, Ph.D., ed.

GPO out of stock NCADI out of stock

NTIS PB #89-103279/AS $39

55 PROBLEMS OF DRUG DEPENDENCE, 1984: PROCEEDINGS OF THE

46TH ANNUAL SCIENTIFIC MEETING, THE COMMITTEE ON PROBLEMS

OF DRUG DEPENDENCE, INC. Louis S. Harris, Ph.D., ed.

GPO out of stock NCADI out of stock

NTIS PB #89-123194/AS $45

56 ETIOLOGY OF DRUG ABUSE: IMPLICATIONS FOR PREVENTION.

Coryl LaRue Jones, Ph.D., and Robert J, Battjes, D.S.W., eds.

GPO Stock #017-024-01250-5 $6.50 NTIS PB #89-123160/AS $31

57 SELF-REPORT METHODS OF ESTIMATING DRUG USE: MEETING

CURRENT CHALLENGES TO VALIDITY. Beatrice A. Rouse, Ph.D.; Nicholas

J. Kozel, MS.; and Louise G. Richards, Ph.D., eds.

GPO out of stock NTIS PB #88-248083/AS $23

58 PROGRESS IN THE DEVELOPMENT OF COST-EFFECTIVE

TREATMENT FOR DRUG ABUSERS. Rebecca S. Ashery, D.S.W., ed.

GPO out of stock NTIS PB #89-125017/AS $23

59 CURRENT RESEARCH ON THE CONSEQUENCES OF MATERNAL

DRUG ABUSE. Theodore M. Pinkert, M.D., J.D., ed.

GPO out of stock NTIS PB #89-125025/AS $23

215
60 PRENATAL DRUG EXPOSURE: KINETICS AND DYNAMICS. C. Nora

Chiang, Ph.D., and Charles C. Lee, Ph.D., eds.

GPO out of stock NTIS PB #89-124564/AS $23

61 COCAINE USE IN AMREICA: EPIDEMIOLOGIC AND CLINICAL

PERSPECTIVES. Nicholas J. Kozel, M.S., and Edgar H. Adams, M.S., eds.

GPO out of stock NTIS PB #89-131866/AS $31

62 NEUROSCIENCE METHODS IN DRUG ABUSE RESEARCH. Roger M.

Brown, Ph.D.; David P. Friedman, Ph.D.; and Yuth Nimit, Ph.D., eds.

GPO out of stock NCADI out of stock

NTIS PB #89-130660/AS $23

63 PREVENTION RESEARCH: DETERRING DRUG ABUSE AMONG

CHILDREN AND ADOLESCENTS. Catherine S. Bell, M.S., and Robert Battjes,

D.S.W., eds.

GPO out of stock NTIS PB #89-103287/AS $31

64 PHENCYCLIDINE: AN UPDATE. Doris H. Clouet, Ph.D., ed.

GPO out of stock NTIS PB #89-131858/AS $31

65 WOMEN AND DRUGS: A NEW ERA FOR RESEARCH. Barbara A. Ray,

Ph.D., and Monique C. Braude, Ph.D., eds.

GPO Stock #017-024-01283-1 $3.50 NTIS PB #89-130637/AS $23

66 GENETIC AND BIOLOGICAL MARKERS IN DRUG ABUSE AND

ALCOHOLISM. Monique C. Braude, Ph.D., and Helen M. Chao, Ph.D., eds.

GPO out of stock NCADI out of stock

NTIS PB #89-134423/AS $23

68 STRATEGIES FOR RESEARCH ON THE INTERACTIONS OF DRUGS

OF ABUSE. Monique C. Braude, Ph.D., and Harold M. Ginzburg, M.D., J.D.,

M.P.H., eds.

GPO out of stock NCADI out of stock

NTIS PB #89-134936/AS $31

69 OPIOID PEPTIDES: MEDICINAL CHEMISTRY. Rao S. Rapaka, Ph.D.;

Gene Barnett, Ph.D.; and Richard L. Hawks, Ph.D., eds.

GPO out of stock NTIS PB #89-158422/AS $39

70 OPIOID PEPTIDES: MOLECULAR PHARMACOLOGY, BIOSYNTHESIS,

AND ANALYSIS. Rao S. Rapaka, Ph.D., and Richard L. Hawks, Ph.D., eds.

GPO out of stock NTIS PB #89-158430/AS $45

216
71 OPIATE RECEPTOR SUBTYPES AND BRAIN FUNCTION. Roger M.

Brown, Ph.D.; Doris H. Clouet, Ph.D.; and David P. Friedman, Ph.D., eds.

GPO out of stock NTIS PB #89-151955/AS $31

72 RELAPSE AND RECOVERY IN DRUG ABUSE. Frank M. Tims, Ph.D.,

and Carl G. Leukefeld, D.S.W., eds.

GPO Stock #017-024-01302-1 $6 NTIS PB #89-151963/AS $31

73 URINE TESTING FOR DRUGS OF ABUSE. Richard L. Hawks, Ph.D., and

C. Nora Chiang, Ph.D., eds.

GPO Stock #017-024-01313-7 33.75 NTIS PB #89-151971/AS $23

74 NEUROBIOLOGY OF BEHAVIORAL CONTROL IN DRUG ABUSE.

Stephen I. Szara, M.D., D.Sc., ed.

GPO Stock #017-024-01314-5 $3.75 NTIS PB #89-151989/AS $23

75 PROGRESS IN OPIOID RESEARCH. PROCEEDINGS OF THE 1986

INTERNATIONAL NARCOTICS RESEARCH CONFERENCE. John W.

Holaday, Ph.D.; Ping-Yee Law, Ph.D.; and Albert Herz, M.D., eds.

GPO out of stock NCADI out of stock

Not available from NTIS

76 PROBLEMS OF DRUG DEPENDENCE, 1986: PROCEEDINGS OF THE

48TH ANNUAL SCIENTIFIC MEETING, THE COMMITTEE ON PROBLEMS

OF DRUG DEPENDENCE, INC. Louis S. Harris, Ph.D., ed.

GPO out of stock NCADI out of stock

NTIS PB #88-208111/AS $53

77 ADOLESCENT DRUG ABUSE: ANALYSES OF TREATMENT

RESEARCH. Elizabeth R. Rahdert, Ph.D., and John Grabowski, Ph.D., eds.

GPO Stock #017-024-01348-0 $4 NCADI out of stock

NTIS PB #89-125488/AS $23

78 THE ROLE OF NEUROPLASTICITY IN THE RESPONSE TO DRUGS.

David P. Friedman, Ph.D., and Doris H. Clouet, Ph.D., eds.

GPO out of stock NTIS PB #88-245683/AS $31

79 STRUCTURE-ACTIVITY RELATIONSHIPS OF THE CANNABINOIDS.

Rao S. Rapaka, Ph.D., and Alexandros Makriyannis, Ph.D., eds.

GPO out of stock NTIS PB #89-109201/AS $31

217
80 NEEDLE SHARING AMONG INTRAVENOUS DRUG ABUSERS;

NATIONAL AND INTERNATIONAL PERSPECTIVES. Robert J. Battjes,

D.S.W., and Roy W. Pickens, Ph.D., eds.

GPO out of stock NTIS PB #88-236138/AS $31

81 PROBLEMS OF DRUG DEPENDENCE, 1987: PROCEEDINGS OF THE

49TH ANNUAL SCIENTIFIC MEETING, THE COMMITTEE ON PROBLEMS

OF DRUG DEPENDENCE, INC. Louis S. Harris, Ph.D., ed.

GPO Stock #017-024-01354-4 $17 NTIS PB #89-109227/AS

Contact NTIS for price

82 OPIOIDS IN THE HIPPOCAMPUS. Jacqueline F. McGinty, Ph.D., and

David P. Friedman, Ph.D., eds.

GPO out of stock NTIS PB #88-245691/AS $23

83 HEALTH HAZARDS OF NITRITE INHALANTS. Harry W. Haverkos, M.D.,

and John A. Dougherty, Ph.D., eds.

GPO out of stock NTIS PB #89-125496/AS $23

84 LEARNING FACTORS IN SUBSTANCE ABUSE. Barbara A. Ray, Ph.D.,

ed.

GPO Stock #017-024-01353-6 $6 NTIS PB #89-125504/AS $31

85 EPIDEMIOLOGY OF INHALANT ABUSE: AN UPDATE. Raquel A. Crider,

Ph.D., and Beatrice A. Rouse, Ph.D., eds.

GPO Stock #017-024-01360-9 $5.50 NTIS PB #89-123178/AS $31

86 COMPULSORY TREATMENT OF DRUG ABUSE: RESEARCH AND

CLINICAL PRACTICE. Carl G. Leukefeld, D.S.W., and Frank M. Tims, Ph.D.,

eds.

GPO Stock #017-024-01352-8 $7.50 NTIS PB #89-151997/AS $31

87 OPIOID PEPTIDES: AN UPDATE. Rao S. Rapaka, Ph.D., and Bhola N.

Dhawan, M.D., eds.

GPO Stock #017-024-01366-8 $7 NTIS PB #89-158430/AS $45

88 MECHANISMS OF COCAINE ABUSE AND TOXICITY. Doris H. Clouet,

Ph.D.; Khursheed Asghar, Ph.D.; and Roger M. Brown, Ph.D., eds.

GPO Stock #017-024-01359-5 $11 NTIS PB #89-125512/AS $39

89 BIOLOGICAL VULNERABILTY TO DRUG ABUSE. Roy W. Pickens,

Ph.D., and Date S. Svikis, B.A., eds.

GPO Stock #017-022-01054-2 $5 NTIS PB #89-125520/AS $23

218
90 PROBLEMS OF DRUG DEPENDENCE, 1988: PROCEEDINGS OF THE

50TH ANNUAL SCIENTIFIC MEETING, THE COMMITTEE ON PROBLEMS

OF DRUG DEPENDENCE, INC. Louis S. Harris, Ph.D., ed.

GPO Stock #017-024-01362-5 $17

91 DRUGS IN THE WORKPLACE: RESEARCH AND EVALUATION DATA.

Steven W. Gust, Ph.D., and J. Michael Walsh, Ph.D., eds.

GPO Stock #017-024-01384-6 $10 NTIS PB #90-147257/AS $39

92 TESTING FOR ABUSE LIABILITY OF DRUGS IN HUMANS. Marian W.

Fischman, Ph.D., and Nancy K. Mello, Ph.D., eds.

GPO Stock #017-024-01379-0 $12 NTIS PB #90-148933/AS $45

93 AIDS AND INTRAVENOUS DRUG USE: FUTURE DIRECTIONS FOR

COMMUNITY-BASED PREVENTION RESEARCH. C.G. Leukefeld, D.S.W.;

R.J. Battjes, D.S.W.; and Z. Amsel, DSc., eds.

GPO Stock #017-024-01388-9 $10 NTIS PB #90-148941/AS $39

94 PHARMACOLOGY AND TOXICOLOGY OF AMPHETAMINE AND

RELATED DESIGNER DRUGS. Khursheed Asghar, Ph.D., and Errol De

Souza, Ph.D., eds.

GPO Stock #017-024-01386-2 $11 NTIS PB #90-148958/AS $39

95 PROBLEMS OF DRUG DEPENDENCE, 1989: PROCEEDINGS OF THE

51ST ANNUAL SCIENTIFIC MEETING, THE COMMITTEE ON PROBLEMS

OF DRUG DEPENDENCE, INC. Louis S. Harris, Ph.D., ed.

GPO Stock #017-024-01399-4 $21 NTIS PB #90-237660/AS $67

96 DRUGS OF ABUSE: CHEMISTRY, PHARMACOLOGY, IMMUNOLOGY,

AND AIDS. Phuong Thi Kim Pham, Ph.D., and Kenner Rice, Ph.D., eds.

GPO Stock #017-024-01403-6 $8 NTIS PB #90-237678/AS $31

97 NEUROBIOLOGY OF DRUG ABUSE: LEARNING AND MEMORY. Lynda

Erinoff, Ph.D., ed.

GPO Stock #017-024-01404-4 $8 NTIS PB #90-237686/AS $31

98 THE COLLECTION AND INTERPRETATION OF DATA FROM HIDDEN

POPULATIONS. Elizabeth Y. Lambert, M.S., ed.

GPO Stock #017-024-01407-9 $4.75 NTIS PB #90-237694/AS $23

99 RESEARCH FINDINGS ON SMOKING OF ABUSED SUBSTANCES.

C. Nora Chiang, Ph.D., and Richard L. Hawks, Ph.D., eds.

GPO Stock #017-024-01412-5 $5 NTIS PB #91-141119 $23

219
100 DRUGS IN THE WORKPLACE: RESEARCH AND EVALUATION DATA.

VOL. Ii. Steven W. Gust, Ph.D., and J. Michael Walsh, Ph.D., eds.

101 RESIDUAL EFFECTS OF ABUSED DRUGS ON BEHAVIOR. John W.

Spencer, Ph.D., and John J. Boren, Ph.D., eds.

GPO Stock #017-024-01426-7 $6 NTIS PB #91-172858/AS $31

102 ANABOLIC STEROID ABUSE. Geraline C. Lin, Ph.D., and Lynda Erinoff,

Ph.D., eds.

GPO Stock #017-024-01425-7 $8 NTIS PB #91-172866/AS $31

103 DRUGS AND VIOLENCE: CAUSES, CORRELATES, AND

CONSEQUENCES. Mario De La Rosa, Ph.D.; Elizabeth Y. Lambert, M.S.;

and Bernard Gropper, Ph.D., eds.

GPO Stock #017-024-01427-3 $9 NTIS PB #91-172841/AS $31

104 PSYCHOTHERAPY AND COUNSELING IN THE TREATMENT OF

DRUG ABUSE. Lisa Simon Onken, Ph.D., and Jack D. Blaine, M.D., eds.

GPO Stock #017-024-01429-0 $4 NTIS PB #91-172874/AS $23

105 PROBLEMS OF DRUG DEPENDENCE, 1990: PROCEEDINGS OF THE

52ND ANNUAL SCIENTIFIC MEETING, THE COMMITTEE ON PROBLEMS

OF DRUG DEPENDENCE, INC. Louis S. Harris, Ph.D., ed.

GPO Stock #017-024-01435-4 $22

106 IMPROVING DRUG ABUSE TREATMENT. Roy W. Pickens, Ph.D.; Carl

G. Leukefeld, D.S.W.; and Charles R. Schuster, Ph.D., eds.

GPO Stock #017-024-01439-7 $12

107 DRUG ABUSE PREVENTION INTERVENTION RESEARCH:

METHODOLOGICAL ISSUES. Carl G. Leukefeld, D.S.W., and William J.

Bukoski, Ph.D., eds.

GPO Stock #017-024-01441-9 $9

108 CARDIOVASCULAR TOXICITY OF COCAINE: UNDERLYING

MECHANISMS. Pushpa V. Thadani, Ph.D., ed.

GPO Stock #017-024-01446-0

109 LONGITUDINAL STUDIES OF HIV INFECTION IN INTRAVENOUS

DRUG USERS: METHODOLOGICAL ISSUES IN NATURAL HISTORY

RESEARCH. Peter Hartsock, Dr.P.H., and Sander G. Genser, M.D., M.P.H.,

eds.

GPO Stock #017-024-01445-1

220
110 THE EPIDEMIOLOGY OF COCAINE USE AND ABUSE. Susan Schober,

Ph.D., and Charles Schade, M.D., M.P.H., eds.

111 MOLECULAR APPROACHES TO DRUG ABUSE RESEARCH:

VOLUME I. Theresa N.H. Lee, Ph.D., ed.

112 EMERGING TECHNOLOGIES AND NEW DIRECTIONS IN DRUG

ABUSE RESEARCH. Rao S. Rapaka, Ph.D.; Alexandros Makriyannis, Ph.D.;

and Michael J. Kuhar, Ph.D., eds.

221
DHHS Publication No (ADM) 91-1823

Alcohol, Drug Abuse, and Mental Health Administration

Printed 1991