Potential Medical Cost Offset Savings

Some recent studies and reports support the premise that providing treatment for alcoholism and other substance abuse disorders can reduce other medical care utilization and costs. Consequently, both employers (as purchasers) and health insurers (as suppliers) may potentially realize savings from cost offsets resulting from alcoholism and drug addiction treatment. However, the existence of such medical cost offsets has been debated but not conclusively proven. Therefore, we have not incorporated offsets into the premium estimates contained in this study. Examples of recent cost offset studies^* are presented for informational purposes below:

• A Rutgers University study⁴ commissioned by the President’s Commission on Model State Drug Laws found that, "On the average, untreated alcoholics incur general health care costs that are at least 100% higher than those of non-alcoholics." After addiction treatment, days lost to illness, sickness claims and hospitalization dropped by about 50%. The researchers concluded that treatment causes sharp reductions in medical care utilization.
• The California Department of Alcohol and Drug Programs in a retrospective outcome study⁵ reported a 17% increase in health status and significant decreases in health care utilization after treatment. Hospitalizations from physical health problems dropped 36%, drug overdose hospitalizations dropped 58%, mental health hospitalizations dropped 44%, emergency room visits dropped 38%, and the total number of hospital days dropped by 25%.
• The state of Iowa after measuring health-related outcomes for over 1,400 clients by comparing the number of hospitalizations in the six months before treatment with the six months after treatment, found a 12% increase in the percentage of clients with no hospitalizations.⁶
• The Alcohol and Drug Abuse Services Agency of the state of Kansas collects data through the Addiction Severity default (ASI)⁷ for each client admitted to its outpatient, residential, and day treatment programs.⁸ Clients with the most severe problems receive treatment in residential settings and continuing care services for at least one year following primary treatment. The average severity score of health-related problems at admission was .124 and at discharge it had decreased to .101, representing an 18.5% reduction in health problems.
• The State Alcohol and Drug Agency in Minnesota has extensively evaluated its programs’ effectiveness. It has reported an abstinence rate of 64% for clients six months after treatment, medical hospitalization rates reducing from 17.5% of the client population six months before treatment to 12.8% of the client population six months after treatment, psychiatric hospitalization rates dropping from 7.4% to 2.6%, and detoxification admissions dropping from 18.7% to 5.3% of the client population.⁹ Minnesota has estimated that it has saved $22 million in annual healthcare costs by providing alcohol and drug treatment.
• The Ohio Department of Alcohol and Drug Addiction Services reports (in its follow-up analyses using the Comprehensive Assessment of Treatment Outcome Registry) substantial decreases in health care costs for the year after clients left treatment.¹⁰ It reported a 66% decrease in hospital admissions (32% to 11%) and a 41% decrease in emergency room utilization (34% to 20%).
• The Alcohol and Drug Addiction Treatment and Support Act (ADATSA) of 1987 established treatment and shelter services for Washington’s indigent and addicted adults. Clients who participated in the ADATSA program incurred half of the in-hospital costs compared to non-treated clients during a 12-month follow-up period.¹¹

Literature has also pointed to the relationship between substance abuse disorders, primarily alcoholism, and medical/surgical costs. For example:

• Using a sample of 63,873 hospitalized alcoholics, an alcoholism treatment study¹² shows far greater severity of medical complications among those who were not treated for alcoholism compared to those who were.
• A study of adult inpatient alcoholism treatment completers¹³ showed dramatic reductions in hospital use one year after alcoholism treatment compared to one year before: 50% reduction for medical services, 60% reduction for psychiatric services, 30% reduction in emergency medical admissions, 50% reduction in emergency psychiatric admissions, 75% reduction in admissions for detoxification services.