National Expenditures for Mental Health Services and Substance Abuse Treatment 1991–2001

Substance abuse and dependence are prevalent disorders. The most recent estimates for 2002 indicate that an estimated 22 million Americans aged 12 and older are classified as having a substance use disorder (9.4 percent of the population) (OAS, 2003). Of these, 3.2 million are classified with dependence on or abuse of both alcohol and illicit drugs, 3.9 million are dependent on or abused illicit drugs but not alcohol, and 14.9 million are dependent on or abused alcohol but not illicit drugs.

Only a small proportion of people with substance use disorders obtain treatment. An estimated 3.5 million people aged 12 or older (1.5 percent of the population) received some kind of care for a problem related to the use of alcohol or illicit drugs in the 12 months prior to being interviewed in 2002 (OAS, 2003). More than half of those in treatment (2.0 million) received care at a self-help group. Approximately 2.2 million received services for alcohol problems during their most recent treatment. An estimated 974,000 people received treatment for marijuana, 796,000 for cocaine, 360,000 for pain relievers, and 277,000 for heroin.

This chapter presents estimates of how much was spent on treating substance use disorders in the United States in 2001. This section also presents information about the types of financing for treatment for substance abuse and dependence and where that care was provided.

In 2001, an estimated $18 billion was devoted to substance abuse treatment (about 17.6 percent of total MHSA expenditures). This amount represented 1.3 percent of all health care spending, which totaled $1,373 billion in 2001 (Figure 5.1).

To put this number in context, in 1998, the total economic costs of alcohol abuse were estimated to be $184.6 billion, and the total economic costs of drug abuse were $143.4 billion (Harwood, 2000; Harwood et al., 1998; ONDCP, 2001). These include the costs of the medical consequences of alcohol and drug abuse, lost earnings linked to premature death, lost productivity, motor vehicle crashes, crime, and other social consequences.

People with substance use disorders rely on public sources of financing to a much greater extent than people with other diseases. Seventy-six percent of total SA spending was by public sources, while 45 percent of all health care spending was by public sources (Figure 5.2).

Among public payers, other State and local government funding (excluding Medicaid) constituted the largest source of support, making up almost half (50 percent) of all public SA funding and 38 percent of total SA funding (totaling $6.9 billion) (calculated from Table A.2, Appendix A). Medicaid comprised another 25 percent of all public dollars spent on SA treatment and 19 percent of total SA expenditures (totaling $3.3 billion). Other Federal government spending on SA treatment, which includes Departments of Defense and Veterans Affairs, and block grants to the States, accounted for 19 percent of public SA spending (totaling $2.6 billion). The Federal SA block grant dollars that go for SA treatment are estimated to be 8 percent of public SA spending (or $1.2 billion, not shown). (While this is a nation-wide estimate, the estimate for individual States may vary considerably.) Medicare was at seven percent of public spending on SA treatment (totaling $0.9 billion). (Note: Figure 5.3, discussed below, shows the payer percentages in relation to all SA spending, rather than just to public SA spending, which we calculated above from Table A.2, Appendix A.)

Private insurance constituted 13 percent of total SA expenditures (Figure 5.3). For all health care, private insurance made up 36 percent of total expenditures (Table A.2, Appendix A). Out-of-pocket spending was eight percent of total SA expenditures, in comparison to 15 percent for all health.

The proportion that each payer devotes to SA was low relative to MH across payers but did vary from payer to payer (Figure 5.4). MH made up 22 percent of other State and local funding for all health care and 10 percent of funding for Medicaid. For Medicare, the percentage was only three percent (calculated based on Table A.2, Appendix A). MH comprised four percent of all health spending covered by private insurance.

The vast majority (84 percent) of substance abuse expenditures in 2001 went to specialty providers (i.e., general hospital specialty units, specialty hospitals, psychiatrists, other MHSA professionals, multi-service mental health organizations, and specialty substance abuse centers) (calculated from Table A.1, Appendix A). Among the most significant were specialty substance abuse centers, accounting for 39 percent of SA expenditures (Figure 5.5). The remaining specialty organizations and individuals providing substance abuse treatment were: multi-service mental health organizations (MSMHOs) (8 percent); independently billing psychologists, counselors, and social workers (7 percent); specialty hospitals (11 percent); and psychiatrists (2 percent) (Table A.1, Appendix A).

Hospitals received 34 percent of all SA expenditures in 2001 (Figure 5.5). General hospitals accounted for 68 percent of SA expenditures for hospital care and the rest went to specialty psychiatric and substance abuse hospitals (calculated from Table A.1, Appendix A). Within general hospitals, 74 percent of expenditures were in specialty units and the remainder were allocated to other areas (or "scatter beds") of the hospital.

Few retail medications existed to treat substance abuse in 2001. Therefore, it is not surprising that prescription medication expenditures were 0.4 percent of total SA expenditures. Two FDA-approved medications are for alcoholism - disulfiram (Antabuse®) and naltrexone (Revia®). Buprenorphine (Subutex® and Suboxone®) for the treatment of opiate addiction was approved in 2002 (after the period covered by this report). Methadone is not available as a retail drug.

By site of care, SA expenditures were most likely to be incurred in outpatient settings (40 percent). Residential facilities accounted for 24 percent of SA expenditures. Inpatient care accounted for 30 percent of SA expenditure. The remaining six percent of SA treatment dollars went to insurance administration (Figure 5.6).

Of the total $18.3 billion spent on SA in 2001, $9.7 billion was directed toward alcohol use disorder treatment and $8.5 billion was allocated for other drug use disorder treatment. For clients with alcohol and drug use disorders, treatment dollars were allocated to alcohol and drug abuse categories of expenditures, based on the split between alcohol and drug use treatment dollars for clients with single diagnoses.

The distribution of financing sources was somewhat similar between alcohol and drug use disorders (Figure 5.7). More funding originated from public sources for drug use disorders (80 percent) than for alcohol use disorders (72 percent). Private insurance contributed 17 percent for alcohol use disorders, but only nine percent for drug use disorders. The reverse was true for other State and local government funding, where it represented 35 percent of alcohol use disorder expenditures and 41 percent of drug use disorder expenditures.

The distribution of expenditures by provider in 2001 was similar between alcohol abuse and dependence and drug abuse and dependence. However, drug abuse and dependence treatment expenditures were more concentrated in specialty providers (89 percent) than were alcohol abuse and dependence expenditures (79 percent) (calculated from Table A.1, Appendix A). Specialty substance abuse facilities provided a greater proportion of illicit drug treatment than alcohol treatment (49 percent versus 31 percent, respectively). General hospitals provided less care for illicit drug abuse and dependence than alcohol abuse and dependence (21 percent versus 25 percent).

Understanding the sources of funding and providers of treatment for substance use disorders is important because so few individuals with substance use disorders actually seek and receive treatment. Funding came primarily from public programs - State and local governments being the most important, as well as Medicaid, Medicare, and other Federal funding combined - to cover 76 percent of substance abuse treatment spending nationwide in 2001. Private insurance represented only 13 percent of these treatment expenditures, while it covered 36 percent of all health care expenditures.

Judging from the distribution of dollars, the treatment of substance use disorders is concentrated in specialty organizations and hospitals. Specialty substance abuse centers, MSMHOs, and hospitals account for 81 percent of the SA dollar. Independent professionals other than physicians - psychologists, counselors, and social workers - account for seven percent of spending, but they are more involved with these treatments than physicians (who account for only five percent). Compared to MH, psychiatrists, in particular, make up a small proportion of substance abuse expenditures (10 percent of expenditures for MH versus two percent for substance abuse). The reason why psychiatrist expenditures for substance abuse are relatively low clearly requires more research. It is possible that psychiatrists are treating substance abuse but using mental health diagnosis codes. Other hypotheses are that they do not believe they have the appropriate skills to treat substance abuse, that reimbursement barriers exist, or that these professionals believe that treatment should be provided in specialized substance abuse settings and support groups, such as Alcoholics Anonymous.