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

Substance use disorders remained a significant problem in the United States during the decade of the 1990s. According to the 2001 National Household Survey on Drug Abuse (NHSDA), the estimated number of illicit drug users (based on drug use in the past month) in the United States (15.9 million) was considerably higher than the estimate from 1992 (12.0 million), a low point in the tracking of illicit drug use (OAS, 2003). The higher number in 2001 is linked to several factors - a much higher rate among youth (10.8 percent in 2001 versus 5.3 percent in 1992), a slight increase in use among adults (6.6 percent in 2001 versus 5.9 percent in 1992), and a 10 percent increase in the size of the U.S. population.

Two nationally representative surveys have recently found that between 1991 - 1992 and 2001 - 2002, the percentage of the population determined to have alcohol abuse increased, while alcohol dependence declined (Grant et al., 2004). Other data indicate that the percentage of chronic drinkers (who consumed 60 or more drinks in a month) comprised 4.6 percent of the population in 1991 and 5.6 percent in 2001 (CDC, 2004).

This chapter examines changes in substance abuse (SA) expenditures from 1991 to 2001.

SA treatment expenditures in 1991 totaled $11 billion (Table A.5, Appendix A). By 2001, this figure had increased to $18 billion (Table A.1). This translates into a nominal growth rate of 4.8 percent annually (Figure 6.1). The SA expenditure growth rate of 4.8 percent is lower than the 6.5 percent annual growth rate for all health. In inflation-adjusted terms, SA spending grew by 2.7 percent and all health by 4.4 percent.

During the first five years (1991 through 1996), SA treatment expenditures grew by 5.0 percent versus 6.5 percent for all health (Figure 6.1). During the last five years (1996 through 2001), SA grew by 4.6 percent versus 6.4 percent for all health. SA expenditures, as a percentage of all health, fell from 1.6 percent in 1991 to 1.3 percent in 2001.

It is difficult to judge whether the growth in substance abuse expenditures has translated into an increase in persons receiving treatment. Estimates are available for the percent of the U.S. population receiving substance abuse treatment in 2001, but not for 1991.

SA expenditure trends differ starkly for public payers as compared with private payers over the 1991 - 2001 period. SA financing by public payers grew by 6.8 percent annually (Figure 6.2). This was slightly lower than the 7.2 percent annual growth rate for all health public payers. In contrast, SA private insurance payments fell by 1.1 percent annually, as compared with an all health growth rate of 6.9 percent. Out-of-pocket spending grew by 3.2 percent annually, compared to 3.8 percent for all health.

As a result of the much higher growth rate of public SA payments in relation to private payments, public payers became an increasingly dominant source of financing for SA treatment. Public payers made up 62 percent of total SA in 1991 and 76 percent in 2001 (Tables A.6 and A.2, Appendix A).

Because of the slower growth rate of private insurance relative to public payer, private insurance declined from 24 percent of total SA in 1991 to only 13 percent in 2001 (Figure 6.3). Out-of-pocket expenditures declined slightly, as well.

State and local governments manage the majority of spending on SA treatment. Counting all of Medicaid and State and local revenue spending, States managed 57 percent of SA spending in 2001. Furthermore, they managed a portion of the spending in the other Federal category-the block grant funds.

Among public payers, the growth rate during the ten-year period was highest for Medicaid (8.1 percent annually), Medicare (8.2 percent annually), and other State and local government (8.7 percent annually). Other Federal expenditures, which include Federal SA block grants to the States, grew 1.7 percent annually (Table A.4, Appendix A). As a result, other Federal government spending made up 30 percent of public SA expenditures in 1991 and only 19 percent in 2001 (Figure 6.4). Other State and local government spending increased from 42 percent to 50 percent of public SA spending over the same period, making it the largest financer of SA treatment. Medicaid grew from 22 percent to 25 percent of public SA expenditures nationally. Medicare increased from six to seven percent of public SA expenditures.

Total SA expenditures grew by approximately $6.8 billion between 1991 and 2001. By far the largest components of this change were specialty substance abuse centers (SSACs), which accounted for 51 percent of the $6.8 billion increase in expenditures (Figure 6.5). The next two largest components were MSMHOs and general hospitals, which each contributed 12 percent of the increase.

SSACs grew from 33 percent of SA expenditures in 1991 to 39 percent in 2001, making it the largest provider segment (Figure 6.6). The proportion of dollars going to MSMHOs increased from five percent in 1991 to eight percent of SA expenditures in 2001.

Expenditures for hospital care declined proportionately over the ten-year period. General hospitals comprised 29 percent of expenditures in 1991 and 23 percent in 2001. The growth rate of SA expenditures for general hospitals was below that for all health care (2.2 percent versus 5.2 percent). Specialty hospitals comprised 11 percent of expenditures in both 1991 and 2001. SA expenditures in specialty hospitals grew by 3.9 percent annually (Table A.3, Appendix A).

The role of physicians and other professionals also declined from 16 percent of SA expenditures to 12 percent. SA spending on physician services increased at a much slower rate (3.5 percent annually) compared with all health care spending on physicians (which rose 6.0 percent annually). Expenditures for SA treatment by other professionals grew by 1.8 percent annually, as compared to 8.0 percent per year for allied professionals involved in all health care treatments (Table A.3, Appendix A).

Delivery of SA treatment by specialty providers (i.e., general hospital specialty units, specialty hospitals, psychiatrists, other MHSA professionals, MSMHOs, and SSACs) dominated in both 1991 and 2001 at 82 and 84 percent of expenditures, respectively (calculated from Tables A.5 and A.1).

Consistent with the decline in hospital care, inpatient expenditures declined from 46 percent of total SA to only 30 percent (Figure 6.7). Outpatient´s share of SA expenditures increased from 29 percent to 40 percent. Care in residential settings grew only slightly, from 20 percent to 24 percent.

Expenditures on SA treatment grew 1.7 percentage points less than the growth rate of all health care. There were important shifts in funding of SA services over the ten-year period. Funding grew markedly for public sources but actually contracted for private insurers. On the public side, Medicaid, Medicare, and other State and local government funding of SA services expanded more rapidly than other Federal sources. State and local government financing grew and remained the largest single source of funding.

Changes in treatment patterns also emerged. As a proportion of total SA expenditures, inpatient care continued to decline, as did independent physicians and other professionals (psychologists, counselors, and social workers). The spending increases in SA treatment occurred primarily in specialty substance abuse facilities, perhaps because this is where demand increased most. Specialty substance abuse facilities remained the largest proportion of provider expenditures.