Financial Cost of Addictive Disorders

The following is part two of a publication from Dr. Brian Jackson.
Part 1 – Introduction to Cost Analysis of U.S. Addictions
Part 2 – Financial Cost of Addictive Disorders
Part 3 – Results from Addiction and Cost Statistics
Part 4 – Treatments for Addiction | Effectiveness and Cost Analysis

Statement of the Thesis:
The thesis investigates the financial and social issues in treating addiction in people and examines whether it is financially prudent to provide treatments for people who are addicts. It investigates the cost incurred, directly and indirectly, in treating addictive disorders in the United States and the benefits of making treatments available for addicts.

Research is done in areas like the grants provided by the Federal government in studying addiction related disorders and the steps taken to educate people to prevent addiction. The study sheds light on the actual health care costs associated with untreated addiction. It can provide insights on the financial gain on the money invested, after successful treatment of addictive disorders. The study can also help in estimating the financial rewards and losses of addiction and to determine the best way to treat addiction related disorders.

Cost of addictive disorders in the United States:

The National Institute of Drug Abuse (NIDA), a subsidiary of the National Institutes of Health, developed an estimate of the economic costs of alcohol and drug abuse in the US. The report indicates that alcohol and drug abuse alone cost an estimated amount of $246 billion in 1992. “Alcohol abuse and alcoholism cost an estimated $148 billion, while drug abuse and dependence cost an estimated $98 billion. When adjusted for inflation and population growth, the alcohol estimates for 1992 are very similar to cost estimates produced over the past 20 years, and the drug estimates demonstrate a steady and strong pattern of increase” (The economic costs of alcohol and drug abuse in the United States-1992, 2006, Overview, para.1).

Most studies reveal that severe drug problems and crimes related to addictive disorders and impaired mental health have progressively increased over the past years. The aftermath of drug and alcohol addiction leads to negative consequences in health and health care systems. The prevalence of criminal behavior and violence is high in addicted individuals and often leads to unemployment, financial destitution and homelessness.

To realize the actual economic costs caused by addictive disorders, various aspects like health care costs, productivity loss, the relation between crime and addiction, automobile accidents involved and premature loss of life have to be analyzed. Health care costs and productivity loss are the direct costs involved in addictive disorders whereas violent crime, automobile accidents and premature death are indirect consequences.

Health care costs:

“The total estimated spending for health care services was $18.8 billion for alcohol problems and the medical consequences of alcohol consumption and $9.9 billion for drug problems in 1992. Specialized services for the treatment of alcohol and drug problems cost $5.6 billion and $4.4 billion, respectively”. (The economic costs of alcohol and drug abuse in the United States- 1992, 2006, Health care expenditures, para.1). Health care expenditures include a number of factors like detoxification and rehabilitation services. Prevention, training and research costs incurred are also grouped under health care costs. Alcohol and drug abuse treatment and prevention costs are estimated as $7.2 billion and $1.8 billion respectively. The support costs like training and research expenditure and insurance administrations total up an amount of $983 million. Thus, the specialty services and support cost for addiction alone add up to $9.9 billion in 1992 and is much more in the recent years.

The medical consequences caused by addiction includes fetal alcohol syndrome, tuberculosis, HIV/AIDS, Hepatitis, violence, drug exposed infants etc. These diseases cost a total of 18 billion dollars with HIV/AIDS accounting for the highest expenditure of almost 3.7 billion. Health care costs also include treatment costs and specialty treatment expenditures like residential care costs, outpatient costs and rehabilitation costs. Specialty treatment costs include the cost of services provided by physicians, nurses, registered doctoral counselors, administrative professionals, and hospitals, etc. and account for another 10 billion dollars. The costs of treatment of addictive disorders in US are discussed later in this paper.

However, the estimates of expenditure due to addiction given in this paper are not absolute. The cost of self help groups and volunteers who attend to alcoholic and drug related addiction problems and other addictive disorders cannot be determined accurately. Traditional treatments and counseling and other costs related to abuse of family members and friends must also be considered to obtain an actual estimate of the health costs due to addictive disorders.

Productivity Loss:

The cost accrued due to impaired productivity or loss of productivity is estimated to be over eighty billion dollars a decade back. Impaired productivity and loss of productivity is the loss of earnings due to the absence of work and household tasks. The costs incurred by impaired productivity are usually born by the addicted individuals or their family members. The prevalence of low work productivity from employees who are drug or alcohol dependant is very high. Addiction leads to loss of pay and increased unemployment as the individual suffering from addiction starts showing withdrawal symptoms and stops working altogether. “An estimated $107 billion in overall productivity losses is attributable to alcohol abuse, and $69.4 billion is attributable to drug abuse” (The economic costs of alcohol and drug abuse in the United States-1992, 2006, Productivity losses: Synopsis, para.1).

Addictive disorders also cost mortality and the number of deaths due to addictive disorders is increasing at a massive rate over the years. The loss of human capital also contributes to the economic loss caused by addiction related disorders. Costs due to mortality is estimated by identifying the deaths caused by addiction related factors like drug or alcohol.

Crime and violence related costs:

The study by the National Institute of Drug Abuse states that “drug abuse is estimated to have contributed to 25 to 30 percent of income-generating crime, and alcohol abuse is estimated to have contributed to 25 to 30 percent of violent crime” (The economic costs of alcohol and drug abuse in the United States-1992, 2006, Crime, para.2). Alcohol and substance related addiction lead to damage of property, destruction of public and private property, smuggling of cash and property, illicit trade of drugs and related objects, physical, sexual and violent abuse of other citizens and homicides. Suicide rates are also high in individuals suffering from addiction related disorders. The expenditure of the criminal justice system in the United States accounted for over 23 billion dollars twelve years ago and has obviously increased over the years. The main components contributing to criminal injustice and violence are alcohol and the use of drugs.

Expenditures due to incarceration of individuals suffering from addiction and related disorders must also be considered as a direct cost of addiction. Incarceration also causes loss of productivity and reduces human capital.

Accidents including fatal motor vehicle crashes are also caused by addiction. This includes loss of property, cost of health care and injury treatment due to accidents, permanent disability to the victims involved in accidents and premature death. “Total costs attributed to alcohol-related motor vehicle crashes were estimated to be $24.7 billion” (The economic costs of alcohol and drug abuse in the United States-1992, 2006, Motor vehicle crashes, para.1). An estimate of the overall cost of drug abuse alone (in millions of 2000 dollars) from 1992 – 2000 is shown in the table below:

Table shows the cost of drug abuse in the United States. In 2000 the estimate was over 160 million dollars.

This table shows the costs for drug abuse alone. The table shows that the cost incurred has progressively increased over the years. The cost of addictive diseases due to alcohol and other factors added up to this will result in a huge amount. The victim of addiction or the immediate family members often incurs the cost of addictive disorders. But the cost to society is equally large as costs to the individual. The costs include the effects on non users, efforts taken by the government and insurance and tax systems.

Costs of incarceration:

Incarceration is the process of keeping the individuals of addictive disorders behind the bars. The number of incarcerated victims in the United States is increasing each year. “In the seven decades from 1910 to 1980, the number of inmates grew by 462,006; while in the 1990’s alone, the number of inmates grew by an estimated 816,965” (Education News: Treatment or incarceration, 2009, para.6). The taxes spent in incarcerating non-violent victims of addiction disorders alone exceed 24 billion dollars each year in the US. Individuals of drug and alcohol addiction and related crimes account for the highest percentage of inmates in state and federal prisons.

Costs of treatment of addictive disorders in the United States:

The department of health and human services under the government of the United States of America has conducted an investigation called the Alcohol and Drug Service Study and have formulated a paper on the Cost of Substance Abuse Treatment in the specialty sector. The report was developed for the Substance Abuse and mental Health services Administration (SAMHSA) and gives detailed cost statistics of addictive disorders in the United States. The national level study was conducted to collect information on the characteristics of substance abuse treatment facilities in the country, clients presently under treatment, status of the clients post treatment, and financing of specialty substance treatment sector care. The results of the cost study are categorized into three: key unit costs, personnel costs and national cost estimates.

The key unit cost variables are the mean cost per admission, mean cost per client day, mean cost per documented visit, mean cost per reported visit and mean cost per counseling hour.

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