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6 rem r ~. IWO lerS: Public and Private Supply ~ a person with a serious drug problem, or a referring clinician, or a parent looking for the best possible help for a troubled son or daughter, the paramount issues in drug treatment are simple and direct: what kind of treatment works best for this problem, and how easy is it to get access to the needed treatment in terms of quality, location, price, and openings? These individual concerns, repeated across hundreds of thousands of cases a year, cast a large question mark over the size, distribution, structure, and efficiency of the treatment supply system. For analysts, these questions are articulated somewhat differently. How well does the treatment supply system now meet the need for drug treatment? What general changes in scale or structure, if any, are necessary to improve the match between the supply of treatment and the need for it? What are the most important constraints or rigidities that condition the possibility of appropriate reforms? More concisely: Does the supply system match treatments to needs? If not, then why not, and how can it be fixed ? In this chapter and the two chapters that follow, the committee at- tempts to resolve these issues. This chapter describes in qualitative and quantitative terms how the supply system is now constituted. This task was easier 10 to 15 years ago, for the system then was more uniform in its content, clients, and purposes and there was a national data collection system. Notwithstanding today's impoverished data, after thorough analysis the evidence clearly depicts the structure of the treatment system: there are To highly contrasting tiers of drug treatmentone for the poor under 200

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PUBLIC AND PRIVATE SUPPLY 201 public sponsorship and one for those who can pay with private insurance or out-of-pocke! fiends. The existence of two tiers of providers is not unique in social and health services. Within the general medical delivery system there are public hospitals and clinics that primarily serve the poor and underinsured and private medical centers that primarily serve the affluent and well-insured. But the drug treatment system breaks that general mold in several critical respects. The two tiers of drug treatment differ from each other not only in their sources of financing but also in their recency and origins, provider and facility characteristics, modalities and services offered, clientele served, and capacity utilized (for example, the size of "waiting lists"~. Moreover, the public tier interacts extensively with the criminal justice system. These contrasts are sharper and deeper than any of the differences that separate the two tracks of general medical care. Based on these differences and its previous analysis of treatment needs, the committee in this chapter reaches several general conclusions about the national supply system, including the relation of the public and private tiers, the nature of their major respective problems, and the general direction of needed reforms. Chapters 7 and 8 continue the discussion begun in this chapter but in greater depth. THE TWO TIERS: AN OVERVIEW It is useful to conceive of the treatment system as being made up of two tiers of providers. The public-tier providers are publicly owned programs or private, not-for-profit programs whose revenues are largely from government agencies. This tier includes large, multisite residential and methadone programs, but mostly it comprises small, not-for-profit outpatient clinics in about 2,000 communities across the nation. These programs primarily serve clients who are indigent or underinsured. This system of care had its origins in the wars on crime and poverty of the late 1960s and early 1970s, and it was (and is) in many ways an adjunct to the criminal justice system. The private tier is made up of privately owned providers (both for- profit and not-for-profit programs) that serve clients who have private health insurance or sufficient financial resources to pay for drug treatment. The private tier has developed mainly from hospital units that originally focused almost entirely on medically directed inpatient treatment of alco- holism. Yet the characteristics of these programs are changing as outpatient care and aftercare become more important. This tier is growing rapidly, and the total revenues received by its providers are beginning to approach the total revenues of providers in the public tier. Within the private tier, the

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202 TREATING DRUG PROBr EMS ranks of for-profit providers are growing more rapidly than the number of not-for-profit providers. There is very little overlap in providers and limited overlap of clientele between the two tiers. On the one hand, people with private health insurance rarely choose to be treated initially by programs that serve the indigent population. On the other hand, public subsidies often are not large enough to cover the charges of private-tier providers. There are a few programs especially residential not-for-profit facilities that straddle the two tiers, but they are dwarfed in number by those clearly belonging to one tier or the other. Financing Differences No data sources currently available permit a comprehensive description of the two tiers. Nevertheless, the tiers are sharply distinguishable in data collected in the 1987 National Drug and Alcoholism Treatment Utilization Survey, or NDATUS.i The axis that most clearly divides the two tiers of treatment is source of revenue. Closely correlated with these tiers are radically higher levels of reimbursements for private clients, modest differences in the nature and richness of delivered care, and disparities in accessibility of services, with a much greater chance that applicants to the private tier can gain immediate admission to treatment. Figure 6-1 shows private revenues as a percentage of total revenues by type of treatment facility and ownership. The figure clearly shows that all types of for-profit providers serve primarily clients who are covered by pri- vate health insurance or who pay their own fees; these providers gain about 80 percent of their revenues from these two courses. Government~wned providers clearly serve clients who are covered by government programs. iThe most recent editions of the survey, in 1982 (NIDA, 1983a) and 1987, each came shortly after dramatic changes in the public financing system. First came the switch in FY 1982 to fed- eral block grants, the major effect of which was to reduce federal treatment funding virtually overnight by 25 percent. The second major change was the 1986 Anti-Drug Abuse Act, which reversed the earlier trend and increased federal dollars for drug treatment by 20 percent. Several cautions are in order regarding the 1987 estimates. First, there is evidence from state reports (Butynski and Canova, 1988) that the response rate to the 1987 NDATUS may have been as low as 70 percent of all programs. Prior NDATUS efforts were reported to have had response rates of better than 95 percent. Second, financial data were omitted by almost 15 percent of responding programs. Thus, the estimates of treatment delivery and funding are conservative. (How conservative cannot be known unless nonresponse analysis is performed by the original survey contractor.) Moreover, this survey focused only on provider units specializ- ing in drug and alcohol treatment. Probably not included in the NDATUS were such providers as community hospitals that deliver symptomatic treatment (detoxification) in scattered units and private practitionerspsychiatrists, psychologists, and social workers who do not work in formally identified specialty service units. The 1987 data reported here are based on original analyses of the 1987 NDATUS data tape supplied to the committee by NIDA.

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PUBLIC AND PRIVATE SUPPLY 100 90 80 70 60 50 30 20 10 For-profit ~ ~ Not-for-profit ~] Government 1 l mL ~sy>~/ art ~e'',' We 203 FIGURE ~1 Defining the two tiers: private fees as a percentage of total revenues, by ownership and facility type. Source: Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey. Not-for-profit organizations are in the middle but are clearly differentiated by type of facility. More than 66 percent of the revenues of programs that are based in not-for-profit hospitals come from private sources. About 20 percent of the revenues of all other types of not-for-profit providers come from private sources; the remaining 80 percent of their revenues come from public contracts, grants, and reimbursements. Table ~1 presents information, divided into the two tiers, on clients, facilities, and service intensity among the providers responding to the NDATUS in 1987. The private tier comprises all for-profit providers plus private not-for-profit hospitals; the public tier comprises all other not- for-profit facilities plus government-owned programs. Private-tier providers received 41 percent of the reported drug treatment expenditures while treating 22 percent of the clients; public-tier providers received 59 percent of total revenues and treated 78 percent of the clients. The average revenue per client admitted to a private-tier program was $2,450, compared with $1,240 per public-tier admission. The primary factor in this difference in revenues is the locus of services offered in the two sectors. About 83 percent

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204 TREATING DRUG PROBLEMS of the revenues received by the private tier were generated by hospital- based programs, in contrast to 9 percent in the public tier. Moreover, inpatient and residential revenues per client in private-tier facilities were three to four times greater in private- than in public-tier facilities, although average outpatient revenues per client were nearly identical (Figure 6-2~. The programs of private-tier providers were more service intensive than those of public-tier providers. In the private residential and inpatient setting, there were 7.2 clients per counselor, compared with 9.7 clients per counselor in the public setting. Although the number of clients per counselor in the outpatient setting was more nearly similar for both tiers, private-tier clients were seen more often. However, without adjusting for group versus individual therapy and for the size of the groups, data not available from the NDATUS, these findings concerning personnel ratios must be viewed cautiously. Finally, although much more expensive, the duration of treatment tends to be somewhat shorter in private- than in public-tier facilities. The net impact of these differences v~s-a-vis quality of care is difficult to assess because the two systems serve quite different types of clients, and those differences probably extend to client therapeutic needs. TABLE 6-1 Comparison of Selected Characteristics of the Public and Private Tiers of Drug Treatment Characteristic Total Private Public Annual admissions (in thousands) 848 212.4 636.0 Current census (in thousands) 263 47.5 215.9 Capacity (in thousands) 329 72.2 256.5 Capacity utilization 80% 66~o 84% Additional capacity 25% 52% 19% Revenues (millions of dollars) 1,312 521 791 Revenue per admission 1,550 2,450 1,240 Facilities 5,121 1,275 3,846 Hospitals 960 801 159 Residential 990 76 914 Outpatient 2,765 331 2,434 Methadone 334 67 267 Corrections 72 0 72 Clients per counselor Inpatient 9.1 7.2 9.7 Outpatient 38.5 37.3 38.8 Outpatient appointments/week 1.7 1.9 1.65 Source: Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey. Data were provided by the National Institute on Drug Abuse.

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PUBLIC AND PLATE SUPPLY LL LL In o 60 - 1, 90 _ A) 80 _ :;: 50 40 20 10 o 205 ~~ Private Tier [;... :... ~ Public Tier 1~, Van! ~ ~ *is,, ~eS,`~e,... , By Eve FIGURE 6-2 loo tiers of cost: estimated revenues per client year in each tier, By facilit`,r and tier. Source: Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Surveyor. Client Differences Compared with private-tier clients, public clients have longer histories of drug taking, are more likely to have taken more types of drugs, are less likely to be employed or engaged in other socially conventional activities, are more likely to have major social deficits (e.g., education), and are more likely to have records of criminal activity and involvement with the criminal justice system. These differences are evident in all of the major studies of public-tier clients, including the Drug Abuse Reporting Program, or DARP (Sells, 1974a,b); CODAP, the Client-Oriented Data Acquisition Process; and TOPS, the Treatment Outcome Prospective Study (Hubbard et al., 1989), when contrasted with multiprogram studies of private-tier clients (e.g., the Chemical Abuse/Addiction Treatment Outcome Registry, or CATOR, as reported in Hoffmann and Harrison [1988] and Comprehensive Care Corporation [1988~. Most of the clients served in the public tier have many deficits such as diminished general health, poor education, and family breakdown. These deficits may be due to their drug problems, or they may predate such problems and exacerbate them. Public-tier providers thus need to have

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206 TREATING DRUG PROBLEMS a variety of services at hand to accomplish their therapeutic goals. As a consequence, their staff requirements may well be higher than those of private-tier providers, and the staff patterns shown in Table 6-1 probably mask deep-seated differences in the program resources available to achieve their therapeutic objectives. Capacity Differences In 1987 there was considerable excess capacity in the nation's drug treatment system. (The extent of capacity utilization in the two tiers is shown in Table 6-1 and Figure 6-3.) Capacity utilization varies by type of program and by tier. In general, there is considerable excess capacity throughout the private tier and much less in the public tier. There is excess capacity in hospital-based programs but little excess capacity in methadone programs. Nationwide, public methadone programs reported about 5 percent excess capacityquite a narrow margin as these programs often have unexpected dropouts and chronic staff shortages. The excess capacity is not evenly distributed across the country. Programs in cities and states are virtually full, with long waiting lists. Moreover, excess capacity, particularly in the private tier, does not necessarily mean that there is currently idle or underused staff and space. Rather, it indicates providers' willingness to expand and accept additional clients and to increase staffing and other program inputs appropriately. THE GROWTH OF THE NATIONAL TREATMENT SYSTEM fiends in Client Numbers and Provider Characteristics The characteristics of the national treatment system have changed over time. Most of the data come from the NDATUS series, which has been conducted by the National Institue on Drug Abuse (NIDA) since 1976. The basic trends are shown in Figure 6-4. In 1976 there were approximately 229,000 individuals in treatment on a daily basis. The majority were in outpatient nonmethadone programs. The next largest group was in methadone maintenance, followed respectively by residential and hospital programs. Enrollment in the residential and outpatient nonmethadone modalities declined steadily from 1976 through 1982, although in some areas of the country, residential treatment enroll- ment was stable even in the face of dwindling funds. In the subsequent five years, however, residential and outpatient nonmethadone enrollment rebounded dramatically; in contrast, methadone maintenance enrollment remained fairly stable. The methadone census peaked at 80,000 in 1977,

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PUBLIC AND PRIVATE SUPPLY 90 - 80 _ 70 _ 60 _ 50 _ 40 _ 30 _ 20 _ 10 _ O _ 207 Private Tier Public Tier Aid/ WI/~/ my. he FIGURE 6-3 Additional available treatment capacity in the national drug treatment system by facility type, as a percentage above current client census. Source: Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey. declined to 68,000 in 1980, and increased to 72,000 in 1982 and to 82,000 in 1987. In light of the great national concern about drugs and crime, it is surprising to observe that formal drug treatment in correctional settings canvassed by the NDATUS fell steadily from 9,100 clients in 1977 to 6,200 in 1982. This figure was nearly unchanged in 1987, even though the number of inmates had more than doubled during the five-year period. A Bureau of Justice Statistics survey (Innes, 1988) estimated that more than 30,000 state prison inmates were receiving drug treatment in 1986, many of them evidently in programs not recognized and included in the 1987 NDATUS. It is likely that these additional inmates were reporting on drug-specific problems discussed during the course of general prison counseling, education, or medical services. The most radical changes were in the hospital census, which declined from 5,500 in 1976 to below 3,000 during 197~1982 and then rebounded to 10,600 in 1987. When the drug treatment system was built up in the early and mid-1970s, hospital-based care was judged to be no more effective in most cases than residential care (or, for many clients, than outpatient

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208 TREATING DRUG PROBLEMS 150 cry 1 40 ma 130 ~ 120 O 110 I 100 90 c,) 80 70 Z 60 50 40 ul 30 ' 20 10 o _ 144 _ '' 128 '' _ "` Outpatient '' _ ' _ '_,` '' _ `~86 '' Methadone ~ - _ _ 74 a' 81 -73 _ 67 71 15 10.6 2.9 21 Residential - 5.5 Hospital 2.6 76 78 80 82 84 86 YEAR FIGURE 6-4 Drug treatment client census by treatment modality, 197~1987. Sources: National Institute on Drug Abuse (197~1980, 1983a) and Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey. care) in protecting health or promoting recovery, but hospitals were clearly much more expensive (Strategy Council on Drug Abuse, 1975; Besteman, 1990~. Therefore, the use of federal drug treatment funds was restricted to medically complicated detoxification; they could not be used for any hospital-based rehabilitation treatment. By October 1987, however, total enrollment in hospital-based detoxification still was only 3,369 clients, but hospital-based inpatient rehabilitation treatment had grown exponentially and was being delivered every day to 7,279 patients. The parallel trend is in the number of hospitals newly reporting spe- cialty treatment units for drug problems. This type of facility increased from 350 in 1982 to 960 in 1987 and reported a total of 180,000 admissions of individuals for drug problems (21 percent of total 1987 admissions). Five out of six of these hospitals were in the private tier. Another recent trend is away from programs that mainly treat drug problems and toward units that treat both alcohol and drug problems. Prior to 1982 the majority of drug treatment programs treated drug clients only. This situation has now changed dramatically. The vast majority of programs (80 percent) now treat both drug and alcohol problems. Since the first survey to make the distinction, the 1979 NDATUS, specialty units treating only drug problems have decreased in number from 2,000 to 1,000.

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PUBLIC AND PRIVATE SUPPLY 209 A last major change is in the balance of ownership of programs. The number of government-owned programs has changed little, going from 950 in 1982 to 1,020 In 1987. But private for-profit programs multiplied from 159 units with 9,800 clients (daily count) to 730 units with 29,000 clients. Private not-for-profit units grew from 1,900 to 3,400 programs, with an almost proportionate increase in clientele. Thus, drug treatment facility growth has been largely in the private tier, especially among hospital-based combined drug and alcohol (chemical dependency) units. In 1987 most of the programs (2,750) in the drug treatment system offered outpatient nonmethadone treatment as their primary modality. Nearly 1,000 hospitals, another 1,000 residential (nonhospital) programs, 330 methadone maintenance outpatient programs, and 72 correctional facilities with specialty drug treatment programs completed the drug abuse treatment system. The total enrollment of 263,000 persons in 1987 was 50 percent greater than in 1982, although only 20 percent larger than in 1976, the first year of the NDATUS. About 848,000 persons were admitted to drug abuse treatment in NDATUS programs during the 12 months preceding the census date, October 31, 1987. A total of 263,000 persons were currently enrolled in drug treatment as of October of that year. Treatment was provided by 5,100 different specialty facilities at an annual cost of $1.3 billion. Additional health care was undoubtedly provided by general health care providers (hospitals with no specialty units, physicians in their offices), but this care was presumably symptomatic in nature (treatment of emergency overdoses, accidents, or infections) and did not constitute efforts to rehabilitate drug abuse or dependence as such. The vast majority (225,000, or 86 percent) of clients in drug treatment during October 1987 were being treated on an ambulatory basiseither methadone maintenance or outpatient nonmethadone treatment although previously they may have received inpatient or residential services. The backbone of the public drug treatment system was 3,100 primary ambula- tory programs that admitted 506,000 clients in 1987 and had 194,000 clients as their static population number (including a small number temporarily in hospital and residential beds). The 1,950 hospital and residentially based programs in the system admitted 303,000 clients during 1987 and had a static enrollment of 62,000 clients; however, 50 percent of these clients were enrolled in their outpatient (including aftercare) services. Nonhospital resi- dential facilities served 27,000 persons, and hospital inpatient wards, 10,600 persons. Hospital and residential revenues, however, were substantially greater than ambulatory and outpatient receipts. There were more clients in drug treatment in October 1987 than at any previously recorded date. The 5,100 programs reporting to the NDATUS for 1987 were the largest number ever recorded, up from only 3,000 in 1982.

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210 TREATING DRUG PROBLEMS 1 400 En 1 200 Cal o o 1 000 800 600 400 200 Nominal Funding / - / 600 ~ _ 490 ~ Ret - 440 300 340 1 1 1 1 1 1 , , . . 76 78 80 82 84 86 YEAR FIGURE 6-5 Drug treatment system funding for 1976-1987 in nominal and real 1976 dollars. Sources: National Institute on Drug Abuse (1976-1980, 1983a); Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey. lYends in the Funding Base The specials drug treatment sector had revenues of $1.3 billion in 1987 (based on the NDATUS), which is sharply above the total system funding of $530 million in 1982 and $500 million to $600 million per year in the 197~1980 period (Figure ~5~. Yet in terms of real dollars or purchasing Dower, funding of the national treatment system has seriously deteriorated since the first NDATUS. Adjusting for inflation by using the medical price index, total 1976 funding was worth 15 percent more than total 1987 funding (Figure 6-5~. On a Aner-client basis the real value of funding decreased about 21 percent from 1976 to 1987.2 The erosion in funding is further indicated in data on funding per client in single-modali~ treatment programs from 1976 through 1987 (Fig- ure 6-6~. Although the nominal dollar values indicate crowing revenue Der "7 ~ A 2 Inflation adjustment might be performed with the consumer price index (CPI) rather than the medical price index (MPI), but the latter is more realistic because treatment system personnel are hired in the medical labor market. In 1982 the NDATUS (NIDA, 1983a) found that drug program staffs were composed of physicians (3 percent), clinical psychologists (5 percent), social workers (7 percent), nurses (9 percent), counselors (35 percent), other medical and direct care personnel (17 percent), and medical administrators and support staff (24 percent). When the CPI is used for inflation adjustment, real system revenues are 9 percent higher in 1987 than in 1976, and funds per client year are nearly identical.

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PUBl UrC AND PRrVATE SUPPLY 211 client over the period, in real terms there was a decrease. The outpa- tient nonmethadone and the methadone maintenance revenues per client declined by about one-third. The decrease in real expenditures, however, does not necessarily extend to the private tier. In the one meaningful series in which a comparison of modalities in each tier across time is possible, residential treatment per client in the public tier was funded in 1987 at 15 percent below the 1976 level after adjusting for inflation, whereas the private-tier equivalent was about 150 percent higher. Sources of Treatment Dollars Underlying the shifts in clients and providers were substantial changes in who paid for treatment (Table 6-2~. In 1976 the federal government paid for at least 43 percent of drug treatment (NIDA, 1978), and state and local governments paid for 48 percent. The rest of the funds came from private fees and donations. Since that time, private payments for drug treatment services have increased dramatically and represent the most fundamental financial change in the system, largely corresponding to the increasing treatment of drug problems in private hospital facilities. Even within governmental funding, there has been a distinct trend away from grant funding and toward more use of fee-for-service reimbursements. In 1987, contracts and vendor reimbursements from states and local governments ($483 million) were the most important sources of revenue 4.0 3.S 3.6 _ 3.4 >_ 3.2 Z 3.0 LL 2.8 cr 2.6 L1J G 2.4 o C) it, 3,630 ~ 3,320 ` \3240 3,178 / `_' \~ Methadone _ ~ \~ ~ Outpatient ~ 2,630 ~ _ _ _ ~ ~ _ _ 2,390 76 78 80 82 84 86 YEAR FIGURE 6-6 Annual funding per client year in methadone and outpatient nonmethadone programs during 1976-1987 (in 1987 dollars). Sources: National Institute on Drug Abuse (1976-1980, 1983a); Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey.

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212 TREATING DRUG PROBLEMS TABLE 6-2 Funding of the National Treatment System, 1976-1987, by Year and Final Source of Funding (in millions of dollars) Source 1976 1977 1978 1979 1980 1982 1987 NIDA/ADAMHAa 160.8 119.3 131.6 143.7 127.6 79.4 11.2 Other federal agencies 88.3 50.0 47.4 48.5 44.8 46.1 36.3 State b 206.0 177.3 164.5 147.7 133.8 165.4 355.3 Local 77.5 51.2 58.1 43.5 39.9 41.4 64.1 State/local fee-for- service reimbursements O.Oc o.o 0.0 3.2 10.7 16.6 74.3 Welfare/social services 0.0 0.0 25.9 21.6 20.2 22.4 55.8 Public third party 0.0 0.0 0.0 49.5 44.5 62.2 139.5 Private third party 0.0 0.0 0.0 11.2 20.0 43.5 348.1 Client fees 0.0 0.0 17.6 17.2 21.3 35.6 157.3 Other 70.8 112.9 73.0 24.6 23.8 21.1 69.8 Total 603.4 510.7 518.1 510.7 486.6 533.7 1,311.7 Total in 1987 $ 1,519.1 1,173.3 1,098.1 990.7 851.0 755.0 1,311.7 Revenue per client in treatment 2,500 2,200 2,400 2,500 2,700 3,100 5,000 Revenue (in 1987 $) per client in treatment 6,300 5,000 5,100 4,900 4,700 4,400 5,000 aNational Institute on Drug Abuse/Alcohol, Drug Abuse, and Mental Health Administration. reincorporating federal disbursements (e.g., block grant funds) administered by state authorities. CFrom 197~1978, cells reported as "0.0" were included in the "Other" category. Source: For 197~1980, data were taken from the National Institute on Drug Abuse reports of data from the National Drug and Alcoholism Treatment Utilization Survey (National Institute on Drug Abuse, 197~1980). For 1982 data, see National Institute on Drug Abuse (1983a). The figures for 1987 were derived from the Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey. for drug treatment providers. These monies, however, incorporated federal block grant funds administered by the states. Block grant outlays in FY 1987 are estimated to have been about $110 million, or half of the $220 million available for alcohol and drug treatment (Butynski and Canova, 1988) after the 20 percent set-aside for prevention. State and local governments thus spent about $373 million of their own appropriations for drug treatment, compared with $110 million in federal block grant monies. Programs reported the receipt of another $47 million in federal categorical contracts, $139 million from Medicaid, Medicare, or other public insurance, and $56 million for welfare and social service payments (e.g., housing and food allowances for clients in residential environments). The exact federal share of these later payments is uncertain, but it is assumed to be about 50 percent because the federal contribution to Medicaid is a minimum of 50 percent. Medicare (which is all federal dollars) has historically experienced a small number of claims for drug treatment.

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PUB' :'C AND PRIVATE SUPPLY 213 In sum, state and local government expenditures on drug treatment from all sources were approximately $470 million, or 37 percent of total NDATUS expenditures, and the federal contribution was about $250 mil- lion, or 19.5 percent of the total (Figures 6-7a and 6-7b). About 36 percent of government treatment expenditures in 1987 (up from 16 percent in 1979) came from public insurance payments (primarily Medicaid), welfare/social a Other (4.3%) 1976 Private (5.0%)~ . State & Local (48.2%) b 1987 Other (5.3%) Private (38.5 ~ Federal (42.5%) Federal (19.5%) State & Local (36.7%) FIGURE 6-7 (a) Funding sources for drug treatment in 1976 (total expenditures: $603 million). Source: National Institute on Drug Abuse (1976-1980~. (b) Funding sources for drug treatment in 1987 (total expenditures: $1.311 billion). Source: Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey.

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214 TREATING DRUG PROBLEMS services payments, and local/state government fee-for-service reimburse- ments. Nongovernmental revenue constituted a large share of total system funding in 1987. With $348 million from private insurance and $157 million from client out-of-pocket payments, private reimbursements totaled $505 million, or 38.5 percent of all revenues. Irends in Federal Funding Federal funding has played a major role in shaping the drug treatment system. Nominal federal funding grew from $40 million in FY 1969 to a peak of $300 million in FY 1974; it stabilized at $250 million to $290 million between 1975 and 1980, then rapidly declined to $160 million in 1982 before again growing to $190 million in 1986 and to $370 million in 1987 and 1988 (Figure ~8~. Final figures for 1989 and tentative figures for 1990 are not yet certain, but they are likely to be comparable to those of the late 1970s. These shifts up and down are even more dramatic after adjusting for inflation. Federal treatment monies directed toward community-based treatment come primarily from Alcohol, Drug Abuse, and Mental Health Adminis- tration (ADAMHA) categorical and block grant funds Amble 6-3~. These figures also demonstrate the magnitude of fluctuations in federal funding for publicly provided treatment between 1980 and 1990. It is important to consider the role of treatment in the federal anti- drug abuse strategy. From 1969 to 1975, the federal government put more 400 200 en _ CE to 6 _ 1000 J u, o a) ~ a' LL ~ O _ CI) t~ Z a) O ~ _ o 800 600 400 200 o 520 / 310 290 Nominal $ ~ 370 /~ 140 '` ,804 110 ~4~ Real (1~ 68 72 76 80 84 88 89 YEAR FIGURE 6~ Federal drug treatment expenditures during FY 1969-1989 (in nominal and real 1969 dollars). Source: Nominal drug expenditure data from the Strategy Council on Drug Abuse (1975 and later yeam), White House Office of Public Affairs (1988), and Ollice of National Drug Control Polipy (1989~. Price deflators were provided by the Bureau of Labor Statistics.

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PUBLIC AND PRIVATE SUPPLY 215 of its anti-drug abuse resources into treatment than into criminal justice or prevention activities. That pattern has now changed. In 1989 criminal justice efforts received an estimated $2.7 billion, compared with $680 million for prevention and $520 million for treatment (Figure ~9 and Bible 64~. In summary, the nation's drug treatment system began to erode after 1976. Although the private tier grew steadily all through the 1980s and the public tier has been increasing since the middle of that decade, the drug treatment system is still notably weaker and smaller than it was in 1976 in aggregate funds and in resources per client served. Sources of overall TABLE 6-3 Federal Appropnations (in millions of dollars) for Drug, Alcohol, and Mental Health Treatment Provided Through Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA)-Administered Categoncal and Block Grants, 1980-1989 Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 (est.) 1990 (tent.) 1,133f ADMSa ADTR Block Grant Supplementb Estimated Portion for Drug TreatmentC 256 136 107 117 92 98 93 167 160 260 448 625d 543 428 468 462 490 468 508 487 765 e 163 156 aAlcohol, drug, and mental health services (ADMS). bAlcohol and drug treatment (ADTR) supplemental 1987-1988 appropriations. CApproximately half of the ADMS block grant was for drug and alcohol treatment. All of the ADTR monies were for drug and alcohol treatment. Congress instituted a 20 percent set-aside of the block grant funds for prevention services in 1984. Ap- proximately half of the block grant substance abuse treatment funds have been spent on drug treatment. Statutorily, not less than 35 percent of the substance abuse monies could be spent on either drug or alcohol treatment. dIn 1980 this figure was an aggregate of categorical grant programs for alcohol, drug, and mental health services. In later years these funds were collapsed into the ADMS block grant. eThe 1989 appropriation of $805.6 million was effectively reduced to $765 million by a 10 percent set-aside for data collection, technical assistance, and services re- search. fAdding the 1990 tentative set-aside of 5 percent yields the actual block grant total ($1. 192 billion). Source: Unpublished data from the ADAMHA Office for Treatment Improve- ment.

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216 TREATING DRUG PROBLEMS 2.6 _ 2.4 _ Cry 2.2 J o Go 2.o 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 o / Criminal Justice ~ - Treatmen,: - By ~ Prevention \ ~ _ l 69 71 73 75 77 79 81 83 85 87 89 YEAR FIGURE 6-9 Federal anti-drug abuse funding for FY 1969-1989 (in 1987 dollars). Source: Nominal drug expenditure data from the Strategy Council on Drug Abuse (lg75 and later yean), White House Office of Public Affairs (1988), and Office of National Drug Control Polic~y (1989~. Price deflators were provided by the Bureau of Labor Statistics. support for the treatment system have changed materially. The govern- mental share particularly that of the federal government has declined, whereas private reimbursements have been growing. Even with the recent large increases in funding through the Anti-Drug Abuse Acts of 1986 and 1988 and the emergency ADAMHA appropriation for FY 1990, federal support for treatment in inflation-adjusted dollars is still well below the level achieved in 197~1974. CONCLUSION The most important feature of the nation's drug treatment supply system is its very clear division between two tiers of providers that differ in financing, origins, clientele, capacity utilization, and modalities. There is a public tier of mostly outpatient and residential programs for indigent clients, many with serious criminal records and other social deficits, that is about 20 years old; and there is a smaller private tier of mostly hospital- based programs for middle- and upper-class clients, which is effectively about 10 years old. The 1987 NDATUS, although a limited and imperfect instrument of observation, gives the clearest available picture of the two tiers. Its data show a private tier composed of 1,275 treatment providers, all of whom were receiving at least half (on average, more than three-quarters) of their revenues from client fees or private third-party reimbursements. More than

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PUBLIC AND PRIVATE SUPPLY 217 800, or 63 percent, of these private-tier providers were in-hospital programs (both for profit and not for profit); about 25 percent (334) were outpatient programs; and the remaining 11 percent were about evenly divided between residential and methadone programs. The public tier revealed by the 1987 NDATUS comprised 3,846 providers receiving on average just below one-fifth of their revenues from client fees or private reimbursements. More than 2,400 (63 percent) of these programs were outpatient facilities (largely private, not-for-profit contractors); 24 percent (914) were residential facilities; and the remaining 13 percent were divided among methadone programs (267), government hospitals (159), and correctional programs (72~. The private tier treated 22 percent of all reported admissions and received 41 percent of system revenues; it averaged $2,450 per treated client, double the $1,240 average in the public tier. This cost difference was largely attributable to two factors. Most private-tier (but relatively little TABLE 6-4 Federal Anti-Drug Abuse Expenditures (in millions of dollars) for Treatment, Prevention, and Cnminal Justice: Obligations for Fiscal Years 1969-1989 Provided in Nominal and Inflation-adjusted Figures Nominal Dollarsa Year Treatment 1969 40 1970 50 1971 80 1972 170 1973 280 1974 310 1975 250 1976 250 1977 260 1978 260 1979 290 1980 270 1981 210 1982 160 1983 180 1984 180 1985 190 1986 190 1987 370 1988 370 1989 520 Criminal Prevention Justice Real 1987 Dollarsb Criminal Treatment Prevention Justice 120 180 260 460 540 640 660 700 670 720 730 770 1,030 1,180 1,370 1,560 1,780 1,830 2,290 2,400 2,460 10 20 50 110 140 160 110 110 110 110 120 140 120 120 140 150 180 190 320 450 680 40 60 90 170 210 280 320 360 370 420 470 550 810 980 1,190 1,420 1,670 1,760 2,290 2,490 2,660 160 190 290 600 950 960 700 620 590 560 560 480 330 230 240 230 220 200 370 340 450 20 70 130 310 350 360 230 210 200 190 190 190 150 150 160 170 190 190 320 440 630 aNominal drug expenditure data are taken from Strategy Council on Drug Abuse (1975 and later years), White House Office of Public Affairs (1988), and Office of National Drug Control Policy (1989). bPrice deflators were provided by the Bureau of Labor Statistics.

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218 TREATING DRUG PROBLEMS public-tier) treatment takes place in hospitals, which are more expensive than other settings; moreover, the average per diem charge in private-tier hospital programs is about four times as high as the average charge in public-tier hospital programs. There is also a threefold average differential between the costs of private and public nonhospital residential programs. Only the outpatient (methadone and nonmethadone) programs were similar in cost in the two tiers. The level of per diem support per client in the public tier fell sub- stantially from the mid-1970s to the mid-1980s, although there has been a notable recovery in the past three years. The actual cost of delivering treatment has not declined; rather, the intensity and breadth of program services and the experience levels of public-tier staff have been reduced. The public tier was originally built, staffed, and trained in the early 1970s largely with federal dollars, under an explicit plan to steadily reduce the federal contribution and increase state and local dollars in proportion. Something like this has occurred, but the federal decline has been much more pronounced than the state and local increases. This pattern is at- tributable to a general shrinkage in public services and a more specific shift back toward the criminal approach to drug problems, rather than to patterns or trends in the severity of the drug problem the epidemiological trends in dependence during the early part of this period were stable and in the latter part have been rising. Private drug treatment was a small, nearly invisible presence through- out the 1970s but then began exponential growth after 1980. This growth largely involved increasing delivery of drug treatment in preexisting or newly opening alcoholism treatment units, which began to see increasing numbers of alcohol/drug and drug-only (mostly marijuana and cocaine) clients among their insured clientele; some programs also began aggressive efforts to reach more such patients as the incidence of alcoholism stopped growing during the 1980s. The extension of alcoholism treatment capacity to drug treatment occurred in the public tier as well and is manifest in the sizable increase in the self-designation of NDATUS treatment units as combined alcohol/drug providers. There was also a large expansion of private methadone programs as political opposition to methadone ma~n- tenance combined with budgetary pressures to close down existing public methadone clinics. How well does the treatment system match current demand and the estimated need for services? In the 1987 NDATUS, reports of additional treatment capacity (which the committee has interpreted to mean idle capital assets, adequate licensing and use permits, and access to additional personnel comparable in training to those already employed) was highest (more than 50 percent above the current census) in private and public

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PUBLIC AND PRIVATE SUPPLY 219 hospitals and in private-tier residential facilities; it was lowest in public- tier methadone and outpatient facilities. There were substantial regional differences in public-tier capacity; consequently, some areas of the country are sorely pressed for public-tier residential treatment as well. The two tiers are so differently configured that it is not sensible, in the committee's judgment, to try to engage more private-tier capacity on a large scale for public use. There is a need for expansion of the public tier but with an important reservation. The current resource intensity of many public-tier programs is marginal at best. Expansion will reduce and dilute this intensity unless careful countermeasures are taken. The need for more resource-intensive treatment appears at least equal in importance to increases in capacity. Rigorous data on the clinical effectiveness of more intensive resources per patient are too sparse to permit certainty or precision on this point, but the most sensible course, in the committee's judgment, is to divide increased public resources between improving the quality of services, facilities, and staff skills and increasing the capacity for new admissions. A high priority should also be assigned to creating data resources and analyses that will permit a close look at the relation of service intensity, quality, and treatment outcomes. Although the rise in severe cocaine problems has meant reductions in opiate drug use in some areas, overall this trend has added to rather than undercut other drug problems such as heroin dependence. Because methadone maintenanceprovided at adequate levels and with supporting services is the most rigorously validated treatment for heroin dependence, there is good reason to put additional resources into this modality in areas of the country where need and demand for it are strongest, keeping in mind the general principle of improving treatment resource intensity in parallel with capacity. The private tier may be capable of offering methadone treatment as efficiently as the public tier, although the scarcity of evaluation research on private-tier methadone treatment warrants serious caution. 1