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7
Public Coverage
The question of whether there should be a large-scale system of publicly
supported drug treatment was answered affirmatively in the 1970s. That
answer has been reaffirmed in the past few years, and the committee's
analysis to this point has not raised any fundamental new doubts. With
the existence and legitimacy of the public tier no longer at issue, the
questions for public coverage are instead ones of management objectives
and techniques. The task of this chapter is to consider the present system
of public coverage in light of the needs, wants, and demands placed on it
and to make appropriate recommendations for improvement.
First, it is necessary to frame the fundamental policy questions that
those responsible for public coverage of drug treatment should address a
critically important endeavor. Even when some of the answers can only
be provisional, approximate, or resolvable by public debate and political
negotiation, asking the right questions is essential in order to assemble
relevant evidence and give rational shape to the decision-making process.
Policy has to do with ends and means. The committee sees three
questions under each of these categories. In deciding on the ends of
treatment policy, the questions are as follows:
· What are the fundamental principles that justify public coverage of
drug treatment? Or, whose treatment should public funds cover, and why?
· What priorities should guide the current expansion of public cov-
erage?
220
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221
· - What is the optimal level of public spending to implement these
priorities?
The committee identifies as principles that public coverage should
seek to remedy treatment constraints that arise from inadequate income
and to reduce external social costs, particularly those relating to crime
and family role dysfunctions. Such efforts often require actively inducing
people to seek treatment through a variety of methods, as well as seeking
mechanisms to increase retention (e.g., legal coercion, outreach efforts,
enhanced social services). Four specific priorities flow from these principles
and conform to the committee's empirical analysis: reduce admission
delays, improve program quality and performance, reach out to young
mothers, and treat more criminal justice clients. This chapter outlines
three progressive strategy options for public decision makers to consider: a
core spending strategy, an intermediate plan, and a comprehensive option.
The priorities and expenditure patterns recommended in this chapter
should not be implemented without reconsidering the adequacy of present
means for managing the public tier. These considerations divide into three
instrumental questions:
· What should be the respective state and federal roles in public
coverage of drug treatment?
.
What are the most appropriate financial mechanisms for providing
public support—essentially, to what degree should the emphasis be on
direct service programs versus public insurance?
What disciplines or controls should be in place to ensure that public
expenditures for drug treatment are appropriate and effective?
State governments have played the major role in financial administra-
tion and quality control of drug treatment in recent years. Now, however,
the federal government, in pumping major new funds into treatment, is
reasserting its earlier leading role. It should take this opportunity to re-
build important directional and accountability mechanisms and to prepare
the ground for later introduction of a larger share of public insurance
financing. (However, public insurance financing will never obviate the need
for direct service support of critical program elements such as outreach
and integration with nonhealth services.) Routine outcome measurement,
training and technical assistance, gatekeeping functions, and performance
contracting will be the keys to upgrading drug treatment and introducing it
permanently into the mainstreams of health and human services.
THE PRINCIPLES OF PUBLIC INTERVENTION
l~venty-five years ago, publicly supported drug treatment in the United
States was confined to the provision of certain therapeutic amenities at
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TREATING DRUG PROBLEMS
four correctional facilities. Each site admitted hundreds of drug-abusing
and dependent individuals in a given year; most of them were convicted of
narcotics violations, but some of them were volunteers requesting treatment.
Leo of the facilities were large federal prison-hospitals, at Lexington,
Kentucky, for the eastern United States and at Fort Worth, Texas, for the
West; the others were specialized rehabilitation prisons operated by the two
most populous states at Rikers Island, New York, and Corona, California.
The challenges of financing and managing public-sector treatment
have changed markedly since that time. Instead of four prison treatment
sites, there are several thousand public-tier programs in communities and
institutions in every state, treating well over 600,000 annual admissions and
interacting with federal institutes, state offices, county agencies, elected
officials, local bureaucracies of criminal justice, education, welfare, and
health care organizations, and occasionally even private insurers. The
issue certainly is not whether there will be large-scale public support for
treatment but how much, what kinds, and for whom.
The reasons why society has become interested in treating illicit drug
abuse are neither strictly hard-headed nor purely idealistic but rather a
combination of the two. These reasons have moved the public not only to
permit treatment of illicit drug abuse and dependence in community settings
but also to enhance the amount of treatment taking place by substantially
reducing the price that the majority of individuals pay for treatment to well
below the cost of providing it—often, in fact, to nothing.
1b better understand the logic by which the government arrives at the
"right" level of support, it is necessary to grasp firmly the specific rationale
for these public subsidies. The reasons for supporting public treatment
fit comfortably within the realm of conventional justifications for other
public health measures, but that is a very broad realm, indeed (Institute of
Medicine, 1988a). In the case of public drug treatment, there are important
specific emphases that ought to be made explicit.
External Costs
Individuals who can be clinically identified as meeting the criteria for
drug treatment (whether or not they are interested in treatment to help
extinguish their drug-seeking behavior) generally impose serious burdens
on other members of society. The harm to victims of violent crime, the
damages to the well-being and future prospects of the individual's family,
the risk of transmitting hepatitis or HIV infection, and other such burdens
are called externalities, or external costs. The problem with external costs
is that, unlike the self-imposed consequences of actions, they do not au-
tomatically discipline or instruct the individual, which is usually the way
harmful behavior is corrected.
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223
Solutions to external cost problems ordinarily take one of two forms.
One form is to reassign these costs to the individuals who produce them
through selective taxes or confiscations, civil liability, or the imposition of
criminal sanctions such as fines or incarceration. I§xing and confiscating
the proceeds of illicit drug-related behavior have proved to be difficult and
frequently haphazard endeavors; moreover, the individuals who originally
impose the external costs are often too poor to pay commensurate civil or
criminal fines. Determining an appropriate fine for transmitting serious and
even deadly diseases is beyond nearly anyone's capacity. With legislatively
mandated sentencing, the consequent sanction for such individuals has
increasingly become jail or prison the individual is made to pay a liberty
price as a "just desert." What this measure emphasizes is less the burden of
harm to individual others and more the moral weight of the drug offense;
and it is a moral calculus that assigns the exaction due the criminal's "debt
to society."
Nevertheless, this price may be considered unsatisfactory in at least
two ways. In the first instance, the penal strategy generally does not fully
reassign the social costs because society has to pay a substantial price to
impose deprivations of liberty on unwilling individuals. Second, to date,
imprisonment has not had enough of the desired effect: individuals who
have paid the price of incarceration have all too frequently (at the rate of
about three felons out of four) come out of prison and reimposed the same
criminal burdens on society.
There is also a third dissatisfaction. Society is uneasy about the strictly
criminal approach to drug consumption. However broad the consensus
on maintaining criminal penalties, particularly for trafficking offenses, the
historical streams of libertarian and medical ideas continue to affect the
nation's collective thinking. Although clearly in the minority, there are
respectable voices questioning the entire wisdom of drug laws, even from
within the bastions of the criminal justice system. In contrast, no such
voices rise in dissent regarding laws that proscribe homicide, sexual assault,
robbery, or grand theft (auto).
These shortcomings of the criminal approach, in particular, the first
two, led originally to the development of the public tier of treatment. As a
result of studies in public-tier programs, which are reviewed in Chapter 5,
there are now reasonable grounds to believe that at least some modalities of
treatment do in fact reduce the external costs of drug abuse and dependence
in greater measure than the cost of the treatment itself. Moreover, in doing
so, treatment provides some benefits that drug-abusing and drug-dependent
individuals themselves seek (although it often takes a substantial amount of
exterior pressure or interior misery or both to bring them to that point).
This last statement brings up the second mode of dealing with ex-
ternalities (the first being to reassign the external COStS): design positive
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TREATING DRUG PROBLEMS
incentives to induce the persons who are producing external costs to stop.
Incentives are a carrot that often accompanies the stick of penalties. The
committee's review in Chapter 4 indicates that the treatment motivations of
drug-abusing and drug-dependent individuals are usually ambivalent, with
some degree of desire for recovery, some degree of pressure to avoid drugs,
and some degree of desire and compulsion to continue seeking drugs; in
other words, applicants show an interest in the benefits of treatment mixed
with hostility toward its constraints. Under these circumstances, the money
price of treatment may for some fraction of individuals play a pivotal role in
determining whether treatment is sought or how much treatment is utilized.
For relatively inexpensive treatment such as outpatient care, a partial sub-
sidy may make a difference; for relatively expensive residential or inpatient
treatment, the cost is high enough that a subsidy may be critical to whether
an individual actually receives treatment.
A complication enters here, namely, the relationship between public
and private benefit. If both the individual and society would benefit from
the individual's positive response to treatment, then who should pay for it?
One approach is to say that the answer should depend on the proportions
of public and private benefit; a second is to express a strong preference
for maximizing private payments (for example, through sliding-scale fees);
a third strategy is to put the fullest onus on public payment. To be
completely efficient in the use of public funding, one would want to lower
prices d~scnminately. No one who is prepared to purchase treatment on
his or her own at its market price (the cost of production plus markups,
reserves, or profit margins, adjusted to competition) should be subsidized.
Subsidies should go only to those who would purchase treatment at some
below-market price, and the amount should be only what is necessary in
each case to assure the purchase.
If the external costs of untreated drug consumption (which, on average,
treatment can be expected to reduce significantly) exceed the costs of
treatment by a large amount and there are individuals who need treatment
but do not want it even at zero cost, then the public might even find it
optimal to create a "negative price." A negative price is an inducement
to enter and stay in treatment that exceeds the minimum cost of helping
clients to extinguish drug seeking. The extreme case of a negative price
is cash inducement: paying people to enter treatment. A more palatable
alternative is incentives in kind, such as amenities that are not strictly
needed for treatment (even though some may in fact prove to make
treatment more effective) for example, attractive facilities, free coffee, or
assistance in dealing with a variety of other social, medical, or psychological
problems.
Intrinsic medication effects may fulfill this incentive function. For ex-
ample, clinically optimal levels of either methadone or naltrexone "block"
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225
the euphoric effects of any other opiates. But the very mild analgesic prop-
erties of stabilized methadone doses, in contrast to the virtually complete
lack of perceptible effects of naltrexone maintenance, constitute a positive
inducement, which may help to explain why methadone maintenance typi-
cally retains a substantial percentage of clients whereas naltrexone retains
very few.
In summary, the combination of high external costs and a reluctant
clientele may lead society to want not only to provide treatment for illicit
drug abuse and dependence at a reduced cost but even to provide some
selected inducements, at least to some potential clients, that go beyond the
cost of bare-bones treatment. (A more technical analysis of the issue of
treatment demand and pricing is sketched in Figure 7-1.)
Income Constraints
Whether or not the external social costs equal or exceed and hence
begin to efficiently justify- treatment expenditures, there is a second major
reason for public support of treatment: the problem of income constraints,
or the fact that some people are simply too poor to afford the cost of
treatment even if they are very interested in obtaining it. In some respects,
society has taken a broad ethical position on income constraints, namely,
that there are certain goods and services that should never be denied to
anyone on the grounds of inadequate income. Generally, these goods and
services fall into one of two categories: items that everyone needs at some
minimum level but that most people can afford (e.g., food and shelter) and
items that only a few people (relatively speaking) might need very badly
at any one time but that most cannot afford at all or without undergoing
some severe degree of hardship for example, major medical care.
Drug treatment appears to belong in the second category. In these
kinds of cases, the government has both encouraged the formation of
private compacts (using tax incentives and regulatory guarantees) to help
the individual in need~mployer-sponsored health insurance is the prime
example and has entered directly into the sponsorship of such arrange-
ments, most prominently in the Medicare program. But private insurance
and Medicare share the characteristic that eligibility for these forms of
coverage depends on making (or having made) ongoing contributions to an
insurance pool through regular premiums that are matched by an employer
and/or deducted from a steadily incoming paycheck
This form of coverage is inapplicable to individuals who do not belong
to a private group health insurance plan and are too young (or otherwise
lack qualifications) for Medicare eligibility. At a minimum, this group
includes an estimated 31 million individuals who are without any health
insurance (Moyer, 1989; cf. Chollet, 1988~. It may also include an additional
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TREATING DRUG PROBLEMS
_ 50
in
=
o
40
o
U)
U'
._
-
UJ
o
In
~ Ps- 10
LLJ
PP—
30
20
LL PI— O
G
-
Ds
S
0 40 1 80 120 160 200
Q TREATMENT EPISODES Q.
(in thousands)
240 280
FIGURE 7-1 The market for drug treatment showing private and public demand. The
great force of external cost considerations affects the whole market for treatment. If
treatment episodes are expected to provide benefits to the public beyond those to the
recipient by reducing the external costs of untreated drug problems, then that expectation
should be reflected in the market by raising the demand schedule for treatment. In other
words, at any given price, the amount of treatment demanded should be greater than just
that sought by individual clients. This increase in the demand for treatment, which results
from induding the benefits to the general public, implies that the socially optimal amount
of treatment is greater than the amount that would be provided in a completely private
treatment market.
This principle is illustrated in conventional economic terms in the figure, which is
hypothetical but modeled on realistic assumptions. The purely private market for treatment
is represented by the downward-sloping demand curve Dp and the supply curve 5. Their
intersection shows the average price, Pp. and total quantity, Qp, of drug treatment episodes
that would be delivered in the private marketplace if the government did not intervene.
The public benefit from treatment dictates that the social demand for treatment, curve Ds'
is higher than the purely private demand for treatment, curve Dp, and the quantity of
treatment desired at any price is accordingly greater. When the social value of treatment
is recognized in the demand schedule Ds, the socially optimal amount of treatment is
indicated lay the intersection of the new demand curve and the supply curve. The socially
optimal quantity of treatment Qs is greater than the quantity delivered in the private market
Qp. To achieve utilization of treatment at the socially optimal level Qs' subsidization of
treatment must be undertaken (by means of governmental or philanthropic subsidies) to
make up the difference between Ps, the price of inducing the socially optimal level of
treatment, and Pt. the average price that many potential clients would actually be prepared
to pay for that many episodes of treatment.
13 million people covered by Medicaid plans and 48 million with private
health plans that lack specified coverage for drug treatment services. These
61 million people are covered for emergency services (e.g., drug overdoses)
and treatment of physical sequelae of drugs; many would probably be
covered for some types of treatment of drug problems under general plan
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227
provisions; and some could afford to pay drug treatment costs out of pocket.
In the committee's judgment, however, a large proportion of the 61 million
individuals in this country without specified coverage for drug treatment
are not covered by their health insurance for appropriate drug treatment
in the event they were to need it.
There are, in other words, at least 31 million and possibly 92 million
individuals for whom insurance coverage of drug treatment may be unavail-
able when it is needed; absent stronger data, the approximate midpoint of
this range, 60 million, is a reasonable figure to use. For many of these in-
dividuals, the out-of-pocket costs of treatment are formidable, particularly
for residential or hospital treatment. The committee hazards the further
estimate that one-third of the 31 million individuals who are uninsured and
one-half of the 30 million who are insufficiently covered might be able to
afford outpatient treatment out of pocket. This still leaves roughly 35 mil-
lion individuals who could not do so and who would qualify as indigent with
regard to buying any form of drug treatment. For residential treatment,
the committee's estimate of the number who would be considered indigent
rises to 60 million.
If society does not want to see drug treatment denied to persons in this
group as a result of income constraints, the standard solution is to develop a
scheme of differential pricing, which enables the relatively indigent person
to pay a below-market price for treatment through a government subsidy or
service program, contingent on an accurate determination of his or her level
of income or wealth. The income criterion could be graduated according
to circumstances; the guiding principle is that the price of treatment should
be brought below whatever threshold rules out the individual being able
to purchase the needed treatment or at which paying for treatment would
create undue hardship. In many cases, using this guideline means the price
must be effectively zero.
Positive Response to Treatment
There is a third principle besides external costs and income constraints
that is worth mentioning: the treatment should do good; that is, the client
should respond well. Of course, some do not. There are public clients who
never achieve significant reductions in their drug-seeking and other criminal
behavior (when the latter is present to begin with) during treatment. When
those who are not responding well leave treatment, their departure cannot
be called an effective result. Yet it does achieve the virtue of efficiency, in
that no further money is wasted. When the public (or any other third party)
is paying the bill for treatment, the most troubling problem is individuals
who neither modify their behavior positively nor leave treatment.
There are not many such people, particularly in the more intensive
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TREATING DRUG PROBLEMS
and demanding programs and modalities. For the most part, people who
stay in treatment do well as long as they are in it, and they either drop
out or are discharged when their behavior deteriorates and therapeutic
corrections (if the program makes them) are unsuccessful. This is not to
say that most people in treatment are absolutely crime and drug free but
that unmistakable improvement over pretreatment conditions is very much
the day-to-day norm.
In principle, there should be no coverage of individuals who are not
expected to respond positively to treatment. But prognostic precision is
simply not acute enough to draw bright exclusionary lines. Even previous
treatment failure is no sure guide because the route to recovery often leads
through several such mistress In drug treatment, as in viral ally all medical
care for severe, chronic conditions, the limited capacity to accurately predict
individual responses dictates that this principle be applied sparingly, usually
on a retrospective rather than prospective basis, therefore erring on the
side of treating too many rather than too few. In practice, denial on the
grounds of expected nonresponse is exercised very little at the point of
admission; instead, it is a judgment made by clients (through voluntary
attrition), by clinicians (through discharge decisions), or by third parties
such as police officers (by arresting violators of the law).
Balancing Treatment Needs and Cost Concerns
With declining budgets the norm from the mid-1970s until fairly re-
cently, one must assume that there will be continuing budget constraints
on drug treatment dollars. It Is difficult to believe, despite notable recent
budget increases by the federal government and a few states, that the day
may come when public treatment funds overshoot the need for treatment.
Ideally, to make the best decisions with limited budget dollars, one should
look at every individual for whom a legitimate argument for public support
could be made, evaluate the strength of the argument in each instance
in terms of relative costs and benefits, and apply a triage or optimizing
procedure to achieve the most efficient distribution of limited funds that
is, to get the greatest return on the investment of each treatment dollar.
This triage would apply not only to whether an individual needed treatment
but also to how intensive (and expensive) a treatment is needed for optimal
results.
However, to calculate precisely for each drug-abusing and dependent
Treatment programs do in fact exclude some people whose personal history is unpromising.
However, these negative prognostic signs are attended to mostly out of a desire to minimize the
risks that nonresponding behavior will disrupt other clients or endanger the clinical setting for
example, programs are leery of admitting individuals who are chronically assaultive or known as
large-volume drug trallickers.
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229
individual the extent of attributable external costs, the ability to pay, the
relative strengths of the desire for and hostility toward treatment (includ-
ing the potency of exterior and interior pressures), and the probabilities
of response to the various treatment options is a complex and demanding
assignment. The specific information needed about individual and program
performance, the cost to collect and evaluate it, and the sheer conceptual
challenge are all extensive, and there would be unavoidable residual uncer-
tainties about the results, in light of the current and foreseeable state of
the prognostic arts.
Instead of trying to exact the last ounce of efficiency by fine-tuning
the structure of price subsidies, some simpler rules of thumb may be (and
generally are) employed. For example, ability to pay is usually determined
by a preset income maximum that for convenience may be equivalent
to local standards for welfare (and Medicaid) eligibility; copayments, if
required, are graduated according to very broad income levels, and external
cost and motivational issues are seldom explicitly considered in determining
direct charges to patients (although they may be very important in admission
and treatment planning decisions). Income is obliquely taken as an index of
external costs in that low-income drug-abusing and dependent individuals
are considered very likely to resort to criminal activities to pay for their
drugs.
The committee believes it is clear that external cost and income con-
siderations are already firmly incorporated into public decisions about the
coverage of drug treatment. The external costs, particularly in terms of vio-
lent crime and increasingly in terms of harm to young children's lives, have
been uppermost in importance. These considerations have been reinforced
by the second type of concern that treatment should not be appreciably
less available to the poor than to the wellmff and well-insured because it is
mostly poor individuals who commit violent crimes and whose children are
least protected from neglect or abandonment. There is a further overtone
of concern (an echo of the 1960s War on Poverty) that general conditions
of racial and income inequality might help cause and perpetuate drug
problems and retard recovery, further reinforcing the urgency of public
intervention.
The principal decision criterion in public coverage is and should be
to make publicly subsidized treatment available to those who are doubly
needy those who most need treatment according to clinical criteria and
who most need financial help to afford it.2 Generally, having a serious
2 exact titration of the inability to pay, so as to marginally reduce public payments to those who
are partially able financially, may be expensive and may reduce the desirable incentives that help
draw reluctant individuals into treatment; in otherwords, the resulting revenue gains from copay-
ment requirements may not be worth it. However, the introduction of means-based copayment
requirements for long-term outpatient treatment, such as methadone maintenance, would make
sense once stabilization of behavior had occurred. Similarly, a payback principle in kind or in
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TREATING DRUG PROBLEMS
need for treatment stands as a guarantee or, at least, makes it quite
probable that external costs are present; moreover, the less the ~ndiv~dual's
legitimate financial capacity, the greater these external costs are likely to
be. In general, the principle of covering the needy should be applied not
only to all those who readily seek treatment but also to all others who
can by legitimate means be induced to seek it. Considerations of external
costs further argue that there is reason to create incentives beyond minimal
coverage of bare-bones programs. Just as the external costs of crime Justin
negative ~ncentives~oercion by the criminal justice system, which may be
helpful in steering individuals toward treatment these costs justifier positive
incentives to some degree, provided they can induce greater motivation and
better retention In treatment. The external costs of poor job performance
and parental deficiencies may justify positive incentives as well, given that
criminal justice coercion of drug-abusing and dependent individuals who are
steadily employed or taking care of children, or both, may be impractical
or unlikely.
In summary, the committee recommends that the principle of public
coverage be to provide adequate support for appropriate and timely admis-
sion, completion, or maintenance of good-quality treatment for individuals
who cannot pay for it, either fully or partly. Public coverage should be
invoked whenever such individuals reed treatment, according to the best
professional judgment, and seek treatment, or can be induced through ac-
ceptable means to pursue it, assuming there is some probability of positive
response.
FROM PRINCIPLES TO PRIORITIES
Chapter 3 concluded that the aggregate need for treatment in the
United States at any one time in 19~ involved about 2.5 million drug-
dependent individuals and 3 million more individuals who were at least
abusing drugs. Chapter 6 indicated that the 1987 survey of treatment
providers found about 260,000 clients in treatment at that time, with total
annual admissions numbering 850,000. Even allowing for an incomplete
count of providers, it is clear that the need for drug treatment according
to relevant diagnostic criteria exceeds the number of annual admissions by
a substantial amount.3
dollars for successful graduates of therapeutic communities or other programs may also make
sense; the prevalence of supportive "alumni groups" and "thirteenth-steppers" reflects this idea.
3 Of course, there are also dynamic considerations: 4 million young people newly enter the prime
onset period each year, and an unknown number leave the drug scene. Appendix 7B contains
some additional comments on the need for dynamic analysis.
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TREATING DRUG PROBLEMS
Fund at new rate per client in treatment- $5,000 per client in treatment,
or $1,860 per client treated.
Keep current mix of residential and outpatient treatment.
132,000 x $5,000 = $660 million
Comprehensive prison treatment
Increase daily prison treatment enrollment by 50,000, or twice the compro-
mise goal (average treatment retention, 6 months).
Assume $3,125 per treatment year delivered in prison.
50,000 x $3,125 /2 = $156.3 million
One-time Capacity ExpansionJImprovements
Residential capacity expansion
Increased length of stay requires additional 2,250 beds.
Waiting list expansion of 25% requires 7,000 beds.
Criminal justice system expansion also adds 50% (14,000 beds).
Expectant mothers expansion requires 14,060 beds.
Assume cost of $20,000 per additional space (discussed above).
(2,250 + 7,000 + 14,000 + 14,060) x $20,000 = $746.2 million
Repair enacting residential facilities
Same as under core option. $90 million
Repair existing outpatient facilities
Same as under core option. $118.1 million
Main additional staff
Assume minimum of 26,000 staff in 1989.
Assume requirement for 34,200 additional staff, which equals 26,000 staff in
1989 divided by 275,000 clients in 1989 times 578,600 clients in future
times 1.1 for increase in staffing intensity.
Assume $2,000 per additional staff for first 10,000 (assumes most with some
prior experience or related training in drug problems) and $4,000 per
each additional stab (minimal or no closely related experience or
training).
10,000 x $2,000 + 24,200 x $4,000 = $116.8 million
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PUBLIC COVERAGE
Eliminate waiting list
INTERMEDIATE STRATEGY OPTION
Annual Recurring Costs
Same as under core option. $330 million
Restore~ndingperclienttol97~19791evel
Same as under core option. $412.5 million
Staff training
263
Assume minimum of 26,000 staff in 1989.
Expect 49,800 total staff in future, which equals 26,000 staff in 1989 divided
by 275,000 clients in 1989 times 478,300 clients in future times 1.1 for
increase in staffing intensity.
Assume annual training expense of $500 per staff.
26,000 x $500 = $13 million, first year
49,800 x $500 = $24.9 million, subsequent years
Program/client performance monitoring system
Assume 815,000 annual public-tier clients in 1989.
Compromise scenario treats 443,100 more clients annually.
Estimate $25 per client for client reporting at intake, during treatment, and
at discharge.
Assume postdischarge follow-up performed on 25% of public clients.
Estimate $200 per client tracked and interviewed to perform follow-up
assessment after discharge.
(815,000 + 443,100) x [$25 + (0.25 x $200~1 = $94.4 million
Aggressive outreach to expectant mothers
Assume aggressive outreach to drug-using expectant mothers reaches 18,750
at $1,000 each plus 18,750 additional at $2,000 each.
18,750 x $1,000 + 18,750 x $2,000 = $56.3 million
Meat 37,500 expectant mothers
Assume half of recruited expectant mothers participate in 6 months of
therapeutic community treatment (currently $12,500 per year, funding
upgraded by 25%), and half get 6 months of outpatient treatment
(currently $2,500 per year, funding upgraded by 25%~.
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TREATING DRUG PROBLEMS
(18,750 x $12,500 x 1.25 + 18,750 x $2,500 x 1.25) / 2 =
$175.8 million
Children of mothers in residential programs
Same as under core option except 37,500 expectant mothers treated per
year.
[~28,600 x 1/4) + (66,000 x 1/4 x 0.106) + (37,500 x 1/2 x 1/2~]
x 0.225 x 2.5 x $6,000 = $61.7 million
Modest probation/parole induction
Increase daily treatment enrollment of probationers or parolees by 66,000
(equal to prior increase to admit waiting list).
Fund at new rate per client in treatment $5,000 per client in treatment,
or $1,860 per client treated.
Keep current mix of residential and outpatient treatment.
66,000 x $5,000 = $330 million
Modest prison treatment
Increase daily prison treatment enrollment by 25,000.
Fund at $3,125 per treatment year delivered in prison (assumed as equal
to annual funding of outpatient because residential costs are already
covered by prison).
25,000 x $3,125 = $78.1 million
One-time Capacitor ExpansionlImprovements
Residential capacity expansion
Increased length of stay requires additional 2,250 beds.
Waiting list expansion of 25% requires 7,000 beds.
Criminal justice system expansion also adds 25% (7,000 beds).
Expectant mothers expansion requires 9,375 beds.
Assume annual cost of $20,000 (see core estimates).
(2,250 + 7,000 + 7,000 + 9,375) x $20,000
Repair existing residential facilities
Same as under core option. $90 million
=
$512.5 million
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Repair easing outpatient facilities
Same as under core option. $118.1 million
Fain additional staff
265
Assume minimum of 26,000 staff in 1989.
Assume requirement for 23,750 additional staff, which equals 26,000 staff in
1989 divided by 275,000 clients in 1989 times 478,300 clients in future
times 1.1 for increase in staffing intensity.
Assume $2,000 per additional staff for first 10,000 (assumes most with some
prior experience or related training in drug problems) and $4,000 per
each additional staff (minimal or no closely related experience or
training).
10,000 x $2,000 + 13,750 x $4,000 = $75 million
APPENDIX 7B
MODELING FUTURE TREATMENT NEEDS AND EFFECTS
All of the strategy options presented here involve prospective resource
requirements and expenditures over the next three to five years. How
long such needs will last is a very important question, but unfortunately
there is no solid base on which to ground the answer. The goal of early
aggressive initiatives is obviously to reduce current and future problems
and requirements for drug treatment and enforcement expenditures in the
future.
Although there is evidence that drug treatment reduces the treated
individual's likelihood of future drug use and criminal activity, this evidence
must be incorporated into a systematic epidemiological model of drug
consumption across the population, considering factors that affect onset,
progression, duration, recovery, and relapse, as well as the respective
effects of prevention, enforcement, and treatment. A dynamic model
is required that predicts the potential need for treatment services over
time contingent on alternative public policies. One might hypothesize
that a "status quo" policy of limited availability of treatment with current
prevention and enforcement policies would produce a gradually increasing
need for treatment. "Legalization" of currently illicit drugs could result in
dramatic increases in the clinically defined need for treatment (although
legalization proponents contend this tendency to increase need would be
offset in terms of economic costs and perhaps clinical criteria as well
by reduced criminal activity). Intermediate anti-drug policies (treatment,
prevention, and enforcement) could be expected to progressively reduce the
need for treatment over time relative to the status quo of limited treatment
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TREATING DRUG PROBLEMS
availability. The alternative scenarios represent fears and desires regarding
the effectiveness of drug policy; what is required is sophisticated analysis
and modeling of the effects of different anti-drug policies on the number of
drug users, their legal and criminal behaviors, and their need for treatment.
Although rudimentary dynamic models of heroin and cocaine use have
been developed (Levin et al., 1975; Hunt and Chambers, 1976; Gardiner
and Schreckengost, 1987; Homer et al., 1988), no one has yet produced
a model that incorporates all drugs or simulates the effects of public
policy variables (prevention, treatment, and enforcement). Consequently,
the strategy options described earlier in this chapter must be considered
short- to medium-term estimates, and judgments about more distant future
requirements must be left in abeyance at present.
APPENDIX 7C
MEDICAID
Although the ADMS block grant has been the principal federal mech-
anism to support the public drug treatment system during the 1980s, the
public health insurance plans, Medicaid and Medicare, have devoted a
notable amount of resources and attention to drug treatment in recent
years. Coverage by Medicaid is the major alternative to grant and contract
mechanisms as the way to provide public coverage.
Medicaid is the major mechanism of public health care financing
for low-income people in the United States who by and large cannot
afford individual private health policies and do not hold jobs that include
employer-sponsored group plan coverage with the obvious exception of
the large group of people with low incomes who receive their primary
health coverage from Medicare.5 The Medicare population of 32 million
is mostly over 65 years of age and is relatively peripheral with regard to
the kinds of drug problems that most engage public concern. Therefore,
Medicare Is not a key element In considering public-tier funding.
5 In addition, certain large populations depend on health programs of the Department of Vet-
erans Affairs and the Department of Defense (DoD) for access to drug treatment. Generally,
the committee has not considered populations covered by the specialized programs of DoD
military personnel and dependent~as part of this study, except insofar as VA programs were
discussed earlier in this chapter.
6 To put the point more concretely, illicit drug abuse and dependence are not major cost factors
in Medicare, nor do Medicare clients figure prominently in the financing of drug treatment pro-
grams. In 1983, for example, there were 4,451 general hospital admissions of Medicare clients
with a primary diagnosis of drug dependence or abuse 0.04 percent of the 10 million annual
Medicare hospital admissions. (By comparison, there were 53,019 Medicare admissions with a
primary diagnosis of alcoholism [Ha~wood et al., 1985~.) In 1987, drug treatment programs of
all modalities reporting to states admitted only 1,300 clients aged 65 and older (Butynski and
Canova, 1988~.
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267
A few states now use Medicaid on a fairly extensive basis to support
drug treatment services, and it has some role in nearly all states. Enough
states increased their use of Medicaid during the 1980s that, according to
the NDATUS results, from 1982 to 1987 public third-party reimbursements
(which are primarily Medicaid) more than doubled. Yet despite the signifi-
cant use of Medicaid in a few states, there are powerful limitations on what
it now can and cannot do for the population without private insurance. To
see why, it is necessary to review briefly the way Medicaid coverage policy
is determined and its limitations with respect to eligibility and services.
Coverage Policy Determination Under Medicaid
Medicaid is a cooperative federal/state program regulated by federal
law but administered by state officials; under it the states have a great deal
of autonomy, including the simple option not to participate. The federal
government pays half or more of the costs of Medicaid program claims
in a state on a matching formula basis, with the match coming from state
appropriations. The match varies from 1:1 to 3:1 (federal:state funds),
depending on a mathematical formula that is set for each state based on
its poverty and income characteristics. The federal government sets certain
minimum requirements (in terms of whom a state must consider eligible
and what services and procedures its program must cover) for classification
as a "participating state," that is, to receive federal matching dollars.
Beyond these minima, states have substantial options to cover more
people or services on their own, and the federal government will continue
to match these expenditures on the same basis as the required coverage.
Federal regulations permit reimbursement of most services delivered in the
major drug treatment modalities, but they do not require states to cover
most of them. As a result, there is no consistency across states in who gets
covered for drug treatment or in what kinds of drug treatment services are
reimbursed.
In 1987 the NDATUS found that third-party public payments to re-
porting providers were $139 million, or nearly 11 percent of total reported
revenues (Table 7C-1~. Third-party public reimbursements included Med-
icaid, Medicare, and some payments by insurance programs for military
families using nonmilitary treatment services. It is probable that most of
the reported revenues were Medicaid dollars, among other reasons be-
cause the majority of these reimbursements were in just three states that
make significant use of Medicaid for drug treatment: New York Califor-
nia, and Pennsylvania, which accounted for nearly $90 million out of the
$139 million in revenues. (These states have quite different approaches,
however, and the large dollar flow in California is attributable to that
state's large size rather than to an unusual level of commitment to this
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TREATING DRUG PROBLEMS
financing mechanism.) Without more detailed information, which no one
has yet assembled, it is impossible to know to what extent different factors
account for the very large differences in state coverage, factors such as
eligibility requirements, the nature of services covered, the reimbursement
rates established by the different states, underlying needs for treatment,
and adequacy of alternative financing mechanisms.
Eligibility
The Medicaid system was the primary health insurance protection
during some part of 1986 for 20.6 million citizens under the age of 65
(Chollet, 1988; U.S. Department of Commerce, 1988~; in comparison, 32.4
million persons in this age group were estimated to be living in poverty (U.S.
Department of Commerce, 1988~. The reason for this evident gap is that,
although federal requirements hold that certain disadvantaged persons and
family configurations are categorically qualified for Medicaid coverage, the
states still have enormous discretion in setting the income-based standards
for eligibility within these categories.
All state plans must cover individuals who qualify for Supplemental
Security Income, which includes blind, permanently and totally disabled,
and aged (over 65) individuals with low annual incomes and total assets.
These standards qualified 6.3 million persons in 1986, of whom 3.1 million
each were aged and disabled, for reimbursement by Medicaid of services not
covered by Medicare. Probably the major significance of this population's
eligibility is that Medicare will not pay for nursing home care but Medicaid
will, and nursing home claims now account for more than two-thirds of all
Medicaid payments, limiting the capacity of this system to deal with other
kinds of health problems.
Most Medicaid beneficiaries (15.5 million) are eligible for Medicaid
assistance owing to their receipt of Aid to Families with Dependent Chil-
dren (AFDC), which is another federaVstate cooperative program. AFDC
eligibility is based on a categorical qualification plus an income standard
established by the individual states. It always covers single-parent families,
pregnant women, and young children in two-parent families provided their
household of residence has an income below a financial "standard of need"
that is usually configured in terms of a percentage of the federal poverty
line. States may at their option cover as "medically needy" categorically
eligible persons in households with incomes somewhat above the AFDC
standard (that is, individuals who cannot receive AFDC). But most states
have used their great latitude in establishing the standard of need to set the
income level of AFDC eligibility, and thus Medicaid eligibility, at a per-
centage somewhat if not substantially (e.g., 35 percent) below the poverty
line.
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269
TABLE 7C-1 Third-Party Public Revenues by State in 1987 as a Percentage
of Public State Total Revenues and of National Third-Party Public Payments
State Revenues Third-Party Public Payments
-
Third-Party Total Percentage of Percentage of
State ($000s) ($000s) State Total All National
Alabama 644 6,987 9.2 0.5
Alaska 16 3,366 0.5 0.0
Arizona 948 24,328 3.9 0.7
Arkansas 354 2,641 13.4 0.3
California 17,779 256,530 6.9 12.8
Colorado 3,753 18,458 20.3 2.7
Connecticut 1,797 20,832 8.6 1.3
Delaware 5 1,352 0.4 0.0
District of Columbia 17 7,306 0.2 0.0
Florida 2,446 61,729 4.0 1.8
Georgia 478 24,288 2.0 0.3
Hawaii 22 4,730 0.5 0.0
Idaho 5 1,429 0.3 0.0
Illinois 1,227 40,484 3.0 0.9
Indiana 1,092 17,391 6.3 0.8
Iowa 1,118 11,553 9.7 0.8
Kansas 498 6,443 7.7 0.4
Kentucky 1,161 7,745 15.0 0.8
Louisiana 1,880 13,967 13.5 1.4
Maine 245 3,459 7.1 0.2
Maryland 3,031 27,837 10.9 2.2
Massachusetts 642 20,300 3.2 0.5
Michigan 1,613 36,408 4.4 1.2
Minnesota 2,337 25,772 9.1 1.7
Mississippi 115 1,769 6.5 0.1
Missouri 500 15,103 3.3 0.4
Montana 9 1,786 0.5 0.0
Nebraska 146 4,725 3.1 0.1
Nevada 21 2,971 0.7 0.0
New Hampshire 196 5,637 3.5 0.1
New Jersey 788 32,797 2.4 0.6
New Mexico 610 6,363 9.6 0.4
New York 58,773 250,382 23.5 42.2
North Carolina 1,337 18,848 7.1 1.0
North Dakota 725 6,486 11.2 0.5
Ohio 6,209 59,123 10.5 4.5
Oklahoma 527 8,227 6.4 0.4
Oregon 223 10,918 2.0 0.2
Pennsylvania 14,190 69,845 20.3 10.2
Puerto Rico 0 10,127 0.0 0.0
Rhode Island 28 5,115 0.5 0.0
South Carolina 431 7,263 5.9 0.3
South Dakota 0 778 0.0 0.0
Tennessee 1,016 9,279 10.9 0.7
Texas 4,856 64,341 7.5 3.5
Continues on new page
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TABLE 7C- 1 (Continuedf
TREATING DRUG PROBLEMS
State Revenues
Third-Party Public Payments
Third-Party Total Percentage of Percentage of
State ($000s) ($000s) State Total All National
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
220
73
1,531
1,275
249
2,023
48
6,828
917
28,653
11,474
2,941
18,200
1,762
Total United States 139,227 1,308,013
3.2
8 0
5.3
11.1
8.5
11.1
2.7
0.2
0.1
1.1
0.9
0.2
1.5
0.0
10.6a 100.0
aThis figure is an average rather than a sum.
Source: Institute of Medicine analysis of the 1987 National Drug and Alcoholism Treatment Utilization Survey.
The federal statutes for Medicaid allow states the option of covering
certain additional individuals who do not fit the mandatory categories:
older children, two-parent intact families, single adults, and childless cou-
ples. Very few states have taken up these options, which would bring
Medicaid much closer to being a form of universal coverage for low-
income people. As a result, probably the largest segment of drug-abusing
and dependent individuals—young, single, adult males are categorically
ineligible for Medicaid.
Aside from eligibility as such, actual registration for Medicaid can be a
problem. In New York, where Medicaid standards are relatively inclusive,
drug treatment programs routinely check whether new clients are certified
or prima facie eligible for public assistance, which virtually ensures Medicaid
eligibility. Uncertified but eligible clients may complete application forms
(kept handy by admission units) at the time of initial program contact and
submit them by mail. In contrast, application for Medicaid coverage in
most states must be made in person at a central office.
Coverage Provisions
The federal guidelines for minimum benefits do not specifically deal
with drug treatment. Federally required Medicaid services primarily include
inpatient and outpatient hospital services and physician services. Although
these services are sometimes necessary to treat some kinds of drug prob-
lems and to deal with such sequelae or complications as trauma, AIDS,
and other infectious diseases, the primary components of drug abuse treat-
ment are psychosocial services (counseling, social work, psychotherapy),
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271
pharmacotherapy (medications such as methadone, buprenorphine, or de-
sipramine), and residency in a therapeutic milieu. Coverage for counseling
services, prescribed medications, and residential treatment outside of hos-
pital wards is not required but is left to the discretion of the states, along
with the rates at which these elements are reimbursable.
There is no systematic study available of state Medicaid coverage for
specific drug treatment services. A number of states do reimburse selected
types and amounts of relevant services, most commonly (based on the
committee's site visit information) physician examinations at admission (but
generally at a rate equal to a conventional outpatient office visit rather than
a multiphasic examination appropriate for an individual potentially severely
compromised by drug abuse or dependence), methadone prescription (but
generally at a rate that does not cover the cost of meeting federal regulations
to run a lawful maintenance clinicy, and services of psychiatrists or licensed
clinical psychologists (but not other counseling professionals). Emergency
hospitalization for drug overdoses is generally covered, but treatment in
residential programs is rarely reimbursed.
These selective reimbursements have been sufficient to allow a few
states with relatively wide eligibility and generous benefits, such as New
York, Pennsylvania, and Colorado, to draw on Medicaid as the source of
more than 20 percent of all provider revenues. (In New York, moreover,
public assistance-eligible clients in residential programs may also receive
reimbursement under the Home Relief and Food Stamps programs, which
helps to defray residential program expenses.) In many other states, how-
ever, drug treatment providers receive almost no Medicaid support.
The Current and Future Status of Medicaid Coverage
In theory, the Medicaid system could cover many drug-abusing and
dependent individuals because the clients served by the public tier are
mostly indigent and that population is the group Medicaid was designed to
serve. Yet the future role of Medicaid is undefined. In a few states, it is
an important underpinning of the treatment system; in others, its effect is
negligible. In the committee's judgment, if Medicaid is to assume a con-
sistent role across the board in financing the public tier of drug treatment,
federal legislation governing Medicaid must be materially altered so as to
address drug treatment needs. Such legislation should delineate eligibility
criteria, the kinds of services and providers eligible for reimbursement,
and minimum reimbursement levels.
Inhere are interesting precedents for Medicaid financing of drug treat-
ment. The AIDS crisis is leading to new federal and state initiatives that
extend Medicaid coverage to populations not previously included. In Cal-
ifornia, individuals diagnosed with AIDS or AIDS-related complex are
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TREATING DRUG PROBLEMS
categorically eligible for Medicaid coverage, whether or not they are eligi-
ble under other categories. If they quality in terms of the income criterion,
these individuals may receive Medicaid reimbursement for covered hospital
and physician services.
In a related precedent, many states are using their Medicaid systems
to disburse $30 million in federal formula grant funds for purchase of the
prescribed AIDS medication ANT. These one-time emergency grants had
no federal attachment to Medicaid, but many states have found it efficient
and convenient to use their existing Medicaid billing, administrative, and
disbursement systems to spend and document these funds, even though
the medication is purchased largely by individuals who are not otherwise
categorically eligible or are not recipients of Medicaid coverage. This
experience demonstrates that existing Medicaid reimbursement mechanisms
can be adapted to manage other reimbursements that are parallel to but
not part of Medicaid under present state criteria.
Finally, and most pertinently, recent legislation (P.L. 100 360) requires
states to provide Medicaid coverage to pregnant women and their infants
who meet or exceed the federal poverty level by up to 35 percent. This
provision is limited to health services related to pregnancy and to conditions
that threaten the well-being of the infant. Maternal drug abuse certainly
threatens the health of the infant, but whether this provision leads to the
induction of such women into appropriate forms of care remains to be
seen. The committee's recommendations regarding expanded outreach to
this population could be partially and increasingly over time supported
through Medicaid reimbursement for those eligible.
Representative terms from entire chapter:
public coverage
