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Does treatment 'pay for itself'?

May 1, 2006
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Looking at the economic argument for addiction treatment

One of the greatest challenges in the field of substance abuse is not developing the technology to treat alcohol and drug addictions but identifying funding sources for treatment programs. Even though successful addiction treatment can have an important impact on people's lives, funding for substance abuse treatment competes with other worthwhile uses of limited resources. Programs are more likely to be funded if they can be shown to “pay for themselves” through reductions in other types of costs.

The costs associated with substance abuse are well known:

  • increased rates of crime, accidents, and infectious diseases such as HIV/AIDS, hepatitis, and tuberculosis

  • increased burden on the criminal justice system and social programs such as unemployment, welfare, Medicaid, disability, and food stamps

  • greater use of emergency room and hospital services

  • exacerbation of certain mental disorders

  • impaired work productivity

The question therefore is whether investment in treatment can reduce the costs of substance abuse sufficiently to represent a net benefit to society.

Although research suggests that substance abuse treatment is associated with net benefits, early studies were subject to certain limitations, including:

  • the inability to compare the benefits of treatment with the costs

  • small sample sizes

  • potential lack of generalizability to the “real world”

  • inability to measure a comprehensive array of social costs

  • the data's age

Fellow researchers and I sought to address some of these limitations by analyzing data from the California Treatment Outcome Project (CalTOP) to address the issue of whether the benefits of substance abuse treatment outweigh the costs.1

CalTOP Analysis

CalTOP was a large demonstration project that collected outcomes data on clients admitted to 43 substance abuse treatment providers in 13 counties in California.2 Surveys were administered to clients at treatment intake and at three and nine months postintake. Survey data on the use of emergency room and hospital services and income received from various sources were linked to information on the patient's mental health services use and criminal activity from government databases. Data on substance abuse treatment costs were collected from 31 of the CalTOP providers using the DATCAP form (

We compared the direct cost of substance abuse treatment with the associated monetary benefits during the nine months following treatment intake. Treatment costs were calculated by multiplying the number of days the client spent in each modality (outpatient, residential, methadone maintenance) by the average per diem cost for that modality and adding them up. Monetary benefits were measured as the increase in employment earnings and reductions in the cost of medical care, mental health services, and criminal activity associated with the client's entrance into substance abuse treatment (a pre/poststudy design). Crime costs included the direct cost of days incarcerated and the victimization, law enforcement, and court costs of all crimes for which the person was arrested. Changes in unemployment, disability, retirement, and welfare income were examined separately. The unit costs (prices) assigned to healthcare services and criminal offenses were derived from a variety of sources.1

The main analyses were based on 2,567 clients who entered substance abuse treatment between April 2000 and May 2001 and were followed for nine months. On average among these patients, substance abuse treatment cost $1,583 and was associated with a monetary benefit to society of $11,487, representing a greater than 7:1 ratio of benefits to costs. The savings were primarily because of reductions in crime ($1,788 in incarceration costs and $5,676 in victimization and other crime-related costs) and increases in employment earnings ($3,352). A small reduction in emergency room use ($223) and a slight increase in welfare payments ($101) were also found, but associations of substance abuse treatment with hospital inpatient care, mental health services, and other government program costs were small and nonsignificant. Our conclusions appeared to be quite robust, based on a variety of sensitivity analyses.

For clients whose initial treatment modality was residential or outpatient, ratios of benefits to costs were nearly 6:1 and 11:1, respectively. (We were unable to estimate this ratio with sufficient precision for methadone maintenance patients because of the small subsample size.) Average monetary benefits were higher for those starting treatment in a residential setting ($16,257 versus $9,049 for those starting treatment as outpatients), but average treatment costs were also higher ($2,791 versus $838). Caution must be exercised in comparing across modalities, however, as the patients treated in each modality have different characteristics and treatment needs, and many of the patients used more than one modality during their treatment episode. Thus, one cannot infer that it would be more cost-effective to switch all patients to the treatment modality with the highest ratio of benefits to costs.