Medicaid Substance Abuse Treatment Spending: Findings Report


Medicaid Substance Abuse Treatment Spending: Findings Report

Executive Summary

Ellen Bouchery, Rick Harwood, Rosalie Malsberger, Emily Caffery, Jessica Nysenbaum, and Kerianne Hourihan

Mathematica Policy Research

September 28, 2012

This report presents the findings of a study conducted by Mathematica Policy Research to improve knowledge about the data on Medicaid substance abuse (SA) treatment available in the Medicaid Analytic eXtract (MAX), develop methods for using these data to estimate Medicaid SA treatment spending, and generate estimates of Medicaid SA treatment spending in calendar year (CY) 2008 and projections for fiscal year (FY) 2011.

The estimates in this study were developed based on MAX data. However, there are gaps in representation of the Medicaid population in MAX. The most significant gap is incomplete reporting of services provided to managedcare enrollees. In addition, data quality issues, reporting anomalies, and inconsistencies in reporting account for other data gaps. We addressed these gaps by imputing expenditures for the managed care enrollees and other populations for whom fee-for-service (FFS) claims data were not available.

This study produced two sets of findings. The first set focuses on a limited number of states for whom FFS SA treatment claims representing a majority of the Medicaid population in the state were available in MAX. The second set of findings reports national estimates of SA treatment expenditures for CY 2008 and projections to FY 2011. A summary of each of these sets of findings is presented here.

SA Spending in the FFS States

Across the 18 states with representative FFS data in MAX, spending on SA services accounted for less than 1 percent of total Medicaid spending. On average, these states spent $6.16 per Medicaid enrolled month 12 or older on medical services to treat a SA diagnosis. There was extreme variation across states in the average amount spent on SA treatment services, from less than $3 per enrolled month to over $26. This variation appears to be linked to differences between states in the supply of specialty SA treatment providers as well as to Medicaid program decisions regarding coverage of optional populations and optional benefits. States that have chosen to expand Medicaid coverage to optional adult populations, or to cover optional SA treatment services such as residential treatment programs and case management, tend to have higher average spending.

Despite mandatory coverage of SA treatment services for children through the early and periodic screening, diagnostic, and treatment benefit, across all 18 states, adolescents 12-17 represented only 18.1 percent of SA treatment expenditures, with males incurring twice the expenditures of females. Working age adults ages 18-64 represented 75.0 percent of SA treatment expenditures, with 38.9 percent of expenditures for females and 36.1 percent for males. Enrollees 65 or older represented 6.7 percent of expenditures, with males having more than double the expenditures of females.

About half of all SA spending in these states was for outpatient services, which were used by almost 90 percent of beneficiaries with a SA diagnosis. The next highest share of spending was 35.2 percent for inpatient hospital care. Prescribed drugs and residential treatment represented 5.4 percent and 7.5 percent, respectively.

Overall, 21.4 percent and 62.4 percent of enrollees with an SA diagnosis identified in CY 2008 MAX data used the emergency room with an SA-related or any diagnosis, respectively. Among the same group 33.6 percent had a SA-related inpatient hospital stay. Overall expenditures for enrollees with an identified SA diagnosis were 2.19 times higher than the average for Medicaid enrollees 12 or older.

National SA Spending Estimates

Medical expenditures to treat a SA disorder were 3.4 billion in CY 2008 (Table ES-1). These services were received by 1.1 million persons (Table ES-2) averaging 3,000 per service user per year. This spending amounted to slightly less than 1.0 percent of the total 334 billion spent on Medicaid, and provided care to about 1.9 percent of the 61 million persons covered by Medicaid.1 An estimated total of 2.0 billion--or 59 percent--of these expenditures were provided through FFS Medicaid, with the remaining 1.4 billion provided through Medicaid managed care plans. The Federal Government paid for 57 percent of these services.

TABLE ES-1. Medicaid Substance Treatment Spending, CY 2008 and FY 2011
Type of SA Service CY 2008
  (in millions $)  
FY 2011
  (in millions $)  
  Annualized Percentage  
Growth Rate
Core SA Treatment Services 3,367 3,952 6.0
Fetal Drug or Alcohol Exposure and Poisoning 87 98 4.6
Other Medical Conditions 100% Attributable to SA 257 292 4.8
MH Services with SA as a Secondary Diagnosis 1,432 1,586 3.8
Non-MH Services with SA as a Secondary Diagnosis   3,290 3,659 3.9

Spending is projected to have increased to 4.0 billion in federal FY 2011, just slightly slower than the increase in total Medicaid spending, which reflects the long-term correlation between SA treatment and total Medicaid spending.

TABLE ES-2. Medicaid Substance Treatment Users, CY 2008
Type of SA Service CY 2008
  (in thousands)  
Core SA Treatment Services 1,138
Fetal Drug or Alcohol Exposure 35
Poisoning Related to Drugs or Alcohol 25
Other Medical Conditions 100% Attributable to SA 53
MH Services with SA as a Secondary Diagnosis 281
Non-MH Services with SA as a Secondary Diagnosis 575
Total Enrollees Identified with SA Related Claima   1,717
  1. Rows above do not sum to this total because some users are identified on more than one type of claim.

Beyond the medical expenditures to treat SA disorders, this study estimated additional categories of costs solely or partially attributable to SA disorders. While these costs are not included in the national SA treatment expenditures, estimated by the Substance Abuse and Mental Health Services Administration (SAMHSA) and known as the SAMHSA Spending Estimates (SSE), such costs generally are included in cost-of-illness studies of drug and alcohol disorders. Costs solely due to drugs and alcohol include fetal exposure to alcohol and/or drugs (49 million, 35,000 persons); alcohol and/or drug poisoning (38 million, 25,000 persons); and other drug and/or alcohol-caused disorders (257 million, 53,000 persons). Much more extensive costs were caused partially by drug/alcohol disorders: mental health (MH) disorders with a co-morbid SA diagnosis (1.4 billion and 282,000 persons) and other health disorders with a co-morbid SA diagnosis (3.3 billion and 575,000 persons). Only a small fraction of these latter costs are due to drug/alcohol disorders, as these expenditures are related primarily to other conditions.


The data quality behind these estimates is reasonably strong. SA treatment utilization data were available for 58 percent of Medicaid enrolled months. The data were missing primarily due to non-reporting of services for Medicaid managed care enrolled months. Utilization and expenditures for the 42 percent of enrolled months with missing data were imputed based either on data from the same state for FFS-insured beneficiaries or the average of data from 18 states with very complete reporting. Imputations were adjusted for age, gender, disability status, Medicare enrollment, and the availability/supply of SA treatment service in the state. Each of these factors was a strong and statistically significant predictor of per-capita utilization of and spending on SA treatment. The imputations represented 42 percent of the final estimates spending on medical treatment for SA disorders.

The estimate of Medicaid core SA treatment spending developed in this study for CY 2008 differs from the projected Medicaid SA treatment spending developed by SAMHSA in the SSE projections for 2004 to 2014.2 While no CY 2008 data point is displayed in the earlier SAMHSA study, it did project the 2006 level of Medicaid spending for SA treatment to be $4,279 million while this study indicates the spending as of 2008 to be $3,267 million. While the current study is limited because of the level of imputations, the SSE estimates were limited because data on unit prices and the "payer source" distribution for specialty SA treatment providers were unavailable to support development of the SSE after 1998--prior to the SAMHSA Survey of Revenue and Expenditures in 2009.

The core SA treatment estimates from this study parallel the estimates from the SSE including only services with a primary diagnosis of SA treatment. However, in this study we also examined spending on treatment for other medical conditions that are caused by SA. The addition of services with a primary diagnosis of fetal exposure, poisoning, and other medical conditions fully related to SA increased the estimate of expenditures for SA treatment by about 10 percent. In contrast to the SSE, this study also estimated spending on services with a secondary diagnosis of SA. We identified $1,433 million in expenditures for MH services with a secondary diagnosis of SA and $3,290 million in Medicaid expenditures for services with a non-MH primary diagnosis and a SA secondary diagnosis. Thus, overall slightly more than 1 percent of Medicaid spending was identified as primarily related to SA and an additional 1½ percent of total Medicaid spending was identified with a secondary SA diagnosis. Both the current study and the SSE exclude costs not directly related to treatment, such as costs stemming from lower productivity, missed workdays, and/or SA-related crimes.


  1. Total Medicaid expenditures and enrollment are based on federal FY 2008 as reported by the Centers for Medicare and Medicaid Services at

  2. Levit, K.R., C.A. Kassed, R.M. Coffey, T.L. Mark, D.R. McKusick, E. King, R. Vandivort, J. Buck, K. Ryan, and E. Stranges. Projections of National Expenditures for Mental Health Services and Substance Abuse Treatment, 2004-2014. SAMHSA Publication No. SMA 08-4326. Rockville, MD: SAMHSA, 2008.

The Full Report is also available from the DALTCP website ( or directly at