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The Economic Burden of the Opioid Epidemic on States: The Case of Medicaid
Douglas L. Leslie, PhD; Djibril M. Ba, MPH; Edeanya Agbese, MPH; Xueyi Xing, PhD; and Guodong Liu, PhD
Considering the Child Welfare System Burden From Opioid Misuse: Research Priorities for Estimating Public Costs
Daniel Max Crowley, PhD; Christian M. Connell, PhD; Damon Jones, PhD; and Michael W. Donovan, MA
The Opioid Epidemic, Neonatal Abstinence Syndrome, and Estimated Costs for Special Education Services
Paul L. Morgan, PhD; and Yangyang Wang, MA
Opioid Misuse, Labor Market Outcomes, and Means-Tested Public Expenditures: A Conceptual Framework
Joel E. Segel, PhD; Yunfeng Shi, PhD; John R. Moran, PhD; and Dennis P. Scanlon, PhD
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Preventing the Next Crisis: Six Critical Questions About the Opioid Epidemic That Need Answers
Dennis P. Scanlon, PhD; and Christopher S. Hollenbeak, PhD
Beyond Rescue, Treatment, and Prevention: Understanding the Broader Impact of the Opioid Epidemic at the State Level
Laura Fassbender, BPH; Gwendolyn B. Zander, Esq; and Rachel L. Levine, MD
The Cost of the Opioid Epidemic, In Context
Sarah Kawasaki, MD; and Joshua M. Sharfstein, MD
The Opioid Epidemic: The Cost of Services Versus the Cost of Despair
Alonzo L. Plough, PhD, MPH

The Economic Burden of the Opioid Epidemic on States: The Case of Medicaid

Douglas L. Leslie, PhD; Djibril M. Ba, MPH; Edeanya Agbese, MPH; Xueyi Xing, PhD; and Guodong Liu, PhD
The societal burden of opioid use disorder (OUD) is considerable and contributes to increased healthcare costs and overdose deaths. However, the burden is not well understood. The purpose of this analysis is to estimate the state Medicaid programs’ costs for treating OUD and how these costs have changed over time. We used data from the Medicaid Analytic eXtract files from 17 states between 1999 and 2013 to examine the healthcare costs associated with OUD. Inpatient, outpatient, and prescription medication costs related to the treatment of OUD were included, as were excess costs for other healthcare services (eg, general medical care) for individuals with OUD relative to a comparison group of individuals without OUD matched on age, sex, and state. We then extrapolated our results to the entire US Medicaid population using population-based sample weights. All costs were adjusted for inflation and are reported in 2017 US dollars. During our study period, the number of patients who were diagnosed with OUD increased 378%, from 39,109 (0.21% of total Medicaid enrollment) in 1999 to 186,979 (0.60% of total Medicaid enrollment) in 2013 in our 17-state sample. Even after adjusting for inflation, total Medicaid costs associated with OUD more than tripled during this time, reaching more than $3 billion in 2013, from $919 million in 1999. Most of this growth was due to excess non-OUD treatment costs for patients with OUD, which increased 363% over the period; the rate of growth is triple the expenditures for OUD treatment services. When the results were extrapolated to the entire United States, the Medicaid costs associated with OUD increased from more than $2 billion in 1999 to more than $8 billion in 2013. The total cumulative costs that were associated with OUD for this extrapolated 50-state sample over a 15-year time period amounts to more than $72.4 billion. OUD imposes considerable financial burden on state Medicaid programs, and the burden is increasing over time.
Am J Manag Care. 2019;25:-S0

The opioid epidemic is a public health crisis that affects all levels of society. As the prevalence of opioid use disorder increases, the associated costs also rise. In this study, we focus on the costs to state Medicaid programs as they pertain to the opioid epidemic.

We used data from the Medicaid Analytical eXtract (MAX) files from 17 states that had complete data from 1999 to 2013 to examine the costs to state Medicaid programs associated with opioid use disorder (OUD). We included inpatient, outpatient, and prescription medication costs related to the treatment of OUD, as well as excess costs for other healthcare services (eg, general medical care) for individuals with OUD relative to a comparison group matched on age, gender, and state. We examined the changes that occurred over the study period in Medicaid enrollees with OUD and the total costs to Medicaid for these individuals. Finally, we extrapolated our results from the 17 states in the sample to the entire United States Medicaid population. All costs were adjusted for inflation and are reported in 2017 US dollars:
  • Although several studies have examined healthcare costs that are attributable to OUD, few have explicitly taken the perspective of state Medicaid. Results from previous studies indicate that the total state Medicaid spending on substance use disorder services, the medications used to treat OUD, and the treatment of newborns with prenatal exposure to opioids is considerable.
  • In our 17-state sample, the total Medicaid costs associated with OUD have more than tripled between 1999 and 2013, reaching more than $3 billion in 2013. After extrapolating these results to all 50 states, state Medicaid costs associated with the opioid epidemic totaled more than $8.4 billion in 2013.
  • Although the cost of OUD treatment increased over time, most of the growth was driven by the rise in costs for other healthcare services. By 2013, costs for other healthcare services comprised 70.1% of total Medicaid costs associated with OUD, compared with 52.4% in 1999.
  • Further research is needed to determine what factors have contributed to the increase in state health insurance costs that are attributed to OUD.

Summary Of Background 

Prevalence and Economic Impact of Opioid Use Disorder

OUD affects 2.5 million Americans1 and is prevalent across all age groups and backgrounds. It has contributed to increasing injection drug use as well as the spread of infectious diseases, such as HIV and hepatitis C.2-4 The growth of OUD has resulted in increases of healthcare costs and of opioid overdose deaths.5 Estimates of overall societal costs (ie, healthcare, criminal justice, and workplace costs) associated with OUD have risen from $11.8 billion in 2001,6 to

$55.7 billion in 2007,7 and $78.5 billion in 2016.8

Individuals with OUD are more likely than those without OUD to use medical services, such as physician outpatient visits, emergency department (ED) services, and inpatient hospital stays.9 They also have a higher prevalence of comorbid conditions, such as other substance use disorders, psychiatric disorders, and pain-related diagnoses.10 Hospitalization rates for patients with OUD have more than doubled, from 117 admissions per 100,000 in 1993 to 296 admissions per 100,000 in 2012.11 The Agency for Healthcare Research and Quality estimates that OUD-related ED visits have grown at a rate of 8% per year since 2005,12 while the rate of overdose deaths involving opioids increased 200% between 2000 and 2014.13 Undiagnosed OUD is also expensive, with estimated costs equal to 80% of the costs of diagnosed OUD.14

Medicaid beneficiaries are at a greater risk for substance use disorders, including OUD,10 with approximately 12% of beneficiaries aged between 18 and 64 years diagnosed.15 Medicaid beneficiaries also have 50% to 100% higher rates of mental and substance use disorders compared with the general population.16 These rates exceed those of other insurance groups.16 Results of a Kentucky study found that 60% of Medicaid recipients with chronic pain both used illicit drugs and misused prescription drugs.17 In addition, Medicaid pays an estimated mean cost of $18,511 per OUD-related ED visit.18 Because Medicaid also pays for one-fourth to one-third of all OUD treatment episodes,19,20 costs are a critically important component of the current opioid crisis in the United States.

Cost of Medication-Assisted Treatment for Opioid Use Disorder

Treatment options for OUD include medication and counseling. Medication-assisted treatment, a combination of medications and counseling, is associated with fewer relapses than medication alone.21,22 Medications used to treat OUD include methadone, buprenorphine, and naltrexone (the long-acting injectable form of naltrexone, Vivitrol, is most common). Buprenorphine, an opioid agonist, is associated with a high cost and limited prescribing capacity.23 Wen et al examined whether the Medicaid expansion of 2014 and the increased prescribing capacity affected buprenorphine use that is covered by Medicaid. The authors found that the expansion was associated with a 70% increase in Medicaid-covered buprenorphine prescriptions and a 50% increase in buprenorphine spending.23 Additionally, although the expansion greatly improved access to OUD medication therapy, it also increased Medicaid expenditures for OUD treatments.23

Almost one-third of patients who receive treatments for substance use disorder are covered by Medicaid.24 Medicaid expenditures related to substance use disorders rose from 9% of the total spending on substance use disorders in 1986 to 21% in 2009.25 In 2009 alone, Medicaid accounted for 21% of the $24 billion that health insurers spent treating substance use disorders,25 although this amounted to slightly less than 1% of total Medicaid spending.26 Between 2011 and 2016, Medicaid spending on buprenorphine, naltrexone, and naloxone (a medication that blocks the effects of opioids and is used in overdose situations) increased 136%, from $394.2 million to $929.9 million.27 An estimated 14.6% of people with OUD received medication therapy in 2014.28 With the annual excess healthcare costs for individuals with OUD ranging from $5874 to $15,183,9 the already high costs of treating individuals with OUD will likely continue to grow, and the burden on Medicaid will likely continue to increase.

Pregnancy, Delivery, Maternal, and Child Outcomes Related to Opioid Use

Prenatal exposure to opioids also poses physiological risks and complications for newborns, such as cleft lip and palate, low birth weight, preterm labor, placental abruption, and neurological problems.29,30 Infants exposed to opioids prenatally have a 50% to 80% chance of developing neonatal withdrawal,31-33 known as neonatal abstinence syndrome (NAS). The opioid epidemic has caused NAS to become a public health challenge, with a 5-fold increase in the incidence of NAS between 2000 and 2012.34-37 This increase in incidence accounts for an estimated $1.5 billion in annual hospital expenditures across the United States.34,37 Although state Medicaid programs provide 78% of medical coverage for pregnant women34-36 and 77.6% of NAS costs are attributed to state Medicaid programs,38 we do not examine these costs in this paper, but instead leave them for other companion articles in this special issue (see pages S264 and S270).39,40

Based on this literature, it is clear that state Medicaid programs bear a particularly large economic burden of the opioid epidemic. In 2015, Medicaid covered 3 of 10 people with OUD.5 With a higher rate of mental and substance use disorders, the Medicaid population is more vulnerable to OUD. The magnitude of this burden and how it has changed over time, however, has not been well documented. The objective of this study was to use data from the Medicaid programs in multiple states over several years to document the economic burden of OUD on state Medicaid programs nationally.

Conceptual Framework

Based on the literature and the various components that make up OUD expenditures, we developed the following framework to describe how OUD could drive up state Medicaid expenditures. Although some states may have other programs that provide treatment for OUD, the current study focuses only on state Medicaid programs. As illustrated in Figure 1, patients with pain conditions may begin using prescribed opioid medications. As patients continue using their medications, they may become addicted and switch to heroin as access to additional opioid pain medications becomes more difficult; their medications may be intentionally or unintentionally diverted to other people. All of these paths end with a diagnosis of OUD. Often, treatment for individuals with OUD is initiated in the ED and leads to further healthcare service use that is reimbursed by health insurance. In the conceptual model, insurance-covered treatments for OUD consist of inpatient services (eg, hospitalizations and residential rehabilitation services), outpatient services (eg, counseling services), and prescription medications (ie, methadone, buprenorphine, and naltrexone). Because the perspective of the cost analysis is that of the state, we include only state expenditures and do not include patient out-of-pocket payments.

Below, we estimate the costs to state Medicaid programs, which provide the bulk of care for OUD, that are attributable to the opioid epidemic. Expenditures associated with OUD have 2 components. First, we identify all inpatient, outpatient, and prescription medication services that have an associated diagnosis code or Food and Drug Administration indication corresponding to OUD. Then, we add the Medicaid expenditures for these services to derive the total cost of OUD treatment to the state Medicaid program. Because individuals with OUD may be more likely to have other health problems, such as infections, injuries/accidents, and poor control of chronic conditions (eg, diabetes or hypertension), we also compare the total Medicaid healthcare expenditures for individuals with OUD with an age-, sex-, and state-matched comparison group of patients who do not have a diagnosis of OUD. This approach allows us to capture both the expenditures directly related to OUD treatment and the expenditures associated with other poor health outcomes that may be related to OUD.

Gross Cost Estimates

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