Two decades ago, the cost of providing addiction treatment was split about evenly between private and public payers, but today taxpayers foot the bill for more than three-quarters of all treatment, according to a new report.

A study funded by the Substance Abuse and Mental Health Services Administration (SAMHSA) found that 77.4 percent of treatment in 2003 was paid for by Medicaid, Medicare, and other federal, state and local sources, up from 50.4 percent in 1986. Meanwhile, the private sector's share of the treatment cost burden slipped from 49.6 percent in 1986 to 22.6 percent in 2003.

Private insurers, who paid 29.6 percent of treatment costs in 1986, were only paying 10.1 percent by 2003. Total dollars paid by private insurers for addiction treatment fell from $2.8 billion to $2.1 billion during the same time period.

Fewer patients were paying for treatment out of their own pocket, as well: in 1986, 13.8 percent of treatment was self-paid, but that fell to 8 percent in 2003.

The findings are in line with a 2004 study by Medstat that showed a decline in addiction benefits utilization among privately insured workers as well as falling treatment expenditures by insurers between 1992 and 2001, said Ronald J. Hunsicker, president and CEO of the National Association of Addiction Treatment Providers (NAATP).

"It does represent significant cost-shifting," he said of the latest report findings. "You can't explain it in terms of changes in incidence of the disease, so the only way to explain it is that the private sector is shifting the burden to the public sector."

Alexa Eggleston, director of national policy for the Legal Action Center, which represents public-sector provider groups, added, "Given that over 40 states have enacted laws requiring some form of coverage for addiction treatment in insurance plans, we need to ask why the laws are not being enforced in most states, and why no one is being held accountable for delaying and in some cases denying treatment," which she said results in "unnecessary deaths, increased costs to the criminal justice and emergency health care systems, and an increased reliance on public dollars to provide desperately needed care." 

Rick Harwood, vice president of the Lewin Group, said that while the "magnitude of [the study findings] is just stunning," he stressed that the trend could be attributed in part to the justifiable cuts in spending on costly hospital-based care in the late 1980s and early 1990s.

"There are appropriate cost savings in the private sector, and I don't want to exaggerate and say [managed-care firms] have slashed and burned," said Harwood. "A lot of this is wringing out of money that was being spent inefficiently."

During the study period, public-sector expenditures on addiction treatment rose an average of 7.5 percent annually. States paid the largest share of treatment costs: 58 percent. "One factor that may be driving this growth is an increase in substance abuse treatment mandated and paid for by correctional institutions -- which generated 36 percent of referrals to specialty substance abuse facilities in 2004," according to a news release on the study.

Harwood added that reluctance among employees to use their health benefits to pay for treatment -- driven by fear of exposure -- also plays a big role in cost-shifting from the private to public sectors. He added, however, that "no one has done a good cost-shifting analysis" on addiction treatment, and that it would be worthwhile to study spending trends that have occurred in the years since the "wringing out" of most hospital-based care took place.

Researchers found that while investment in outpatient care was rising, spending on inpatient care declined about 1.2 percent per year from 1986 to 2003. Total spending on addiction treatment rose 4.8 percent annually, the report noted, while overall healthcare spending rose 8 percent during the same time period. "I don't think there's any evidence to suggest that the outcomes would be different if we had a way to look at the last four years," said NAATP's Hunsicker.

The costs of healthcare are built into the prices that consumers pay for goods and services, added Hunsicker, so taxpayers are being hit twice when treatment costs are shifted to the public sector. "We're already paying for benefits on the private side, but people can't access [treatment]," Hunsicker said. "That's why we need to get a parity law passed and a patient's bill of rights."

Pamela Greenberg, president and CEO of the Association of Behavioral Health and Wellness -- a trade group for the behavioral managed-care industry -- also sees parity as a possible remedy.

"I think that some of the decrease in the proportion of costs paid by private insurance is a direct result of the decline in the percentage of premiums that goes toward behavioral health," she told Join Together. "The latest numbers I've heard is that behavioral health receives a mere 1 to 2 percent of the entire health care premium. I also suspect that some employers have purchased health insurance policies that may place more restrictions on the substance-use insurance benefit."

The study was conducted by researchers from SAMHSA, Thomson Healthcare, and The Lewin Group. It was published in the July/August 2007 issue of the journal Health Affairs.