Cost of Substance Abuse to Healthcare System - Medicare | CASAColumbia

The Cost of Substance Abuse to America’s Health Care System; Report 2: Medicare Hospital Costs

The Cost of Substance Abuse to America’s Health Care System; Report 2: Medicare Hospital Costs

Published: May 1994

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This report is one in a series of reports evaluating the cost of addiction to America’s health care system. It focuses on costs of substance abuse to inpatient hospital services under Medicare.


This analysis involved a review of research studies, all meeting predetermined inclusion criteria that identified substance abuse (tobacco, alcohol or drugs) as a major risk factor for acquiring a given disease/condition. Based on this research, statistical analyses were conducted to evaluate the risk of a particular health condition that can be attributed to substance abuse or addiction, in whole or in part, and the cost of these conditions to Medicare programs. To determine the Medicare hospital costs for treating substance-abuse-related illnesses, CASAColumbia used Medicare data reported on the 1991 National Hospital Discharge Survey (NHDS).


In 1991, there were 2.2 million tobacco-, alcohol- or drug-related Medicare admissions, which accounted for 20% of all Medicare hospitalizations. Because these substance-abuse-related cases tended to be more expensive to treat than the average hospital case, the amount actually paid out by Medicare for substance-abuse-related care was even higher, accounting for 23% of the total Medicare payments for hospital care. 

Medicare spent over $13 billion of its $57 billion inpatient short-stay hospital expenditures on substance-abuse-related care. Nearly 1 out of every 4 Medicare dollars spent on inpatient hospital care and 1 out of every 5 Medicare hospital admissions were attributable to substance abuse. These amounts exceeded the 1 out of 5 dollars spent in the Medicaid program for substance-abuse-related conditions. Based on these results, it is estimated that for 1994, substance-abuse-related Medicare hospital costs will rise to $20 billion.


The report found that any health reform that hopes to offer care to all Americans at a reasonable cost must mount an all-fronts attack on all substance abuse—involving both legal and illegal drugs. It recommends that preventing diseases that result from substance abuse and prolonging a healthy life for the elderly could be much more potent weapons against rising Medicare expenditures than the multitude of other, more frequently discussed cost-containment measures or benefit  deductions. It further states that debating the broader issues surrounding health care reform without either acknowledging the impact of substance abuse or including the prevention and treatment of this problem as an integral part of that reform will be a costly mistake.

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