Expanding Substance Use Disorder Coverage Would Cost Medicare $362M

September 01, 2022 - Adding Medicare coverage for substance use disorder (SUD) services for residential programs, intensive outpatient programs, and licensed and certified counselors would cost Medicare $362 million annually, according to a study conducted by RTI International and prepared for the Legal Action Center (LAC).

Around 1.7 million Medicare beneficiaries live with an SUD, but only 11 percent received treatment in any given year, additional research from RTI found. Currently, Medicare coverage for SUD treatment is limited and does not include all treatments, settings, or provider types.

The program excludes SUD treatment coverage in intensive outpatient programs, partial hospitalization, specialty addiction outpatient clinics, and residential addiction programs. Coverage is also unavailable for SUD treatments provided by licensed professional counselors and certified addiction counselors.

Researchers used data from the Substance Abuse and Mental Health Services Administration’s (SAMHSA’s) National Survey on Drug Use and Health (NSDUH) and 2019 census data for all fee-for-service Medicare beneficiaries to estimate the cost to Medicare of adding SUD coverage for residential programs, intensive outpatient programs, and allowing licensed and certified counselors to bill Medicare for SUD treatment.

Adding SUD residential coverage would cost Medicare $935 million per year, while coverage at intensive outpatient programs would cost $928 million per year, and covering SUD treatments from counselors would cost $66 million per year. In total, expanding SUD coverage would cost Medicare $1.9 billion annually.

This expansion would cover over 75,000 residential treatment episodes, 116,029 intensive outpatient episodes, and almost 59,000 visits with counselors.

However, expanding SUD treatment coverage would also save Medicare money as it would reduce spending on treating medical conditions caused by untreated SUD and lead to fewer SUD-related hospitalizations and emergency department visits.

Medicare would save almost $1.3 billion annually from reduced incidence of comorbid conditions and $217 million from reduced hospital and emergency department spending related to treating SUDs. This would lead to nearly $1.6 billion in annual savings for Medicare.

After considering the $1.9 billion increase in costs and the almost $1.6 billion in savings, expanding coverage for SUD services would cost Medicare $362 million annually. This accounts for around 0.04 percent of the total Medicare budget, the report noted.

“Our results are consistent with research in non-Medicare populations demonstrating that SUD treatment results in significant savings,” Tami L. Mark, PhD, a senior fellow at RTI and lead author of the study, said in a press release.

“Among Medicare beneficiaries, alcohol and drug use disorders can lead to falls and other injuries, dementias, cardiac conditions, infectious diseases, depression, and anxiety. Treatment can be lifesaving and restore social, emotional, and physical health. However, to be most effective, individuals need access to a full continuum of care that is tailored to their needs.”

Around 12 percent of Medicare beneficiaries are dually eligible for Medicaid, which typically provides coverage for residential and outpatient SUD services. Therefore, a portion of the $362 million increase represents a shift from Medicaid spending to Medicare spending, researchers noted.

However, an Urban Institute report found that adolescents enrolled in Medicaid who had SUDs were unlikely to receive treatment.

Even though expanding SUD coverage under Medicare would increase costs for the federal program, the change would be cost-effective as more Medicare beneficiaries would have access to SUD treatment.

In addition to widening Medicare coverage, leveraging telehealth services may help increase access to SUD treatment.

Data from Cigna found that virtual care can also help reduce healthcare costs for patients.