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Using Cost Offsets to Fund Chemical Dependency Treatment to the Working Disabled Population: The Washington State Experience

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Presented at the National Academy for State Health Policy's 20th Annual State Health Policy Conference in Denver, Colorado. Author: Doug Allen

Presented at the National Academy for State Health Policy's 20th Annual State Health Policy Conference in Denver, Colorado. Author: Doug Allen

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Using Cost Offsets to Fund Chemical Dependency Treatment to the Working Disabled Population: The Washington State Experience Using Cost Offsets to Fund Chemical Dependency Treatment to the Working Disabled Population: The Washington State Experience Presentation Transcript

  • Using Cost Offsets to Fund Chemical Dependency Treatment to the Working Disabled Population The Washington State Experience Doug Allen Director, Division of Alcohol and Substance Abuse State of Washington October 15, 2007 1
  • Using Cost Offsets to Fund Chemical Dependency Treatment Expansion Overview Problem – Resources: Costs to other systems • Solution – Treatment reduces medical costs and crime • Cost offsets defined • Cost offsets – Where to look • Measuring cost offsets • Questions during the budget cycle • Lessons learned • Postscript on the Washington State Experience • 2
  • Using Cost Offsets to Fund Chemical Dependency Treatment Expansion Problem – Resources: Costs to Other Systems For the past 10 years, we’ve been treating only 1 in 4 Adults  on Medicaid known to have an alcohol or drug problem 13.6% 10.8% The Consequences: Need for alcohol/drug treatment  has increased in the low income adult population 1993-94 2003 3
  • Consequences: The bill keeps going up Substance Abuse Problems  Substance abusing clients have alarming arrest rates 24% 1 in 5 working age disabled WORKING AGE Clients with clients – 28,000 people – have DISABLED Identified a substance abuse problem Arrested Substance indicated by: Past Year Abuse Problem 8X Diagnosis of substance  abuse, dependence, or Higher psychosis in medical claims Drug-related arrest  3% Received services from the  Division of Alcohol and Substance Abuse No Substance Abuse Identified SOURCE: Department of Social and Health Services, Research and Data Analysis Division. 4
  • Consequences: The bill keeps going up Every year the arrested individuals add an estimated $84 million in criminal justice and victim costs Criminal Justice costs include: Victim  Police, sheriff Costs  Local jail Criminal $30 million  Courts, prosecution Justice  Corrections Costs  Community supervision $54 million Victim costs include:  Monetary costs  Quality of life SOURCE: Washington State Institute for Public Policy arrest cost model. The $84 million is the estimate of the present value of life cycle costs of crimes resulting in an arrest by DSHS working age disabled clients with AOD problems in FY 2002. Client arrest data from the Washington State Patrol arrest database. 5
  • Solution - Treatment Reduces Medical Costs and Crime AOD Treatment Reduces Crime in Our Communities Treatment . . . Reduces the risk of an arrest by  16% Treatment . . . Reduces the risk of a felony conviction by  34% INCLUDES persons who were SSI eligible at least one month between July 1997 and December 2001, and who had a record of an arrest or a conviction in the two years prior to the beginning of the follow-up period. EXCLUDES clients who died before the end of the 12-month follow-up for arrests or the 18-month follow-up for convictions. SOURCE = SSI Cost Offset Project database (RDA). TOTAL CLIENTS = 8,213. 6
  • Solution - Treatment Reduces Medical Costs and Crime AOD Treatment Reduces Emergency Room Costs Treatment Effect Per Person Per Month 35% Our research shows Untreated  $442 REDUCTION the number of visits to ER COST OFFSET the ER are reduced as – $154 well Average Per Client Per Month And we have evidence  Treated of savings in other $288 medical and social services costs 0 n = 8,881 n = 7,153 SOURCE: Department of Social and Health Services, Research and Data Analysis Division. 7
  • Solution - Treatment Reduces Medical Costs and Crime GOAL: Reduce the burden of substance abuse on our criminal justice, medical and social service systems Q: Who’s covered? Medicaid and GA-Unemployable adults  24% NOW: 0% 20% 40% 60% 80% 100% 60% 40% FY 2007: FY 2006: Q: The Cost? $53 million for treatment expansion, paid for by savings  in other areas of the DSHS budget – primarily reductions in medical and long-term care SOURCE: Department of Social and Health Services, Research and Data Analysis Division. 8
  • What are cost offsets? Cost offsets are savings that arise when a treatment causes reduced expenditures in other dimensions of care “Prevention” effects – e.g., reduced risk of hospitalization • Service substitution • Net or gross cost offsets? The “net cost offset” is the difference between the cost of the • intervention (e.g., CD treatment) and the savings generated by the intervention (e.g., reduced use of other Medicaid services) Partial or full? Full cost offset – the intervention produces savings that fully • offset the cost of the intervention over the time horizon used for measurement Partial cost offset – the intervention produces some savings • but does not fully offset the cost of the intervention 9
  • Where to look for cost offsets from CD treatment Which service areas? Medical services • Reduced risk of catastrophic events caused by substance use such  as accidents and overdoses Reduced rate of deterioration of co-morbid chronic physical  conditions Reduced abuse of prescription drugs and associated emergency  room (ER) “cycling” Long-term care (LTC) services • Nursing home stays  Boarding homes and in-home services  Mental health services • Psychiatric inpatient hospitalizations  Potential for direct substitution of CD treatment for mental health  therapy if appropriate Other potential areas: • Criminal activity  Employment  Child welfare services  10
  • Where to look for cost offsets from CD treatment Which clients? Key savings centers – Medicaid medical and LTC services • The working-age disabled • SSI-related  General Assistance  Other Medicaid coverage groups • TANF and related clients  Pregnant women  11
  • Measuring cost offsets Evaluation design challenges Experimental designs have desirable statistical properties, but • generally are not an option – state alcohol/drug treatment systems do not randomize clients into treatment Our evaluation design can be thought of as a “quasi-experiment” • where the historical under-funding of alcohol/drug treatment creates a “comparison group” of clients with alcohol/drug problems who remain untreated The key challenge is selection bias – can we identify clients with • untreated substance use disorders who are really comparable to the clients who enter alcohol/drug treatment? Technically, the key question is whether we can use the cost  data for the untreated comparison group in such a way that it forms a credible “counterfactual projection” of what treated clients would have experienced if they had remained untreated Whether or not all clients in the untreated comparison group  would have been willing to enter treatment is not relevant 12
  • Measuring cost offsets Thinking like an actuary/economist Build analyses around targeted medical coverage groups • FFS Medicaid  Working-age disabled  Use per-member-per-month cost outcome measures • Use statistical models that address concerns about • selection bias Identify a comparison group of clients with substance use  problems who remain untreated Use regression techniques that control for observable  differences between treated and untreated clients: Baseline medical costs  Baseline chronic disease profile  Demographics – age, gender, race/ethnicity  13
  • Questions During the Budget Cycle Original cost estimates were based on comparisons of • Medicaid costs for clients entering treatment, relative to clients who appeared to need treatment but did not receive it. Is this a fair comparison? How persistent are the cost savings? • What penetration rates are achievable? • How will you monitor whether the assumed savings • actually occur? 14
  • 2005-07 Biennium: Original Washington State Goals As funded by the Legislature, prior to FY 2006 Supplemental Budget adjustment Medicaid Disabled 14,628 Other Medicaid FY 07 12,296 12,267 47% GOAL FY 07 FY 06 10,240 38% 40% GOAL GOAL 8,559 FY 06 7,881 31% FY 05 GOAL FY 05 26% 26% GA-U 2,782 Medicaid Aged 2,014 1,653 255 190 123 7,881 (26%)* 123 (10%)* 8,559 (25%)* 1,653 (34%)* TREATED IN FY 2005 Treatment Goal FY 2006 12,267 (40%) 190 (14%) 10,240 (31%) 2,014 (37%) Treatment Goal FY 2007 14,628 (47%) 255 (19%) 12,296 (38%) 2,782 (47%) * “Penetration Rate” (percent of those in need who actually received AOD treatment) in parentheses 15
  • Lessons Learned High quality data and analysis are essential • The more you have, the more they want – expectations • are raised Developing data analysis infrastructure takes time • Publication in peer-reviewed journals adds credibility • Outcomes/data analysis is not free! • 16
  • Postscript on the Washington State Experience Actual cost savings per treated patient are better than expected Medical savings per treated client are exceeding the Medical Savings original budget assumptions. Actual  For adult Medicaid Disabled clients, medical savings Difference monthly are now estimated to be $287 per treated client per = $88 savings per month, compared to $199 in the original appropriation. client  For adult Medicaid Disabled clients, nursing home $287 savings are estimated to be $137 per treated client per Assumed month, compared to $58 in the original appropriation. in original appropriation  Actual medical savings for GA-U clients are estimated $199 to be $149 per treated client per month, compared to $117 in the original appropriation.  Potential savings in other areas including criminal justice and child welfare costs have not been estimated. Medicaid Disabled Clients FISCAL YEAR 2006 Assumed Actual Difference $199 $287 + $88 Medical Savings: Disabled 0 $117 $149 + $32 Medical Savings: GA-U 2006 FY $58 $137 + $79 Nursing Home Savings: Disabled For most target populations, the number of additional • clients has fallen short of the originally budgeted targets SOURCE: Department of Social and Health Services, Research and Data Analysis Division. 17