Eric R. Wright, PhD Director, IU Center for Health Policy [email protected] The Economic Impact of Substance Abuse in Indiana

Eric R. Wright, PhDDirector, IU Center for Health Policy

[email protected]

www.healthpolicy.iupui.edu

The Economic Impact of Substance Abuse in Indiana

Economic Impact Publications• The Consumption and

Consequences of Alcohol, Tobacco, and Drugs in Indiana: A State Epidemiological Profile 2009

(Chapter 12)

• The Economic Impact of Substance Misuse and Abuse in Indiana

Significance of Substance Abuse• Substance abuse and addiction have a profound impact on

all sectors of our society• Leading to a wide range of social, legal, and health

problems, including: Domestic violence Child abuse and neglect Crime Chronic health problems Increased mortality Higher health care costs Lost productivity

• Real economic impact is difficult to quantify because there are both direct and indirect consequences

National Studies• Because of these

complexities, only a handful of studies have tried to quantify the economic impact of substance abuse on the nation

The Methodological Basis for Our ResearchNational Center on Addiction and Substance Abuse at Columbia University (CASA, 2001) [2]

Survey: Substance abuse-related spending for all 50 states, D.C., & Puerto Rico (Indiana did not participate)

Survey methodology development: Extensive literature review of substance abuse costs studies AND pilot-testing with 5 states to develop budget survey

Respondents: State budget officers had broadest view/expertise on budgetary matters CASA wanted to educate them about the impact of substance use/abuse on the

budget)

Underestimate: Only covers state costs (doesn’t include federal, local, or private funds/costs)

The Methodological Basis for Our Research (cont.)

National Center on Addiction and Substance Abuse at Columbia University (CASA, 2009) [3]

Update on the 2001 studyIncluds federal and local government costs in

addition to state spendingThe nation spent total of $467.7 billion (federal,

state, and local) on substance abuse and addiction in 2005

Indiana SEOW

Since Indiana did not participate in the CASA studies, and an estimate of costs attributable to substance abuse is critical in guiding prevention planning and funding allocations, the SEOW decided to replicate CASA’s methodology and assess Indiana’s expenditures related to alcohol, tobacco, and drug abuse.

Methodology

• We followed CASA’s methodology whenever possible

• We attempted to identify federal, state, and local budget / expenditure information for FY 2008

• When we could not retrieve detailed data from state departments, we relied on the as-passed state budget for FY 2008 [4]

Methodology (cont.) To assess overall expenditures due to substance abuse, we examined these areas of funding:

• Substance-related prevention, treatment, and research• Healthcare• Criminal justice and juvenile justice• Judiciary• Education• Child welfare programs• Income support programs• Mental health• Developmental disabilities• Public safety• State workforce• Regulation and compliance

Substance-Related Prevention, Treatment, and Research

• Includes all programs and services with the explicit goal of preventing, treating, and researching alcohol, tobacco, and other drug use and addiction

• 100% of allocations were directly attributable to substance use

Substance-Related Prevention, Treatment, and Research

Agency Net Allocation

Division of Mental Health and Addiction $50,925,976

Indiana Tobacco Prevention and Cessation Agency

$16,200,000

Indiana State Department of Health $2,616,262

Total (100% Attributable to Substance Use) $69,742,238

BUDGET SOURCE: As-passed budget FY 2008 [4]

Healthcare• ATOD use has been associated with over 80 diseases and

injuries, imposing substantial costs to our healthcare system [5-6]• We used substance-attributable fractions (SAFs) estimated by

CASA [2-3] and converted them to Indiana SAFs, using the ratio of substance abuse prevalence rates in Indiana to that of the nation

• Since prevalence rates differed between the Medicaid and Medicare subpopulations, we calculated the Indiana SAFs for each of these categories

• Population-specific SAFs were then applied to the corresponding state-level spending data obtained from the CMS National Health Expenditure data [7] to calculate the amount attributable to substance abuse for each of the categories

HealthcareTotal Healthcare Spending*

Substance-Attributable Healthcare Spending

Medicaid Total $5,473,000,000 $1,735,000,000

State Funds $2,047,000,000 $649,000,000

Federal Funds $3,426,000,000 $1,086,000,000

Medicare Total $8,030,000,000 $3,065,000,000

Public Funding (Medicaid and Medicare Total) $13,503,000,000 $4,800,000,000

All additional healthcare spending** $36,278,000,000 $8,498,000,000

Total Healthcare Spending** $49,781,000,000 $13,298,000,000

* Total FY 2008 spending was projected based on CMS national growth rate projection.** The figure for all additional health spending was computed by subtracting Medicaid and Medicare spending from total health spending; it primarily encompasses spending from private insurances and out-of-pocket expenses. Neither the “all additional health spending” nor “total health spending” figures were included in the impact analysis of Indiana’s cost burden.BUDGET SOURCE : Centers for Medicare and Medicaid Services, 2009 [7]

Criminal and Juvenile Justice• Substance abuse is a factor in over 80% of adult

corrections cases and in 79.5% of juvenile cases [3, 8]• We applied these substance-attributable shares to

expenditures for Indiana’s correctional system, such as running and maintaining correctional facilities (including personnel costs), rehabilitation and reentry programs, probation for adult and juvenile offenders, and capital costs for correctional facilities

• Additionally, we added 100% of costs from programs that explicitly address substance abuse and addiction

Criminal and Juvenile Justice Justice System Spending Local Funding for Criminal Justice $45,867,971 Attributable to Substance Use (85.3%) $39,125,380 State Funding for Criminal Justice $1,063,118,684 Attributable to Substance Use (81.0%) $861,126,134 Federal Funding for Criminal Justice $4,603,870 Attributable to Substance Use (82.2%) $3,784,381 Funding for Juvenile Justice $49,585,625 Attributable to Substance Use (75.5%) $37,437,147

Funding for Substance Abuse Programs in the Justice System (100%) $552,119 Capital Costs for Juvenile Justice Facilities (79.5%) $278,011 Capital Costs for Criminal Justice Facilities (81.0%) $15,450,754 Total Attributable to Substance Use $957,753,926

BUDGET SOURCE : As-passed budget FY 2008 [4]; Indiana Criminal Justice Institute, 2009 [9]; Indiana Department of Corrections, 2009 [10]; Indiana Judicial Center, 2009 [11]

Judiciary

• CASA identified substance-attributable shares of the judiciary system based on court type [3, 8]Drug Courts: 100%Criminal Courts: 86.3%Family Courts: 74.1%Civil Courts: 0%

• Funds that could not be ascribed to a specific court were assigned a substance-share average (65.1%), i.e., the average of the four percentages

Judiciary Courts

FederalFunding

State Funding

Local Funding Total

Drug Courts $942,623 $402,446 NA $1,345,069

Attributable to Substance Use (100%) $942,623 $402,446 NA $1,345,069

General/Not Distinguished Courts $937,651 $158,557,284

$42,381,462 $201,876,397

Attributable to Substance Use (65.1%) $610,411

$103,220,792 $27,590,332

$131,421,534

Family Courts $500,000 $2,920,248 $309,530,726

$312,950,974

Attributable to Substance Use (74.1%) $370,500 $2,163,904

$229,362,268 $231,896,672

Total Judiciary Funding $2,380,274 $161,879,978

$351,912,188

$516,172,440

Total Attributable to Substance Use $1,923,534

$105,787,142

$256,952,600 $364,663,275

Note: The substance abuse share of 65.1% for general/not distinguished courts is an average of the shares for the four court types, as identified by CASA: Drug courts (100.0%) + criminal courts (86.3%) + family courts (74.1%) + civil courts (0.0%) / 4 = 65.1%BUDGET SOURCE: As-passed budget FY 2008 [4]; Indiana Criminal Justice Institute, 2009 [9]; Indiana Judicial Center, 2009 [11]

Education• Substance abuse can affect schools in several ways:

Faculty and staff use can affect the learning environment

Student use can affect the individual’s academic capacity as well as school security

Parental use can affect the students’ capacity and readiness to learn

• CASA identified cost areas that can be linked to substance abuse and estimated that the aggregate of these costs would add up to 11.4% of the annual expenditures for elementary and secondary education [3]

Education Agency Net Allocation Education Funding for Substance Abuse Programs Department of Education $1,376,719 Total (100% Attributable to Substance Use) $1,376,719 All Other Education Funding Department of Education $4,766,519,467 Indiana State Teachers’ Retirement Fund $648,776,985 State Library $10,880,490 Arts Commission $4,768,599 Indiana Criminal Justice Institute $1,156,938 School Lunch Division $954,612 Commission on Proprietary Education $844,971 Education Employment Relations Board $719,136 Historical Bureau $469,762 Indiana State Department of Health $73,866 Total $5,435,164,826 Attributable to Substance Use (11.4%) $619,608,790 Grand Total Attributable to Substance Use $620,985,509


Child Welfare Programs

• There is a well-documented link between substance abuse and child abuse/neglect, which often results in the placement of children into protective services [12-18]

• CASA estimated that substance abuse and addiction contributed to 73.1% of child welfare cases nationally in 2005 [3]

Child Welfare Programs

Agency

Net Allocation

Department of Child Services $775,068,042

Division of Family Resources $161,911,113

Total Child Welfare Funding $936,979,155

Attributable to Substance Use (73.1%) $684,931,762


Income Support Programs• Substance abuse and addiction may interfere with a

person’s ability to be self-sufficient, increasing use of income assistance and supplemental programs [3]

• CASA estimated the substance-attributable shares for the following support programsTemporary Assistance to Needy Families (TANF) and

General assistance (GA): 23.4%Housing and homeless assistance: 66.0%Other assistance (including employment, food and

nutrition): 23.5%

Income Support Programs

Program Net Allocation

TANF/GA $320,579,878


Housing/Homeless $16,583,378


Other Income Support Services $198,834,320


Total $535,997,576

Attributable to Substance Use $132,686,786


Mental Health

• Higher rates of substance abuse have been documented for those with severe mental illnesses [19-21]

• According to CASA estimates, the substance-attributable share for mental health programs is 55.9%

Mental Health Agency Net Allocation

Division of Mental Health and Addiction $42,749,141

Family and Social Services Administration $32,794,005

Logansport State Hospital $39,817,278

Richmond State Hospital $28,391,428

Madison State Hospital $24,310,970

Larue Carter Memorial Hospital $21,286,117

Evansville State Hospital $22,965,697

Evansville Psychiatric Children’s Center $3,854,163

Capital Costs for Mental Health Facilities $9,356,264

Total $225,525,063



Developmental Disabilities – FASD • Following CASA’s methodology, we based our estimates on

funding for fetal alcohol spectrum disorder (FASD); FASD has been well-studied and the link to maternal alcohol use has been clearly established

• FASD is an umbrella term describing possible physical, mental, behavioral, and/or learning disabilities that can occur in an individual whose mother drank alcohol during pregnancy. FASD is broader than the previously used term “fetal alcohol syndrome” (FAS) and includes: FAS, fetal alcohol effects, alcohol-related neurodevelopmental disorder, and alcohol-related birth defects [22]

• Lupton et al. (2004) provided state-level estimates of the number of people with specific disabilities who also have FASD [23]; this information was used to calculate the budget share for Hoosiers with FASD

Developmental Disabilities

Program Prev Rate

/ 1,000 Prev

Indiana

Eligible for Program &

have FASD

Hoosiers Eligible &

have FASD Budget

Allocation

Budget Share for

FASD

Medicaid Waiver $316,333

Aged and Disabled * $63,267 $0 Traumatic Brain Injury * $63,267 $0

Autism 3.5 22,056 4.7% 1,038 $63,267 $2,974

DD 3.9 24,577 40.0% 9,720 $63,267 $25,307

Support Services 7.4 46,633 23.0% 10,758 $63,267 $14,551

Day Services-DD** 7.4 46,633 23.0% 10,758 $5,100,000 $1,173,000 Supported Employment 14.2 895,010 2.1% 18,805 $4,000,000 $84,000 Residential Services-DD 7.4 46,633 23.0% 10,758 $41,209,124 $9,478,099 Vocational Rehabilitation 14.2 895,010 2.1% 18,805 $15,748,926 $330,727

Total $11,108,658

* Not Related to FASD ** DD = developmental disabilitiesNote: We calculated the budget share for FASD by multiplying the budget allocation with the percentage of population who are eligible for a program and have FASD.BUDGET SOURCE: As-passed budget FY 2008 [4]

Public Safety• Public safety issues are addressed by various agencies and

programs, including homeland security, criminal justice, law enforcement, drug interdiction, corrections, and others

• Our public safety analysis excludes programs and expenditures that have been identified in previous sections, such as specific justice and judiciary components

• CASA estimated the substance-attributable share for public safety to be 19.7%, because 19.7% of highway traffic accidents were alcohol-involved

• For our estimate, We attributed 100% of substance abuse specific public safety

programs and Added 19.7% of all additional public safety funding

Public Safety Agency Net Allocation

Public Safety Funding for Substance Abuse Programs Alcohol and Tobacco Commission $11,439,612 Indiana Criminal Justice Institute $9,737,638 Indiana State Police $1,204,307 Indiana Professional Licensing Agency $191,202 Total (100% Attributable to Substance Use) $22,572,759 Additional Public Safety Funding Indiana State Police $174,876,535 Indiana Criminal Justice Institute $11,425,386 Law Enforcement Training Academy $4,909,281 State Budget Agency $150,000 Total $191,361,202 Attributable to Substance Use (19.7%) $37,698,157 Grand Total Attributable to Substance Abuse $60,270,916


State Workforce• Substance abuse and dependence compromises

workforce productivity by contributing to absenteeism, lost productivity, an increase in workplace accidents, higher turnover rates, and higher health insurance costs, thus increasing the cost of business [22, 24-27]

• CASA estimated 0.37% of total payroll and fringe benefits costs attributable to absenteeism due to substance abuse and addiction

• For our estimate, We attributed 100% of substance abuse specific

programs and Added 0.37% of total cost of payroll and fringe benefits

State Workforce

State Workforce 2008 Net Allocation

Substance Abuse Share of Employee Assistance Programs (100%) $179,852

Total Payroll $1,255,324,841


Total Fringe Benefits $558,124,864


Total Attributable to Substance Use $6,889,616

BUDGET SOURCE: Indiana State Personnel Department, 2009 [28]

Regulation and Compliance

• Indiana collects excise taxes on alcoholic beverages, cigarettes and tobacco products, and controlled substances

• In FY 2008, Indiana collected $570 million in substance-related excise taxes; i.e., 4% of overall revenue from state taxes ($14.01 billion)

• To calculate the net gain from sale of these products, we subtracted 4% of overall DOR budget from the revenue brought in by tobacco, alcohol, and controlled substances

Regulation and Compliance State Revenue and DOR Budget Allocations Dollar Amount

Revenue from Substance-Related Excise Taxes

Tobacco $525,272,438

Alcohol $44,707,807

Controlled Substances $27,005

Total $570,007,250

Total Budget Appropriated for Department of Revenue $77,472,571

Estimated Budget to Cover Costs to Collect Substance-Related Excise Taxes (4.07% of Total DOR Budget)

$3,153,134

Net Gain from Substance-Related Excise Taxes $566,854,116

Note: Revenue from substance-related excise taxes made up 4.07% of all revenue for FY 2008 in Indiana. Therefore, a cost share of 4.07% was applied to the DOR budget, and the corresponding amount ($3.2 million) was subtracted from the revenue to calculate the net gain from substance-related excise taxes.BUDGET SOURCE: As-passed budget FY 2008 [4]

Estimated Costs/Allocations Attributableto Substance Use (Indiana, FY 2008)• Funding to Reduce Substance Use

Prevention, Intervention and Research: $70 million• Funding to Address Consequences of Substance Use

Healthcare costs/Medicaid and Medicare: $4.8 billion Corrections and Judiciary: $1.3 billion Education: $621 million Child welfare: $685 million Income support: $133 million Mental health: $126 million Developmental disabilities/FASD: $11 million Public safety: $60 million State workforce: $7 million

• Net Gain from Substance Use Excise taxes for alcohol, tobacco, and controlled substances: $567 million

TOTAL IMPACT:$7.3 BILLION

Federal, State, and Local Spending/Funding (Per Capita) Attributable to Substance Use in Indiana Compared to Illinois, Michigan, Ohio, and Kentucky

Indiana FY 2008

4-State Average Adjusted for Inflation

FY 2008

Healthcare $756.47 $830.74

Income Support, Child Welfare $128.85 $197.52

Justice, Judiciary, Regulation + Compliance $119.07 $290.79

Education $97.87 $197.67

Mental Health, Developmental Disabilities $21.62 $38.01

Prevention, Intervention, Research $10.99 $35.67

Public Safety, Interdiction $9.50 $88.37

Workforce $1.09 $9.69

TOTAL $1,145.46 $1,688.46

Note: 4-state average is based on 2005 data for Illinois, Michigan, Ohio, and Kentucky, as reported by CASA (2009) [3]. We then applied the CPI to adjust for inflation and improve comparability to Indiana.

On average, IL, MI, OH, & KY spend $543 more annually per capita on substance abuse than Indiana!

Limitations

• For the most part, we only had access to information about budget allocations rather than actual spending

• Our estimates are predominately based on state and federal funds and do not include locally-generated government funding or private sector spending

• Given the preliminary state of scientific knowledge, it is difficult, if not impossible, to assign a precise value or fraction to costs that are indirectly attributable to alcohol and drug use.

Final Thoughts

• Indiana spends significantly more on addressing the consequences of alcohol, tobacco, and other drug use than on prevention

• For every dollar Indiana spends on services dealing directly and indirectly with substance use, 66 cents are used for healthcare, while only 1 cent pays for prevention/intervention initiatives

• If effective prevention policies and programs were implemented nationwide, substance abuse initiation would decline for 1.5 million youth and be delayed for 2 years on average [1]

1. Miller, T., & Hendrie, D. (2009). Substance abuse prevention dollars and cents: A cost-benefit analysis (Vol. DHHS Pub. No. (SMA) 07-4298). Rockville, MD: Center for Substance Abuse Prevention, Substance Abuse and Mental Health Services Administration

2. National Center on Addiction and Substance Abuse at Columbia University. (2001). Shoveling Up: The Impact of Substance Abuse on State Budgets. Retrieved July 23, 2010, from http://www.casacolumbia.org/download.aspx?path=/UploadedFiles/3gbjmclw.pdf

3. National Center on Addiction and Substance Abuse at Columbia University. (2009). Shoveling Up II: The Impact of Substance Abuse on Federal, State, and Local Budgets. Retrieved September 24, 2009, from http://www.casacolumbia.org/absolutenm/articlefiles/380ShovelingUpII.pdf

4. Indiana State Budget Agency. (n.d.). 2007–2009 As-Passed Budget. Retrieved September 24, 2009, from http://www.in.gov/sba/2473.htm

5. Rehm, J., Taylor, B., & Room, R. (2006). Global burden of disease from alcohol, illicit drugs and tobacco. Drug and Alcohol Review, 25(6), 503-513

6. Single, E., Robson, L., Xie, X., & Rehm, J. (1998). The economic costs of alcohol, tobacco and illicit drugs in Canada, 1992. Addiction, 93(7), 991-1006.

7. Centers for Medicare and Medicaid Services. (2009).National Health Expenditure Account Data. Retrieved December 9, 2009, from http://www.cms.hhs.gov/NationalHealthExpendData/

8. National Center on Addiction and Substance Abuse at Columbia University. (2004). Criminal Neglect: Substance abuse, juvenile justice and the children left behind. Retrieved October 1, 2009, from http://www.casacolumbia.org/absolutenm/articlefiles/379-Criminal%20Neglect.pdf

9. Indiana Criminal Justice Institute. (2009). Byrne-JAG Awards for Calendar Year 2008. Indianapolis, IN: Information Received from Joshua Ross, Division Director, Research and Planning, Indiana Criminal Justice Institute

10. Indiana Department of Corrections. (2009). Correction costs and funding for FY 2008. Indianapolis, IN: Information Received from Amanda Copeland; Director, Planning & Research, Indiana Department of Corrections.

11. Indiana Judicial Center. (2009). 2007 Probation Report. Indianapolis, IN: Information Received from Michelle Goodman, Staff Attorney, Indiana Judicial Center

REFERENCES

http://www.casacolumbia.org/download.aspx?path=/UploadedFiles/3gbjmclw.pdf

http://www.casacolumbia.org/absolutenm/articlefiles/380ShovelingUpII.pdf

http://www.in.gov/sba/2473.htm

http://www.cms.hhs.gov/NationalHealthExpendData/

http://www.casacolumbia.org/absolutenm/articlefiles/379-Criminal%20Neglect.pdf

12.Denton, R. E., & Kampfe, C. M. (1994). The relationship between family variables and adolescent substance abuse: A literature review. Adolescence, 29(114)

13.Downs, W. R., & Harrison, L. (1998). Childhood maltreatment and the risk of substance problems in later life. Health & social care in the community, 6(1), 35-46

14.Finkelhor, D., & Dziuba-Leatherman, J. (1994). Children as victims of violence: A national survey. Pediatrics, 94(4), 413-420

15.Harrison, P. A., Fulkerson, J. A., & Beebe, T. J. (1997). Multiple substance use among adolescent physical and sexual abuse victims. Child Abuse & Neglect, 21(6), 529-539

16.Sher, K. J., Gershuny, B. S., Peterson, L., & Raskin, G. (1997). The role of childhood stressors in the intergenerational transmission of alcohol use disorders. Journal of Studies on Alcohol, 58(4)

17.Widom, C. S. (1989). Does violence beget violence? A critical examination of the literature. Psychological Bulletin, 106(1), 3-28

18.Widom, C. S., & Hiller-Sturmhofel, S. (2001). Alcohol Abuse as a Risk Factor for and Consequence of Child Abuse. Alcohol Research & Health, 25(1)

19.Grant, B. F., Stinson, F. S., Dawson, D. A., Chou, S. P., Dufour, M. C., Compton, W., et al. (2004). Prevalence and Co-occurrence of Substance Use Disorders and Independent Mood and Anxiety Disorders Results From the National Epidemiologic Survey on Alcohol and Related Conditions. Archives of General Psychiatry, 61(8), 807-816

20.RachBeisel, J., Scott, J., & Dixon, L. (1999). Co-occurring severe mental illness and substance use disorders: a review of recent research. Psychiatric Services, 50(11), 1427

21.Regier, D. A., Farmer, M. E., Rae, D. S., Locke, B. Z., Keith, S. J., Judd, L. L., et al. (1990). Comorbidity of mental disorders with alcohol and other drug abuse. Results from the Epidemiologic Catchment Area (ECA) Study. JAMA, 264(19), 2511-2518

22.Ames, G. M., Grube, J. W., & Moore, R. S. (1997). The relationship of drinking and hangovers to workplace problems: An empirical study. Journal of Studies on Alcohol, 58(1)

23.Lupton, C., Burd, L., & Harwood, R. (2004). Cost of fetal alcohol spectrum disorders. American Journal of Medical Genetics(1).

REFERENCES

24. Frone, M. R. (2006). Prevalence and distribution of illicit drug use in the workforce and in the workplace: Findings and implications from a US national survey. Journal of Applied Psychology, 91(4), 856-869

25. Larson, S. L., Eyerman, J., Foster, M. S., & Gfroerer, J. C. (2007). Worker substance use and workplace policies and programs (Vol. DHHS Publication No. SMA 07-4273, Analytic Series A-29). Rockville, MD: Substance Abuse and Mental Health Services Administration, Office of Applied Studies

26. Mangione, T. W., Howland, J., & Lee, M. (1998). New perspectives for worksite alcohol strategies: Results from a corporate drinking study. Boston, MA: JSI Research and Training Institute

27. McFarlin, S. K., & Fals-Stewart, W. (2002). Workplace absenteeism and alcohol use: a sequential analysis. Psychology of Addictive Behaviors, 16(1), 17-21

28. Indiana State Personnel Department. (2009). Annual State Workforce, 2008. Indianapolis, IN: Data provided by e-mail to Indiana University Center for Health Policy.

REFERENCES

IU Center for Health Policy

The IU Center for Health Policy collaborates with state and local government, as well as public and private healthcare organizations in health policy and program development to conduct high quality program evaluation and applied research on critical health policy-related issues.

Eric R. Wright, PhD

Director, Center for Health Policy

Professor and Division Director for Health Policy and Management

Department of Public Health, IU School of Medicine

Indiana University-Purdue University Indianapolis (IUPUI)

410 W. 10th St. Suite 3100

Indianapolis, IN 46202

317-274-3161

[email protected]

www.healthpolicy.iupui.edu

Documents

Eric R. Wright, PhD Director, IU Center for Health Policy [email protected] The Economic Impact of Substance Abuse in Indiana