Economic Impact of Drug & Alcohol Addiction

The devastating physical effects of drug abuse have long been established, as have the negative impacts addiction can have on one’s social and emotional well-being. But an oft-overlooked result of substance abuse is the financial burden inflicted on addicted individuals, their families, and society as a whole.

As a person descends deeper and deeper into drug or alcohol abuse, his ability to earn money often decreases while his addiction-related expenses continue to soar. Many people in this situation find themselves forced to rely upon friends or family members for financial assistance, while others end up destitute and reliant upon government assistance or other social services.

A National Burden

The U.S. Office of National Drug Control Policy estimates that drug abuse in the United States cost $180.9 billion in 2002 (the last year for which such statistics are available). According to the ONDCP report that analyzed drug abuse’s cost to the nation between 1992 and 2002, the $180.9 billion price tag represents “both the use of resources to address health and crime consequences as well as the loss of potential productivity from disability, death, and withdrawal from the legitimate workforce.”

Highlights from the ONDCP study include the following:

  • The difference between the 2002 price and the $102.2 billion estimate from 1992 indicated an annual increase of more than 5.34 percent through the decade addressed in the report.
  • The rate at which drug-abuse-related costs increased exceeded the 5.16 percent annual growth in gross domestic product over the same time period.
  • The largest proportion of costs was from lost potential productivity, followed by non-health “other” costs and health-related costs.
  • At the time the report was written, loss of productivity was predicted to cost $128.6 billion in 2002, while health-related costs were projected to total $16 billion.
  • Data provided by the Centers for Medicare and Medicaid Services show that from 1992 to 2002, overall health care spending in the United States increased by an annual rate of 6.5 percent, which means that substance abuse-based health care spending grew at a slower-than-average rate. Experts attributed this to improved techniques, and resultant lowered costs, for treating addicted patients who had contracted HIV/AIDS.
  • The final major category of costs, non-health “other” costs, totaled $36.4 billion in 2002. This amount included the price of the addiction-related components of the criminal justice and social welfare systems.

The authors of the ONDCP study acknowledged that their estimates are likely less than the actual costs related to drug abuse, and note that their numbers do not reflect the use (or misuse) of legal substances such as alcohol and tobacco. Yet, “even if we only compare the health-related costs of drug abuse,” they wrote, “it still must be considered one of the more costly health problems in the nation.”

States, Programs Feel the Pinch

When alcohol abuse is factored into the equation, the results can be staggering. For example, the Texas Commission on Alcohol and Drug Abuse reported that alcohol alone accounted for 63 percent of the estimated $25.9 billion the state spent on substance abuse in 2000.

For purposes of comparison, if this ratio were applied to the ONDCP’s estimated $180.9 billion cost of illegal drug use, the result would be an annual national expenditure of more than $488.9 billion on alcohol abuse.

In the June 30, 2008 edition of the Los Angeles Times, staff writer Susan Brink reported on the financial impact drug and alcohol abuse had on one major American hospital:

[Dr.] Patricia Santora of Johns Hopkins University School of Medicine and colleagues found that 14 percent of people admitted to Johns Hopkins Hospital from 1994 to 2002 were alcohol or drug abusers.

Of these more than 43,000 patients, the researchers found, about half abused two or more drugs, resulting in hospital costs in 2002 of $28 million. An additional 25 percent abused alcohol only, incurring $20 million in hospital costs in 2002. (Treatment costs rose in each year of the study period.)

“Virtually all . . . were admitted for the medical and psychiatric consequences of their abuse,” Santora says.

“Our results demonstrated the high prevalence of hospital admissions with co-occurring [alcohol/drug abuse addiction disorders] and the striking financial costs placed on the hospital, government programs, and insurers,” Santora and her co-author, Dr. Heidi E. Hutton, wrote in the June issue of the Journal of Substance Abuse Treatment.

A June 25 article about Santora and Hutton’s research on the e! Science Newswebsite noted that hospitalization costs for individuals with multiple addiction disorders increased by an inflation-adjusted 134 percent between 1994 and 2002, with expenditures related to opioid abuse rising by 484 percent. Seventy percent of these individuals were eligible for health coverage under Medicaid or Medicare, the news site reported.

A Wiser Investment

Faced with what appear to be perpetually spiraling costs, are Americans doomed to spend an ever-increasing amount of money in the fight against drug and alcohol abuse? At least one expert believes revising how these dollars are spent could dramatically decrease how much is paid out every year.

In a 2004 report by the Substance Abuse and Mental Health Services Administration (SAMHSA) that evaluated the costs of drug and alcohol treatment in the United States, Charles Curie, who was then the SAMHSA administrator, observed that more spending on treatment would likely result in a significant lowering of other costs.

“Treatment is a bargain compared to expenditures for jails, foster care for children, and health complications that often accompany addiction,” Curie wrote. “Rarely do we have public initiatives that can save society as much as substance-abuse treatment and recovery support services. Treatment provides an opportunity for recovery for the individual, better homes for children, and improved safety for our communities.”