As federal and state substance abuse agencies work to establish priorities and coordinate their efforts, it is imperative that policymakers have reliable national and state estimates of Medicaid spending on substance abuse treatment and accurate methodologies for projecting Medicaid and Medicare substance abuse spending.

Mathematica developed a methodology to produce estimates of Medicaid expenditures for substance abuse treatment and then applied that methodology to develop estimates for 2008 based on Medicaid Analytic eXtract (MAX) data. These methods included an approach to estimating expenditures for Medicaid subpopulations covered under managed care. Medicaid spending projections for 2011 were also developed as well as a method for developing substance abuse spending estimates for Medicare. In addition, we developed alternative definitions of substance abuse expenditures to provide a range of estimates to address varied policy issues.

The findings from this project will help the Office of National Drug Control Policy, state officials, and other policymakers align funding to policy priorities and develop budgets that support substance abuse prevention and treatment.

Key Findings:

• Nationally, medical expenditures to treat a substance abuse disorder were 3.4 billion in 2008.
• Across the 18 states with representative fee-for-service data in MAX, spending on substance abuse treatment services accounted for less than 1 percent of total Medicaid spending.
• On average, these states spent $6.16 per Medicaid enrolled month among individuals age 12 or older on medical services to treat a substance abuse diagnosis.
• There was extreme variation across states in the average amount spent on substance abuse treatment services, from less than $3 per enrolled month to over $26.