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Impacts of Insurance on the Demand and Utilization of Drug Abuse Treatment: Implications for Insurance Mandates

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  • Allen Goodman
  • Janet Hankin
  • Eleanor Nishiura
  • James Sloan

Abstract

This article addresses costs and utilization for mental health/substance abuse treatment, with particular emphasis on the emerging importance of self-insured coverage in the 1990s. We estimate drug abuse treatment demand and utilization with an insurance claims database from self-insured employers. The study population was selected from a large database consisting of health insurance claims for all treatment events starting 1 January 1989 and ending 31 December 1991. Approximately three-quarters of the increase in in-patient usage attributable to fractional co-insurance is due to increased usage per person (the other one-quarter refers to increased numbers of users). About half of the increase in outpatient usage is due to increased usage per person. In summary, our estimates provide useful measurements of the potential impacts of improved drug abuse treatment coverage. Although the potential induced in-patient expenditures and dead-weight losses are substantial compared to co-insurance rates of 0.5, losses can be trimmed by adjusting co-insurance, even at rates of approximately 0.1.

Suggested Citation

  • Allen Goodman & Janet Hankin & Eleanor Nishiura & James Sloan, 1999. "Impacts of Insurance on the Demand and Utilization of Drug Abuse Treatment: Implications for Insurance Mandates," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(3), pages 331-348.
    • Handle: RePEc:taf:ijecbs:v:6:y:1999:i:3:p:331-348
    DOI: 10.1080/13571519984115
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    References listed on IDEAS

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    1. Goodman, Allen C., 1988. "An econometric model of housing price, permanent income, tenure choice, and housing demand," Journal of Urban Economics, Elsevier, vol. 23(3), pages 327-353, May.
    2. Hayami, D.E. & Freeborn, D.K., 1981. "Effect of coverage on use of an HMO alcoholism treatment program, outcome, and medical care utilization," American Journal of Public Health, American Public Health Association, vol. 71(10), pages 1133-1143.
    3. Newhouse, Joseph P. & Phelps, Charles E. & Marquis, M. Susan, 1980. "On having your cake and eating it too : Econometric problems in estimating the demand for health services," Journal of Econometrics, Elsevier, vol. 13(3), pages 365-390, August.
    4. Chen, K. & Kandel, D.B., 1995. "The natural history of drug use from adolescence to the mid-thirties in a general population sample," American Journal of Public Health, American Public Health Association, vol. 85(1), pages 41-47.
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    Cited by:

    1. Cartwright, William S. & Solano, Paul L., 2003. "The economics of public health: financing drug abuse treatment services," Health Policy, Elsevier, vol. 66(3), pages 247-260, December.
    2. Dhaval Dave & Swati Mukerjee, 2011. "Mental health parity legislation, cost‐sharing and substance‐abuse treatment admissions," Health Economics, John Wiley & Sons, Ltd., vol. 20(2), pages 161-183, February.

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