Substance use disorder coverage would only slightly increase Medicare spending

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Adding substance use disorder coverage for residential and intensive outpatient programs would only have a nominal net impact on Medicare spending, at about $362 million per year, according to a new analysis by the Legal Action Center. By contrast, total Medicare spending in 2020 was $825.9 billion.

Medicare would incur an additional $1.9 billion annually to cover 75,637 residential treatment episodes, 116,029 intensive outpatient episodes and 58,890 visits with counselors, the data showed. But these costs would be partially offset by reduced costs from treating medical conditions caused by substance use disorder, and from fewer SUD-related hospitalizations and emergency department visits. 

Collectively, the Legal Action Center estimated these cost savings would amount to as much as $1.6 billion annually.

Because Medicare beneficiaries who are dually eligible for Medicaid often already have coverage for these services under Medicaid, some portion of this estimated cost increase represents a shift from Medicaid spending to Medicare spending. About 12% of Medicare beneficiaries also have Medicaid coverage.

Medicare covers a broad array of treatment services for those with mental illness and substance abuse disorders, but special rules limit coverage and reimbursement. Medicare's coverage of services for mental health, behavioral health and substance abuse disorders is not as extensive as its coverage for other services, according to the Center for Medicare Advocacy. Medicare will pay for treatment of alcoholism and substance use disorders in both inpatient and outpatient settings. Medicare Part A pays for inpatient substance abuse treatment; people will pay the same copays as for any other type of inpatient hospitalization. Likewise, Medicare Part B will pay for outpatient substance abuse treatment services from a clinic or hospital outpatient department.

WHAT'S THE IMPACT?

In 2020, there were 61.5 million Medicare beneficiaries, and an analysis of data from the National Survey of Drug Use and Health found that about 3% of Medicare beneficiaries (1.7 million) had a substance use disorder in the past year.

Yet only 11% of Medicare beneficiaries with SUD received treatment in any given year. Among Medicare beneficiaries who wanted SUD treatment, the main reasons they didn't receive it were a lack of SUD insurance coverage and that they could not afford treatment.

Despite the need for effective treatments to address SUD, Medicare does not cover all SUD therapies, settings or provider types. Medicare effectively excludes coverage for SUD treatment in intensive outpatient, partial hospitalization, specialty addiction outpatient clinics and residential addiction programs, as well as by licensed professional counselors, certified addiction counselors and peers. Medicare only began covering opioid treatment programs, which provide methadone and other medication treatment, in 2020 because of the SUPPORT for Patients and Communities Act of 2018.

And unlike most private insurance and Medicaid-managed care plans, Medicare is not subject to the Mental Health Parity and Addiction Equity Act of 2008, which requires coverage of and access to SUD and mental health benefits at the same level as medical and surgical benefits.

The study estimated the per-year change in Medicare spending from adding coverage of SUD residential ($935 million), intensive outpatient ($928 million) and counseling ($66 million). The total is about $1.9 billion annually. Cost offsets from reduced incidence of comorbid conditions and reduced SUD-related hospitalizations and ED visits are about $1.5 billion annually, bringing the net impact to about $362 million per year.

THE LARGER TREND

Substance use disorder has been a pervasive problem. In June, the Department of Health and Human Services said it was investing close to $15 million in 29 organizations in rural communities to address psychostimulant misuse and related overdose deaths.

Psychostimulants include methamphetamine and other illegal drugs, such as cocaine and ecstasy, as well as prescription stimulants for conditions such as attention deficit hyperactivity disorder or depression. The overdose crisis has evolved over time and is now largely characterized by deaths involving illicitly manufactured synthetic opioids, including fentanyl, and increasingly psychostimulants, according to the HHS Overdose Prevention Strategy.

With the $15 million investment, HHS has provided a total of more than $400 million for the Rural Communities Opioid Response Program initiative, a multiyear initiative aimed at reducing the morbidity and mortality of substance use, including opioid use, in high-risk rural communities. 

Through the Substance Abuse and Mental Health Services Administration, HHS also recently announced $55 million in funding for its Tribal Opioid Response grant program that addresses the overdose crisis in tribal communities.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com