Benefits Background on estimating benefits Costs and benefits of treatment to taxpaying citizens Specific economic impacts: crime, health care, and productivity Conclusion The components of economic impacts analyzed in this chapter are very similar to those studied as part of the original CALDATA report. This chapter analyzes the costs of treatment and the estimated benefits to taxpayers an index of economic impacts that includes reductions in the burden of crime, healthcare utilization, and welfare/disability payments. This study did not, and could not, assess certain other economic values pertaining to persons who received welfare income, were raising children, and/or report custody or parenting problems. For example, this study could not ascertain the economic benefits that accrued directly to the children who were in households where parents were treated for substance abuse problems. Such economic benefits could include the prevention of publicly-subsidized out-of-home placements for neglected, abused, impoverished, or involuntarily abandoned children, as well as the long term impact of successfully treated parents on their children s educational performance, employment productivity, and other dimensions of well-being. These kinds of benefits could have present economic values comparable in scale to the direct effects of treatment. However, we have no good empirical basis for modeling such effects at this time, so we can only recognize their potential importance and recommend that data and methods be developed in future research to assess them. Background on estimating benefits This chapter discusses the economic costs and benefits of treatment for women and men who relied on welfare income, had children, had parenting or custody issues, or some combination of these. Data analyzed here are based on similar data reported in the first CALDATA report, Evaluating Recovery Services. The report estimated that, from the perspective of taxpayers, the economic benefits of treatment (totaling over $1.49 billion) outweighed the cost of treatment ($209 million) by a factor of 7 to 1. This was due mostly to reductions in crime and partly to reductions in healthcare. Economic gains during and after treatment were also slightly offset by increases in the amount of welfare income received by persons during and after treatment. Equivocal employment outcomes in the CALDATA sample resulted in less strong conclusions about the benefits of treatment when viewed from the perspective of society. The three major categories of substance abuse-related economic impacts (and benefits) are crime, health, and productivity. This study applies the standard "cost of illness" methodology to calculate economic impacts of drug and alcohol abuse for the years before and after treatment and the period during treatment. Average costs for specific behaviors are applied to client- reported engagement in those behaviors. Avoided costs equals "benefits." Calculating the benefits of treatment entails a comparison of the economic impacts of treatment clients before treatment with their impacts during and after treatment. When economic impacts either during or following treatment are lower than the baseline costs, a "benefit" is said to exist. Conversely, when economic impacts during or following treatment are greater than the baseline, benefits take on a negative value. Costs to Taxpaying Citizens includes losses to individuals who do not engage in drug abuse or related behavior. For these people, loss of earnings for a drug or alcohol dependent person is of less concern, but the value of theft losses or the amount of money expended on welfare and disability for drug and alcohol dependent persons is viewed as a tangible cost. While most substance abusers do pay taxes to some extent, the largest part of the tax bill is borne by those that are not substance abusers. The following components define costs to taxpaying citizens as measured in this analysis: Criminal Justice System Costs: the cost of police protection services, prosecution, adjudication, public defense, and corrections (incarceration and parole/probation). Victim Losses: victim expenditures on medical care, repairs of damaged property, and lost time from work that result from predatory crimes. Theft Losses: the estimated value of property or money stolen during a crime, excluding any property damage or other victim losses. Health Care Service Utilization: the economic value of inpatient, outpatient, and emergency medical care and inpatient and outpatient mental health care that could have been avoided. Income Transfers: transactions in which resources are moved from non-substance abusing law-abiders to others via gifts, public assistance, or public and private disability insurance. There clearly are other types of "cost" borne by taxpayers and society that are not represented in this study. For example, it is not possible at present to estimate: decrements in household productivity or responsibility among substance abusers; social impacts on family and friends; short-term and long-term impacts on children in the care of substance abusers who may, as a result, suffer greater risk of neglect, abuse, poverty, abandonment (including involuntary abandonment due to incarceration), or other forms of deficient parenting. Analysis of CALDATA indicates that many CALDATA clients who received welfare income before, during, or after treatment also received some income legitimate full- or part-time employment. However, it is not possible at present to disentangle the sequence of employment and welfare receipt. The remainder of this chapter presents the costs and benefits of treatment for different subgroups. The chapter concludes with an analysis of changes in crime, healthcare, and income from welfare, productivity, and employment among CALDATA clients. Costs and benefits of treatment to taxpaying citizens The benefits of treating the CALDATA population, as viewed by taxpayers, outweighed the costs of treatment regardless of whether a treatment recipient was male or female, received welfare income, had children, or reported parenting concerns. The cost and benefits to taxpayers of treatment provided in California are summarized in Table 5.1 and analyzed separately for women and men, and for subgroups of interest within gender. We first discuss the average cost of treatment and average length of stay per episode of treatment, followed by economic impacts before treatment and savings during and after treatment. Total savings and benefits divided by costs are presented last. It is important to note again that the potential intergenerational benefits of treatment savings in health care, social services, and remedial or other special educational services to children of substance abusers are not included in this analysis. These benefits would accrue more to treatment of women than men because of their higher incidence of child rearing responsibilities. On average, a CALDATA treatment episode cost about $1,361. Treatment for men cost about 5 percent more on average than for women, and about 25 percent more than the average cost of treatment for women with children ($1,088). These differences reflected the lower percentage of women in residential treatment settings, which were about 5 to 8 times more expensive per week than outpatient treatment, and their shorter stays in treatment, particularly in residential settings. The average cost of a treatment episode was nearly identical for women with children who did and did not receive welfare income. On average, a CALDATA treatment episode lasted 95 days (for those discharged from treatment in other words, excluding continuous methadone clients).(Endnote 7) The average treatment episode lasted 96 days for women with children, 90 days for women who received welfare income, and 80 days on average for women with both children and welfare income. These lengths of stay are appreciably shorter than for women who did not have children (137 days), did not receive welfare income (136 days), and women who had no children, no welfare income, and no other parenting/custody problems (167 days). In the year before treatment, treatment recipients imposed costs on taxpayers of $22,787, including the economic cost of crime, health care, and welfare/disability receipt. Women in general imposed a lower economic burden in the year before treatment than men, averaging $18,000 to $19,000 for most women. Women with children who received welfare income cost taxpayers about $18,000 whereas women with no children, welfare income, or parent/custody issues cost about $15,000. Reductions during treatment and after treatment in costly behaviors "saved" taxpaying citizens $10,118 in total, but the largest savings were among men who had higher pre-treatment economic impacts. Savings were lower among women with children compared to women without children ($4,307 vs. $7,008), among women who received welfare income compared to women who did not receive welfare income ($3,268 vs. $7,419), and among women who had children and received welfare income compared with those who had neither ($2,913 vs. $6,497). Despite lower overall savings among women with children and/or welfare, the benefits of treatment outweigh the costs of treatment by 2.5 to 1 (welfare recipients) and 2.7 to 1 (women with children and who received welfare income). While these returns on investment are smaller than found among women without children, welfare, or either, the treatment was still strongly cost-beneficial. Table 5.1 Costs and Benefits to Taxpaying Citizens Treatment Cost Length of Stay (Days) Impact Before Savings During Savings After Total Savings Benefit to Cost Ratio Women Children $1,088 96 $1,826 $1,163 $3,145 $4,307 3.96 Welfare $1,283 90 $1,834 $807 $2,462 $3,268 2.55 Children+Welfare $1,082 80 $1,805 $495 $2,418 $2,913 2.69 Children/No Welfare $1,105 121 $1,858 $2,351 $4,373 $6,724 6.09 No Child, Welfare $1,757 167 $14,996 $2,641 $3,857 $6,497 3.70 Men Children $1,207 93 $1,923 $1,253 $4,091 $5,343 4.43 Welfare $1,538 76 $2,960 $1,260 $9,079 $10,340 6.72 TOTAL $1,361 95 $22,787 $2,082 $8,037 $10,118 7.43 Specific costs and benefits: crime, health care, and productivity The economic impacts of crimes committed by CALDATA clients were generally lower among women compared with men. Pre-treatment economic impacts for crime were also lower among women with children and women who received welfare income compared with their counterparts. While there was a 42 percent drop in crime related costs from before to after treatment among all CALDATA clients, women with children had lower improvement than women without children (25% versus 42%) and women who received welfare income had lower improvement than women who did not receive welfare income (22% versus 42%). Women who had children and/or received welfare income started with lower costs associated with crime, but had lower proportionate reductions in crime committed. The costs associated with health care utilization averaged about $3,200 before treatment for all CALDATA clients. Health care constitutes a relatively small share of the economic cost of substance abuse imposed on taxpayers (14%). Women who received welfare income had lower health care costs than women who did not receive welfare income, but had substantially greater increases in health care costs in the year after treatment compared with their counterparts (20% versus 3%). This difference may be a result of a greater awareness of health problems or greater stability to follow through and complete courses of medical care as a result of the alcohol or drug treatment contact. While women with or without children did not substantially differ on pre-treatment health care costs (3,000 vs. $3,300), women with children virtually did not change their health care costs from before to after treatment (-4%), whereas women without children increased health care costs by 15 percent. Women with children and who received welfare income used $2,200 worth of health care before treatment, and increased this use by 12 percent in the year after treatment. Women with neither children nor welfare typically used $3,600 worth of health care in the year before treatment, but decreased this use by 13 percent in the year after treatment. We analyzed in more detail the proportion of CALDATA clients who received welfare, disability, and legitimate earnings either before, during, or after treatment, and the average amount received by those receiving any of these funds. The key findings are as follows: Welfare eligibility and receipt were dynamic. About 30 percent of women who received welfare income before treatment received no welfare income in the year after treatment, while about 16 percent of women who received no welfare income before treatment began receiving welfare income during and following treatment. Overall, there was a slight net decrease in welfare receipts, matching a nonsignificant slight decrease in the overall percentage who received welfare payments. About 60 percent of the women who were raising children received welfare income in the year before treatment, compared with 20 percent of women with no children. For both subgroups, this proportion increased somewhat during treatment then dropped after treatment. Women with children received an average of $5,400 in welfare income in the year before treatment and about $5,100 in the year after treatment, while women with no children received on average $2,500 in welfare income before treatment and $3,000 in the year after treatment. In no population subgroup studied were more persons employed either full- or part-time after treatment than before treatment. Rates of employment either stayed the same or dropped during and following treatment compared with before treatment. For example, employment among women with children dropped from 35 percent before treatment to 29 percent after treatment. Moreover, 26 percent of women who received welfare income in the year before treatment also received earnings from full- or part-time employment during some part of that year, and 24 percent of women who received welfare income before treatment received earnings from employment in the year after treatment. These generally disappointing employment results, presented in the first CALDATA report, may be at least partially explained by concurrent changes in the California labor market. Table 5.2 shows a statewide downturn in employment in California over the study period. The unemployment rate steadily increased from 5.6 percent in 1990, the "baseline" year for most CALDATA clients, to over 9 percent in 1992/1993, the "follow-up" period for most CALDATA clients. These patterns are apparent for men and women; data from the Los Angeles and San Francisco MSAs also show the same trend. Substance abusers, if employed, tend to be employed in blue collar and lower-wage paying jobs that are disproportionately affected by employment fluctuations. More study of California s unemployment and the CALDATA population are needed to help understand the apparent worsening of employment among substance abusers noted in CALDATA. Table 5.2 Unemployment in California, 1989 - 1993 Number Unemployed Total Percent Unemployed Men Percent Unemployed Women Percent Unemployed Los Angeles Percent Unemployed San Francisco 1989 737 5.1 5.1 5.1 4.7 3.3 1990 823 5.6 not avail. not avail. not avail. not avail. 1991 1119 7.5 7.9 7.1 5.8 3.3 1992 1382 9.1 9.4 8.6 8.0 4.8 1993 1407 9.2 9.7 8.7 9.7 6.1 Source: U.S. Bureau of Labor Statistics, Geographic Profile of Employment and Unemployment. Multiple editions; U.S. Statistical Abstracts, multiple editions. 1990 Gender and MSA data not available at present. Conclusion The benefits of treatment as measured from the point of view of taxpayers, including reductions in crime, transfer payments, and health care expenditures, outweighed the costs of treatment for men and women and for those who received welfare income, were raising children prior to entering treatment, or expressed parenting concerns as a reason for seeking treatment. An average treatment episode lasted about three months, cost about $1,400, and yielded benefits to taxpayers during and after treatment worth about $10,000, with the greatest share of benefit deriving from reductions in the economic burden of crime. The measured benefit to taxpayers exceeded the cost of treatment by 6 to 1 for women with children who did not receive welfare and 2« to 1 for women with children who did receive welfare. Benefits were lower among women than men, and especially among women who were parents or received welfare, principally because women, especially those with children or receiving welfare initially committed less crime than men. The role of treatment in moving persons from economic dependency to greater self-support was difficult to evaluate in CALDATA, because overall unemployment rose steadily in California throughout the period under study, from about 5.6 percent to 9.2 percent, and the treated population largely worked in occupations that are disproportionately affected by employment fluctuations. Nevertheless, from the standpoint of social welfare policy, particularly as it bears on families, we believe these cost/benefit calculations provide clear encouragement for the support of treatment. [Back to Table of Contents]