The sensitivity of substance abuse treatment intensity to co-payment levels

  • Anthony T. Lo SassoEmail author
  • John S. Lyons
Regular Articles


This study exploits variation in co-payment levels among different contractual arrangements within a regional managed behavioral health care organization to estimate the relationship between co-payment levels for substance use treatment services and the intensity of substance use treatment. The substance use treatment benefits involved a range of co-payment levels across nearly 400 employers during the years 1993 through 1998. Multiple regression techniques were used to estimate the effect of co-payment levels on treatment intensity. The results indicate that co-payment levels had a significant negative effect on outpatient and inpatient substance use treatment. For outpatient treatment the effect on intensity implied a co-payment elasticity of −0.18, implying that moving from a $10 co-payment to a $20 co-payment would result in, for example, a reduction from 5 to 4 outpatient visits per episode. However, the effect was larger for persons with combined alcohol and drug use disorders, as they exhibited a co-payment elasticity of −0.27. For inpatient days, the co-payment elasticity was considerably smaller at −0.017. Given the benefits of maintaining persons with substance use disorders in treatment, employers may have an incentive to take steps to minimize the barriers to treatment.


Substance Abuse Health Promotion Disease Prevention Behavioral Health Regression Technique 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 1.
    Chaloupka F. Rational addictive behavior and cigarette smoking.Journal of Political Economy. 1991;99:722–742.Google Scholar
  2. 2.
    Becker GS, Grossman M, Murphy KM. An empirical analysis of cigarette addiction.American Economic Review. 1994;84:396–418.Google Scholar
  3. 3.
    Pacula RL. Does increasing the beer tax reduce mari juana consumption?Journal of Health Economics. 1998;17(5):557–585.Google Scholar
  4. 4.
    Manning WG, Blumberg L, Moulton LH. The demand for alcohol: the differential response to price.Journal of Health Economics. 1995;14:123–148.Google Scholar
  5. 5.
    Grossman M, Chaloupka FJ, Sirtalan I. An empirical analysis of alcohol addiction: results from the monitoring the future panels.Economic Inquiry. 1998;36:39–48.Google Scholar
  6. 6.
    Chaloupka FJ, Grossman M, Taurus JA. The demand for cocaine and marijuana by youth. In: Chaloupka FJ, Grossman M, Biclal WK, Saffen H, eds.The Economic Analysis of Substance Use and Abuse: An Integration of Econometric and Behavioral Economic Research. Chicago: University of Chicago Press; 1999:133–155.Google Scholar
  7. 7.
    Saffer H, Chaloupka FJ. The demand for illicit drugs.Economic Inquiry. 1999;37(3):401–411.Google Scholar
  8. 8.
    Farrelly MC, Bray JW, Zarkin GA, et al. The joint demand for cigarettes and marijuana: evidence from the National Household Surveys on Drug Abuse.Journal of Health Economics. 2001;20(1):51–68.Google Scholar
  9. 9.
    Zweifel P, Manning WG. Moral hazard and consumer incentives in health care. In: Culyer AJ, Newhouse JP, eds.Handbook of Health Economics. Amsterdam: Elsevier; 2000.Google Scholar
  10. 10.
    McLellan AT, Woody GE, Metzger D, et al. Evaluating the effectiveness of addiction treatment: reasonable expectations, appropriate comparisons. In: Egerton JA, Fox DM, Leshner Al, eds.Treating Drug Abusers' Effectively. Malden, Mass: Blackwell; 1997.Google Scholar
  11. 11.
    Bell DC, Richard AJ, Feltz LC. Mediators of drug treatment outcomes.Addictive Behaviors. 1996;21(5):597–613.Google Scholar
  12. 12.
    Ershoff D, Radcliffe A, Gregory M. The southern California Kaiser-Permanente chemical dependency recovery program evaluation: results of a treatment outcome study in an HMO setting.Journal of Addictive Diseases. 1996;15(3):1–25.Google Scholar
  13. 13.
    Hoffmann NG, Miller NS. Treatment outcomes for abstinence-based programs.Psychiatric Annals. 1992:22(8):402–408.Google Scholar
  14. 14.
    Hubbard RL, Marsden ME, Rachal JV.Drug Abuse Treatment: A National Study of Effectiveness. Chapel Hill, NC: University of North Carolina Press; 1989.Google Scholar
  15. 15.
    McKay JR, Alterman Al, McLellan AT, et al. Treatment goals, continuity of care and outcomes in a day hospital substance abuse rehabilitation program.American Journal of Psychiatry. 1994:151(2):254–259.Google Scholar
  16. 16.
    Moos RH, Finney JW, Cronkite RC.Alcoholism Treatment: Content, Process, and Outcome. New York: Oxford University Press; 1990.Google Scholar
  17. 17.
    Simpson DD. Effectiveness of drug-abuse treatment: a review of research from field settings. In: Egerton JA, Fox DM, Leshner Al, eds.Treating Drug Abuse Effectively. Malden, Mass: Blackwell; 1997.Google Scholar
  18. 18.
    Hoffman JA, Caudill BD, Koman JJ III, et al. Comparative cocaine abuse treatment strategies: enhancing client retention and treatment exposure.Journal of Addictive Diseases. 1994;13(4):115–128.Google Scholar
  19. 19.
    French MT, Mauskopf JA, Teague JL, et al. Estimating the dollar value of health outcomes from drug-abuse interventions.Medical Care. 1996;34:890–910.Google Scholar
  20. 20.
    Newhouse JP, and the Insurance Experiment Group.Free for All? Lessons from the RAND Health Insurance Experiment. Cambridge, Mass: Harvard University Press; 1994.Google Scholar
  21. 21.
    Manning WG, Newhouse JP, Duan N, et al. Health insurance and the demand for medical care: evidence from a randomized experiment.American Economic Review. 1987;77:251–277.Google Scholar
  22. 22.
    Manning WG, Wells KB, Duan N, et al. How cost sharing affects the use of ambulatory mental health services.Journal of the American Medical Association. 1986;256:1930–1934.Google Scholar
  23. 23.
    Keeler EB, Manning WG, Wells KB. The demand for episodes of mental health services.Journal of Health Economics. 1988;7:369–392.Google Scholar
  24. 24.
    Frank RG, McGuire TG. Economics and mental health. In: Culyer AJ, Newhouse JP, eds.Handbook of Health Economics. Amsterdam: Elsevier; 2000.Google Scholar
  25. 25.
    Findlay S. Managed behavioral health care in 1999: an industry at a crossroads.Health Affairs. 1999;18:116–124.Google Scholar
  26. 26.
    Sturm R, Zhang W, Schoenbaum M. How expensive are unlimited substance abuse benefits under managed care?The Journal of Behavioral Health Services & Research. 1999;26(2):203–210.Google Scholar
  27. 27.
    Strurm R. Managed care risk contracts and substance abuse treatment.Inquiry. 2000;37:219–225.Google Scholar
  28. 28.
    Lave JR, Peele PB, Xu Y, et al. An exploratory analysis of behavioral health care use within families.Psychiatric Services. 2002;53:743–748.Google Scholar
  29. 29.
    Alexander JA, Lemak CH. The effects of managed care on administrative burden in outpatient substance abuse treatment facilities.Medical Care. 1997;35(10):1060–1068.Google Scholar
  30. 30.
    Alexander JA, Wheeler JRC, Nahra T, et al. Managed care and technical efficiency in outpatient substance abuse treatment units.Journal of Behavioral Health Services & Research. 1998;25(4):377–396.Google Scholar
  31. 31.
    Liu X, Sturm R, Cuffel BJ. The impact of prior authorization on outpatient utilization in managed behavioral health plans.Medical Research and Review. 2000;57(2):182–195.Google Scholar
  32. 32.
    Lemak CH, Alexander JA. Managed care and outpatient substance abuse treatment intensity.Journal of Behavioral Health Services & Research. 2001;28(1):12–29.Google Scholar
  33. 33.
    Lo Sasso AT, Lyons JS. The effects of copayments on substance abuse treatment expenditures and treatment reoccurrence.Psychiatric Services. 2002;53(12):1605–1611.Google Scholar
  34. 34.
    Stein B, Orlando M, Sturm R. The effect of copayments on drug and alcohol treatment following inpatient detoxification under managed care.Psychiatric Services. 2000;51(2):195–198.Google Scholar
  35. 35.
    Frank RG, Goldman MM, McGuire TG. A model mental health benefit in private health insurance.Health Affairs. 1992;11:98–117.Google Scholar
  36. 36.
    Frank RG, McGuire TG, Newhouse JP. Risk contracts in managed mental health care.Health Affairs. 1995;14:50–64.Google Scholar
  37. 37.
    Frank RG, Huskamp HA, McGuire TG, et al. Some economics of mental health “carve-outs”.Archives of General Psychiatry. 1996;53:933–937.Google Scholar
  38. 38.
    Dowd CE, Ashley-Dixon R. Consolidation: the changing face of the behavioral health care industry.Managed Care Quarterly. 1999;7(1):61–63.Google Scholar
  39. 39.
    Greenberg W, Allen J, Wider JJ, et al. Industry consolidation: what's at stake for consumers and purchasers?Behavioral Healthcare Tomorrow. 1998;7(4):32–38.Google Scholar
  40. 40.
    Keeler EB, Rolph JE. The demand for episodes of treatment in the health insurance experiment.Journal of Health Economics. 1988;7:337–367.Google Scholar
  41. 41.
    Huskamp HA. Episodes of mental health and substance abuse treatment under a managed behavioral health care carve-out.Inquiry. 1999;36:147–161.Google Scholar
  42. 42.
    Simon GE, Fishman P. Cost implications of initial antidepressant selection in primary care.Pharmacoeconomics. 1998;13(1, pt 1):61–70.Google Scholar
  43. 43.
    Kessler LG, Steinwachs DM, Hankin JR. Episodes of psychiatric care and medical utilization.Medical Care. 1980;8:1219–1227.Google Scholar
  44. 44.
    Greene WH.Econometric Analysis. 4th ed. Upper Saddle River, NJ: Prentice-Hall; 2000.Google Scholar
  45. 45.
    Ferguson FN. Stake theory as an explanatory device in Navajo alcoholism treatment response.Human Organization. 1976;35(1):65–78.Google Scholar
  46. 46.
    Hubbard RL, Marsden ME, Rachal JV, et al.Drug Abuse Treatment: A National Study of Effectiveness. Chapel Hill, NC: University of North Carolina Press; 1989.Google Scholar
  47. 47.
    Goodman AC, Holder HD, Nishiura E. Alcoholism treatment offset effects: a cost model.Inquiry. 1991;28(2):168–178.Google Scholar
  48. 48.
    Holder HD, Blose JO. Alcoholism treatment and total health care utilization and costs: a four-year longitudinal analysis of federal employees.Journal of the American Medical Association. 1986;256:1456–1460.Google Scholar

Copyright information

© National Council for Community Behavioral Healthcare 2004

Authors and Affiliations

  1. 1.Institute for Policy ResearchNorthwestern UniversityEvanston
  2. 2.the Department of Psychiatry and Behavioral Sciencethe Northwestern University Medical SchoolChicago

Personalised recommendations