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19 Cost-Effectiveness
Information that compares the net medical cost of treatment for a person with
alcohol problems with the treatment effect or effects is necessary for judging the desirability
of support for such treatment and of insurance coverage for it. This analysis of costs and
effects furnishes "cost-effectiveness" data that can be used in decision making.
Cost-effectiveness analysis as a decision aid is, at base, a comparative tool. No
strategy is literally cost-effective in isolation; the most that can be said is that one strategy
is more cost-effective than another. If, for instance, strategy A is more costly and no more
effective than strategy B. one can say that B is cost-effective compared with ~ However,
the information on costs and effectiveness of the two strategies cannot tell us that strategy
B is cost effective in isolation or in comparison, let us say, to a strategy of no intervention.
The comparative aspect of cost-effectiveness is an important point, especially when different
treatment strategies are analyzed. Strictly speaking, cost-effectiveness analysis as such can
only provide information about relative desirability and not about whether anything at all
should be done. There is, however, one common and natural use of the term cost-e,ffectiverzess
as an absolute concept that is relevant to the treatment of alcohol problems. If a costly
medical treatment lowers medical costs elsewhere in the system (either simultaneously or
in the future), if it does so to such an extent that the value of the cost savings more than
offsets the cost of the treatment, and if the treatment at least does no harm, then it might
legitimately be said that the treatment is Cost effective and obviously desirable in the sense
that it leads to negative net medical costs compared with a No treatments alternative.
The cost-effectiveness analysis of treatment for alcohol problems has, to a
considerable extent, pursued this question of cost offset (IOM, 1989~. In addition to the
question of whether treatment itself actually saves money, compared with no treatment,
there is the additional particular question of which treatment to select. The net cost of
treatments varies; some treatment strategies may have higher net costs than others but may
also have greater effectiveness. This situation then poses the classic cost-effectiveness
question: how does the additional cost compare with the additional effectiveness?
The discussion that follows, examines both of these cost-effectiveness questions:
the possibility of cost offsets (and a negative net cost) of some treatment compared with
no treatment and the cost-effectiveness of one treatment compared with another.
Studies of Costs and Cost Offsets
Because alcohol problems and alcohol dependence are associated with positive
medical costs-for example, from alcohol-related illness and from accidents and injuries- it
might be expected that successful treatment would lower those costs and an offset would
occur. Jones and Vischi (1979) carried out an early review that displayed the pattern
shown in subsequent research. They reviewed 25 studies that examined whether treatment
for mental illness, alcohol abuse, or drug abuse reduced subsequent utilization of health
services. Twelve of the 25 studies involved alcohol abuse; Jones and Vischi concluded that
these studies showed that reductions did take place in either medical care utilization
measures (e.g., hospital days, outpatient visits) or surrogate measures (e.g., sick days,
sickness and accident benefits paid). They also observed reductions in the subsequent use
of health services that ranged from 26 percent to 69 percent, with a median reduction of
40 percent. Methodological problems were noted in all 12 studies (e.g., limited time spans,
small samples, lack of appropriate comparison groups); in addition, none of the studies
was a randomized clinical trial that could have served to suggest causality. A further
455
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456 BROADENING THE BASE OF TREATMENT FOR ALCOHOL PROBLEMS
methodological problem was that a majority of the reviewed studies were conducted in
HMOs or employer-based programs. This factor led the reviewers to raise questions about
the generalizability of the findings as well as about the specific cause of the observed
subsequent reductions in utilization (i.e., the cause may have been a characteristic of the
treatment setting rather than of the treatment itself).
Jones and Vischi discussed the implications of the findings for three areas of policy
concern: (1) the setting in which treatment takes place, (2) the linkage of treatment for
alcohol and drug abuse and mental disorders with general health services, and (3) health
insurance coverage. They made no specific recommendations because of the limitations of
the studies they reviewed. Their review, however, set the stage for continued studies of cost
offsets in subsequent health services utilization and in insurance costs as a major strategy
for obtaining improved coverage for treatment of persons with alcohol or drug problems
or mental disorders. ~ ~
coworkers (1983), Holder (1987), and Holder and colleagues (1988).
~ .
come or these more recent studies are reviewed by Saxe and
These analysts
attempted to determine whether treatment for alcohol problems provides any cost offsets
and, if it does, whether the offsets are large enough to produce a negative net cost for
~,
treatment.
The types of cost offset studies that have been conducted and the nature of the
results differ by the form of insurance coverage for treatment, the characteristics of the
population at risk, and the process by which people are induced to seek treatment.
Because there is reason to believe that the cost offset may vary depending on the process
that stimulates treatment, it will be useful to treat each group of studies separately.
Early studies of cost offsets looked at the experience of employee assistance
programs (EAPs).
latest programs identified workers who were problem drinkers and
assisted and encouraged them in seeking treatment. A number of studies of (EAPs) have
compared medical costs, disability costs, and sick days before and after an employee was
successfully referred for treatment (e.g., Alander and Campbell, 1975~. There was consistent
and unequivocal evidence of a change in outcome after treatment, either compared with the
employee's previous behavior or compared with trends among a control group of persons
with alcohol problems who did not seek treatment. Amone the treated employees, sick
days and injury days fell, and inpatient costs dropped.
_
~ ,^ Sometimes the savings in the
medical costs over the one- to two-year follow up period exceeded (in present value terms)
the cost of the program; sometimes the offset was not complete. However, these studies
typically followed small groups over a limited time period and did not measure all medical
costs.
A later set of studies used data from insurance and HMO plans and permitted
longer follow-up periods and larger samples of employees and dependents. Holder and
colleagues (Holder and Hallan, 1976, 1986; Holder and Those, 1986) examined several large
samples (in one case, more than 1,500 observations) of persons with alcohol problems.
Using sophisticated statistical models, they compared the total medical cost levels of the
participants before and after treatment initiation. The Holder team found a universal
pattern of decreases in hospital admission rates and average total medical costs, compared
with past trends and with trends in a control group. Over a two- to three-year period, the
full cost of the treatment was more than offset. Other studies (Brock and Boyajy, 1978;
Sherman et al., 1979) showed similar results.
The third group of studies involved were people who were receiving treatment from
publicly funded programs (both the Veterans Administration and Medicaid)
(Magruder-Habib et al., 1985; Calkins et al., 1986~. These studies failed to find a cost
offset and may in fact have found a cost increase. This finding is in contrast to those from
earlier studies of public clients (JWK International Corporation, 1976; Gregory et al., 1982;
Becker and Sanders, 1984~; however, those studies projected substantial cost offsets but
were not based on actual total expense data. Luckey (1987) conjectures that the differences
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COST-EFFECTIVENESS
457
among the populations in these studies of publicly funded programs, compared with the
EAP and insurance company studies, may explain the difference in results; that is, lower
income people may have more chronic health problems before they initiate treatment and
may have fewer incentives (or less opportunity) to maintain recovery.
Thus, the overall picture regarding cost offsets is one of cost declines after
treatment for people who are not poor, declines which are frequently large enough to offset
the cost of treatment (Luckey, 1987~. Do these studies conclusively demonstrate that there
is a negative net cost? Does the remarkable consistency of documented reductions in
health care costs among insured groups strongly suggest the decreases are real?
Unfortunately, despite the consistency of the results and the large sample sizes,
there is still a methodological Achilles heel to the findings. In all of the studies, treatment
recipients selected treatment for themselves (self-selection) and were not randomly assigned.
That is, the studies do not tell us how those individuals would have fared had they not
obtained treatment, information that could have been provided through the use of random
assignment to experimental and control groups. The comparisons that were actually used
in the studies were based either on the prior experience of those who sought treatment or
on the experience of other control groups. As a result, the studies cannot report with
confidence that treatment caused a difference in outcome (i.e., enabled later cost offsets)
because the studies use two different groups of people for comparison: those who sought
treatment and those who did not.
Yet a question remains: If the treatment did not necessarily cause the decline,
what did? One possible answer is that the people who sought treatment were ready to stop
drinking anyway, with or without help. The other possibility is the statistical phenomenon
called "regression to the mean," in which periods of unusually high levels of anything
(whether it be rainfall, temperature, or the Dow-Jones index) are most likely to be followed
by a return to the average: because an episode of treatment for alcohol problems is
accompanied by high costs for all medical care, it is to be expected that low costs would
follow.
Some reviewers nevertheless conclude that there is some evidence to support the
hypothesis that treatment for alcohol problems is cost-beneficial (Saxe et al., 1983; Holder,
1987; Luckey, 1987~. The benefits of treatment for alcohol problems are cautiously seen
to be in excess of the cost of providing such treatment even if they fall short of what may
be claimed. The caution stems from the subjective judgments that the reviewers must
conjecture about the degree of spurious causation in the studies they reviewed because
neither the studies nor the reviews provide any objective basis for determining the
seriousness of the problem of spurious causation.
One way out of this impasse would be to use the kind of reasoning suggested
earlier. There are no controlled trials of cost offsets in real world settings, but there are
the many before-and-after studies reviewed (Holder, 1987; IOM, 1989~. There are the many
controlled trials of the effectiveness of treatment in clinical settings reviewed for this report.
Can one link the two sets of results to come to a reasonable conclusion? There are two
reasons why the answer may still be negative. One answer is brief and theoretical; the
other is longer and is based on empirical fact.
The theoretical problem is that the effectiveness demonstrated in controlled trials
of treatment alternatives (there have been no controlled trials of cost-effectiveness) may not
carry with it the kind of cost offset (at least in terms of size) suggested by the uncontrolled
studies. This objection might be dismissed by appeal to the ethical and practical difficulties
of randomizing large numbers of persons with alcohol problems to a long-term
no-treatment trial. However, the strength of such an appeal is lessened by the fact that
there have been some additional large sample studies that do use a type of real-world
random assignment and that failed to find any cost offset (e.g., Hayami and Freeborn, 1981;
Manning et al., 1986~.
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458 BROADENING IlIE BASE OF TREATMENT FOR ALCOHOL PROBLEMS
It is usually not easy to assign people who seek treatment to a no-treatment control
group, nor is it possible to assign people who do not seek treatment to treatment.
Considering the difficulties involved in randomized controlled trials, it will necessarily be
impossible to get a reliable estimate of the cost offset for treatment of an "average" person
with alcohol problems. In any case, because there is no way to compel that person to seek
treatment, such an estimate does not really answer the relevant policy question: whether
there is a cost offset for the type of person who can be induced to enter treatment by
feasible policy interventions (e.g., better insurance coverage, the use of an EAP, court
orders, an especially powerful way of marketing treatment). This question can be explored
using a different methodology from that of randomized trials. Although one cannot assign
individuals to treatment and no treatment study conditions, one can assign populations
containing persons with alcohol problems to policy interventions that are thought to
provide a stronger stimulus to such treatment than is provided in other environments. An
example of such a study is provided by the Hayami and Freeborn (1981) analysis of
different levels of out-of-pocket payment. This study raises serious questions about the
existence of a relevant cost offset.
In the Hayami and Freeborn study, more than 20,000 members of the
Kaiser-Portland health plan were randomly assigned to different levels of out-of-pocket
payment for subsequent treatment for alcohol problems. Half of the population was
~assigned" to receive coverage for such care free of charge (i.e., full insurance coverage); the
others received the standard benefit of 50 percent coverage.
Regardless of the level of insurance coverage, only a small percentage of the plan's
members who were eligible for treatment of alcohol problems actually sought such
treatment. The free care group used significantly more treatment services than the
copayment group and also showed a modest improvement in condition. However, there was
no difference between the two groups in the use of medical services in the posttreatment
period. That is, there was no evidence of a cost offset associated with more generous
insurance coverage and the higher level of use associated with it.
A study that examined a wider range of insurance coverage but for mental health
services in general and not just for alcohol problems treatment, is the RAND Corporation
health insurance study carried out by Manning and coworkers (1986~. This study employed
a randomized design that assigned 5,800 people to levels of insurance coverage ranging
from free care to very high copayments. Compared with those who had free care, those
who had copayments were less than half as likely to use mental health services. The
follow-up period in this study (up to five years) was longer than in the Hayami-Freeborn
study, but again no posttreatment cost offset was found.
Yet these studies also have certain limitations that may affect the meaning one
ascribes to their results. The follow-up period in the Hayamai-Freeborn study was short
(although the follow-up period in the Manning study was not); the Manning team's study
was not limited to treatment for alcohol problems. These limitations mean that one can
only say that these studies failed to find any cost offset, not that a cost offset does not
exist. Nevertheless, these results raise serious questions about the inevitability of cost
offsets from more extensive insurance coverage, and they surely do not prove that better
coverage saves enough money to offset its cost.
It would be possible to reproduce these studies, even in private insurance settings,
by phasing in more generous benefits for treatment of alcohol problems on a random or
nonsystematic basis. Alternatively, it would be possible to examine the experience of
people with other, exogenous influences on their use of services (e.g., the distance to or
availability of treatment facilities, mandated referrals by the criminal justice system) to carry
out population-based real world analysis of cost offsets. In the current state of knowledge,
however, there is still some doubt that the net cost of treatment for alcohol problems
would surely be negative for some population. "Probably" is a reasonable adverb to attach
OCR for page 459
COST-EFFECTIVENESS
459
to cost offsets, but reasonable people can differ. One should hasten to add that suspecting
that treatment might have a net positive medical cost hardly suggests that treatment is
undesirable. It only means that attention must De rocusea on ant; owner Do; [U ~O
gained from reducing alcohol problems. Those benefits, in terms of increased productivity,
reduced danger to others, and the value placed by the person with an alcohol problem and
his or her family on the reduction or elimination of that problem, are all surely positive.
It is on the value of these benefits that one should rest the case for the advantage of
treatment for alcohol problems (Harwood et al., 1984; Harwood, 1988~.
Cost-Benefit and Cost-Effectiveness Analysis
The discussion above indicated that there is some, although not conclusive, evidence
that spending money on treatment today lowers future medical costs. Whether there is, in
any case, sufficient cost savings in the future to more than offset current costs is not
known. Compared with no treatment, the use of some treatment (i.e., brief intervention)
has a chance of lowering cost. But what about treatment beyond the level of brief
interventions? More intensive treatment, even if it should be discovered to have some cost
offset, almost surely will have a positive net cost. Yet a more costly treatment may still
be appropriate if it is more effective, if it provides more overall person and social benefit.
Conversely, a treatment that provides some additional benefit may still not be desirable if
it costs too much. For effective judgements, what we need to know is the cost effectiveness
of alternative forms of treatment, a comparison of additional costs and additional benefits
(Luckey, 1987~.
There has been almost no formal examination of the cost-effectiveness of alternative
treatments (Pauly, 1988~. As discussed in Chapter 5, there is substantial uncertainty about
whether interventions beyond the brief intervention level have any additional benefit when
indiscriminately applied; there has been virtually no analysis of their additional cost. It is
probably plausible to assume that brief interventions are cost-effective compared with no
treatment. (The cost of a brief intervention is so low that a negative net cost is achieved
through only a small cost offset. Moreover, even if it should have a positive net cost, that
cost is likely to be low enough that the benefit provided by such interventions would
usually be judged to be worth the cost.) Beyond brief interventions, however, there is
simply no basis for determining the additional costs compared with the additional benefits
because there is much uncertainty about benefits and virtually complete ignorance about
costs. Thus, it is not known whether there are any additional cost offsets attached to
treatment offered at levels beyond that of brief intervention. Also at issue is whether
positive costs, if present, are exceeded by benefits.
Holder and colleagues (1988) have indicated the sort of study needed to answer this
question: one with standard measures of outcomes, standard means of treatment, and
random assignment. Absent this type of analysis, one is forced to make informal
comparisons by relying on the effectiveness literature and guessing what the comparative
costs would be.
The best (and most conclusive) example of such an analysis is based on the "more
intensive-less intensives split. As noted earlier (see Chapter 5 and Appendix B), when
forms of care that are more intensive than brief interventions are applied to
undifferentiated populations of people with alcohol problems, there is usually no
significantly greater effect than there would have been using less intense treatments. Under
the reasonable assumption that more intensive care is more costly than brief interventions
or outpatient care, one could conclude that more intensive care is less cost-effective than
those less costly alternatives. This is not a tautology; if the improvement in effect with
more intensive, more costly care had been positive and large, one might well have
concluded that more costly care was more cost-effective. With zero effects and high costs,
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460 BROADENING THE BASE OF TREATMENT FOR ALCOHOL PROBLEMS
however, it is a foregone conclusion that it more costly care is not more cost-effective.
More generally, given any set of treatment approaches that yield comparable outcomes-and
this uniformity is the rule rather than the exception in effectiveness studies for alcohol
treatment the least costly intervention in the set is always the one to be preferred on
cost-effectiveness grounds.
Holder and colleagues (198$) suggest some possible exceptions to this conclusion.
They note that "it may be that certain types of programs/facility combinations better retain
persons with chronic, severe alcohol problems in treatment or some form of institutional
care (24-hour care) is necessary for patients with more severe physical disability resulting
from chronic drinking" (p. 7~. They conclude, however, that at present "this is more
speculation than science."
Are there circumstances requiring qualifications to the conclusion that
residentiaVinpatient care is less cost-effective than outpatient alternatives? Most of the
argument, as usual, turns out to be about effectiveness, and not about cost. Many of the
studies that show no differences are old and do not represent the type of treatment
program currently being used in many residential programs. Others reveal that certain
kinds of persons may do better in a residential setting, especially persons with less social
stability (Kissin et al., 1971) or with a dysfunctional family or work relationships (McLellan
et al., 1982~. There was one random assignment study where residential care proved more
effective for socially disadvantaged persons (Wanberg, Horn, and Fairchild, 1974~. Against
these exceptions, however, is mounted a group of studies that show that outpatient or day
treatment settings offer effective treatment that is at least as good as-if not better
than that offered in inpatient/residential settings.
The finding that an inpatient program is sometimes more effective does not, of
course, mean that it is also cost-effective. Put more bluntly, if residential programs for
people with dysfunctional family relationships are a little better but a lot more costly than
outpatient programs, they may still be undesirable because the benefits are not worth the
cost, that is, are not large enough to "justify" the cost. To know for sure, it is necessary
to assign values to benefits, something health care analysts try to avoid if at all possible.
Yet ducking the value judgment may not always be an option. The value judgement may
need to incorporate considerations other than cost effectiveness. For example, for persons
with severe and chronic alcohol problems, Holder and colleagues (1988), concluded that
there is no treatment intervention with a full cost offset.
Although residential or inpatient settings may be more costly and no more effective
than outpatient approaches for people who have already decided to initiate treatment, they
may attract more people into treatment than the "live in the community/face your friends
alternative. If treatment does have a cost offset, spending more per person to attract more
people to treatment may actually result in a lower net cost for a given population of people
with alcohol problems. However, this "marketing" or "attractiveness" dimension which
reflects the benefits individuals perceive will be forthcoming from a particular treatment-has
not been investigated at all. More evidence may show that this ability to attract persons
to treatment could be the strongest argument, if there is to be any strong argument to be
made, for treatment in the residential setting.
The intensity of treatment (as distinct from the treatment setting) again displays
the No difference" results. There have been few direct comparisons of brief interventions
(e.g., brief counseling) compared with intensive residential treatment. A recent study by
Chick and coworkers (1988) showed better outcomes for extended treatment by the second
follow-up year but did not provide estimates of the difference in the cost of the two
approaches. Finally, even informal comparisons of treatment methods are simply not
possible on cost-effectiveness grounds (Holder et al., 1988~.
In summary, for a heterogeneous group of persons with alcohol problems, no one
treatment has been shown to be more effective than any other, whether the treatment
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COST-EFFECTIVENESS
461
variable used for study is the setting, intensity, modality, technique, or process. Thus, it
cannot be ruled out that, even in some of the cases in which more intensive treatment is
effective, the cost per unit of "effect" is disproportionately large. Better information is
sorely needed.
Matching and Cost-Effectiveness
Matching individuals with alcohol problems to particular treatments seems to
increase average treatment effectiveness. Matching is the strategy preferred by this
committee. However, there is no literature that bears on the question of cost-effectiveness
in matching programs because there is relatively little evidence on the question of the
effectiveness of matching itself (Holder et al., 1988~. Posing the cost-effectiveness question
requires first that one specify both the total level of resources to be applied to a population
of persons with alcohol problems who have different needs and how those resources are
distributed among different individuals. One might imagine that in theory there is some
distribution, given a resource constraint, that "maximizes effectiveness" but what is it?
Without such knowledge, the allocation of resources based on clinical judgment about
appropriate matching could lead to lower aggregate "effectiveness" than if there were no
matching.
A related issue concerns the cost-effectiveness of various matching procedures. The
"best" treatment for a particular individual, given his or her condition, may not be the most
cost-effective one. As the dismal comment of the previous paragraph suggests, it may even
be best to do nothing, or to do very little, rather than match treatment to someone for
whom the most effective treatment has nevertheless low effectiveness and high cost.
Still a third cost-effectiveness question concerns the cost of matching itself. Careful
assessments use up real resources, and the benefits from better matching may not be worth
the cost of determining who needs which treatment. One suspects this may be particularly
the case with less severe problems, where it may be less costly to give everyone a standard
brief intervention and perform assessments much later and only for those people who seem
to be responding poorly. Conclusions here all depend on information that has not even
been a subject of speculation, much less an object of fact: the cost of assessment; the
consequences (in both cost and outcome) of mismatches, whether false positives or false
negatives; and the cost in real-world settings of managing clinically ideal matching
programs.
If overlaid on the problem is the notion that, from a policy perspective, all one can
do is encourage matching or try to structure insurance and financing policy to permit
matching, the situation becomes even more complex. How effective, and how cost effective,
would it be to replace blanket 28-day program insurance coverage with coverage for
managed care? Would case managers really be able to avoid enough long inpatient stays
to pay for easier access to outpatient care? Or would one see the more common
real-world setting in which outpatient treatment expands when coverage is extended but the
long inpatient stays fail to contract?
Conclusions and Recommendations
Although there are some critical findings from cost-effectiveness research that have
helped the committee to formulate its recommendations on financing treatment for alcohol
problems, it is painfully obvious that much of what we need to know is not known.
Defensible measures of the cost-effectiveness of treatment beyond brief interventions for
particular populations are simply not available; consequently, the data on cost-effectiveness
are still insufficient for unambiguous policy guidance. Accordingly, the committee sees it
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462 BROADENING THE BASE OF TREATMENT FOR ALCOHOL PROBLEMS
as appropriate to recommend an intensive program of research to determine the costs of
alternative treatments for persons with alcohol problems relative to the benefits of such
treatments. The committee recommends that thefederal government sponsor an expanded program
of research and ar~aisis directed at discovering the costs, effectiveness, and responsiveness to
insurance coverage of the various treatment strategies now in use and the matching strategy, which
the committee favors, that is now being introduced. The program should include studies of the
impact of all types of third party funding on the utilization of different forms of treatment
for alcohol problems. Agencies which should be involved in developing this program of
research would appropriately include the National Center for Health Services Research, the
Health Care Financing Administration, and the National Institute on Alcohol Abuse and
Alcoholism.
None of these agencies currently has such an effort under way. The recent NIAAA
(1988) program announcement outlining areas of interest and requesting applications for
research on financing issues and the costs of various treatment services and settings
represents an initial step toward developing such a program. Much more, however, needs
to be done (Wallen, 1988: IOM, 1989~. In particular, studies should be undertaken to
determine the question of whether it is necessary to provide discrete coverage for brief
interventions in order to bring more persons into treatment and to compare alternative
detoxification and primary rehabilitation strategies.
As recommended in Chapter 18, there should also be an expansion of the federal
government's services research effort to establish the cost-effectiveness of alternative
strategies and models for treating alcohol problems. Studies of treatment effectiveness
should not be undertaken without a consideration of the comparative cost-effectiveness
questions (Holder et al, 1988~. Thus, treatment outcome studies should routinely include
mode of payment and cost data in order to begin to define the relative cost-effectiveness
of various approaches to treatment of alcohol problems.
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Representative terms from entire chapter:
insurance coverage
