Evaluation of the Washington State Treatment Expansion Progam: Medicaid Cost Offsets

In 2005, the Washington State legislature enacted Senate Bill (SB) 5763, which provided funding (> $25 million) to establish the Treatment Expansion Program to expand access to substance abuse (SA) treatment for Medicaid clients. Approximately 65% of the program's funding came from expected savings in the Medicaid budget. SB 5763 was based on the assumption that cost-offsets (cost savings) generated by SA treatment would “pay for” the expanded treatment. We analyzed the cost offsets associated with the program to determine whether cost savings associated with SA treatment would pay for the expanded treatment. More specifically, we analyzed the difference in Medicaid expenditures per member per month (pmpm) for 2 groups identified through administrative data as needing SA treatment: (1) working age disabled clients enrolled in the aged, blind or disabled (ABD) program, including clients with dual Medicaid-Medicare eligibility (N=11,251), and (2) clients on general assistance (N=8,235). Comparison groups were constructed by identifying clients with similar Medicaid eligibility who needed SA treatment but did not receive it. We used multiple regression techniques to evaluate the difference in pmpm Medicaid expenditures over a 24-month follow-up period after initiation of treatment during the period July 2004 through June 2006. SA treatment was associated with reductions in pmpm Medicaid costs of $385 for ABD clients and $160 for general assistance clients. Total cost savings were estimated at $16.8 million. The findings suggest there are important cost offsets associated with SA treatment that may justify expanding access to treatment to serve clients with unmet need.