Tobacco Documents Online

Center on Addiietdo.ni and Substance Abusee at! Columbia Utfiversity 152 West 57th Street New York, NY 10019 phone 212 841 5200 fas,212 956 8020 Board qjDirectors Joseph A. Califano, Jr. C'hair9nan and Pm,sident'. James E. Burke Betty Ford Douglas A. Fraser Barbara C.Jordan Donald R. Keough LaSalle D. Leffall, Jr., M.D. Manuel T. Pacheco;,Ph.Dj . Linda Johnson Rice E. John Rosenwald, Jr. George Rupp, Ph.D. Frank G. Wells The Cost of Substance Abuse to Americai s Health Cialre System Report 2: Medicare Hospital Costs May 11994

Board of Directors Joseph A. Califano, Jr. Chairman and President of CASA James E. Burke Chairman of the Partnership for a, Drug-Free America Betty Ford Chief Executive Officer of the Betty Ford Center in Rancho Mirage, California Douglas A. Fraser Professor of Labor Studies at Wayne State University (former President of United Auto~ Workers), Barbara C. Jordan Professor at the LBJ Sehool of Public Affairs at the University of'Texas at Austin (former Congressvvoman from Texas) Donald R. Keough Chairman of the ! Board of Allen and Company Incorporated (former President of The Coca-Cola Company). LaSalle D. Leffall, Jr., M.D. Chairman of the Department of Surgery at Howard University College of Medicine Manuel T. Pacheco, Ph.D, President of the University of Arizona Linda Johnson Rice President and Chief Operating Officer of the Johnson Publishing Company, Inc. E. John Rosenwald, Jr. Vice Chairman of The Bear Stearns Companies Inc. George Rupp, Ph6D. President'of Columbia UniiversityFrank G. Wells (1932-1994) (former President and Chief Operating Officer of The Walt Disney Company) This, studyx+asconductedbyJeffrevMerrilT, VicePresidentforPnlicy anttResearch~atCASA;Kimberley Fox Senior Program Manager;, Han-hua Chang, Research Assistant; Gerald Pulver, Data Manager; and Dr. Andrew Schiff lU1'edical Associare. The studv was funded bv a grant f,rom the Henrv J. Kaiser Fnmidv Forutdatinn. Copyright ° 1994 bti= C'enter on Addiction and'Substance Abuse at Columbia University 4/94

FOREWORD S bsianee abuse and add'iction is an equal opportunity problem. Old and young, rich and poor are eq ually vuliserable to its effects on their healith. In order to improve the health and well-being, of our nation's cirtizens, we~ need to recognize the universality of the effects of' substance abuse and mount an all-fronts attack on all abuse of liegal an& illegal dh2gs, alcohol, and~ tobacco. The centrall missions of CASA--the Center on Addictiion, andl Substance Abuse at. Columbia University--are to i&ntil'iy the cost of substance abuse throughout Ameriean, society and inform the American people of those costs andl the impact of'substanceabuse on theirr lives: to findl out what works in prevention and treatment; and to encourage all individuals and institutions to take responsibility to: deal withi substance abuse. For almost two years, funded by the Henry J. Kaiser Family Foundation, CASA has been engaged ini the first analysis ever undertaken of the cost of substance abuse: to the nation's health care system. The initial phase: of this project, completed in July of 1993,, examined the effect of substance abuse on inpatient Medicaid hospital costs. In that study, CASA found that one in five hospital days and $7:4 biilliioni of Medicaid inpatient hospital costs in 1994, will be linked with the use or abuse of alcohol, tobacco or drugs. This second report docurnents the iQnpact on the Medicare hospital program. Nearly one out of every four dollars Medicare spends on inpatiient' hospital care, andi one out of every five Medicare hospital admissions, are attributable to substance abuse. From cancer to stroke andhea2-tdisease, from respiratory infections to injuries andl accidents, the use and" abuse ofcigarettes, alcohol, pills and drues is a major cause of many diseases that eventually result in

hospitalizations for which Medicare pays. In 1994 dollars, substance abuse will cost Medicare $20 billion in inpatient hospital costs alone. These numbers are low. Research documenting the health effects of alcoholl and drugs on: the elderly has not been a high priority and studies of the effects of' abuse of prescription drugs are nearly non-existent. Even for cigarettes, where there is a substantial body of research on~ health effects, much of it ignores the: elderly and the accumulated consequences of smolting, for decades, which affects the elderly disproportionately. Physicians underreport the inciidence of alcohol andl drug abuse in the elderly population~ more so than inn the younger population. Concern about patient confidentiality and embarrassment leads many doctors to fail to record alcohol and drrug, problems. Physicians often misperceiive disorientation or incoherence caused by alcohol or drugs as a symptom of the natural aging process or dementia. For Medicare, the biggest culprit, in causing poor health is tobaceo, accounting for nearly 80% of substance abuse-reldted Medicare hospitalizations. Again, this may be because we do not know enough about the health effects of alcohol and drugs. But it also reflects the high prevalence of long-term smoking, among the elderly. More than 36% of' Medicaree recipients are former smokers and nearly 20% currently smoke. Three out of five current smokers and'one third of the qpitters smoked more than 10 cigarettes a day for more than 35 years. Perhaps the most disturbing finding of this study is that substance abuse will cost the Medicare program one trillion dollars over the next 20 years. On April 21, the trustees of t'heM'edieare Trust Fund released areportprediethng tha2theFund would run out of money ihseven years. Inevirtably;thepolit6c~iansresponded with prop~osalsto~ raise taxes, increase ii

premiums, andYor cut benefits. In all the discussions about rising, Mediicare costs, little attention focused on how to prevent hospitalizations altogether. A ten percent reduction in the amount of substance abuse would save the Trust Fund $100 billion over the next 20! years. This study was condrueted by CASA under the direction of Jeffrey Merrill, Vice President for Policy and Research and a professor at Columbia University School! of Public Health, and Kimberley Fox,, senior program manager, with the assistance of Han~ hua Chang; 1' Gerald Pulver and Dr. Andrew Schiff. Their research could not have beeni accomplished without the valuable advice of a number of distingtaished physicians, epidemiologists, and economists. For their continuedl assistance and consultation on this entire project to identify the cost of substance abuse to, the ! health care system, I would especially like to thank Jeffrey Kelman, M~D: and Dorothy Rice, ScD. By the end' of the year, CASA will complete its assessment of the impact of substance abuse on the entire health care system and will release a report covering the entire system -- private sector hospirtalizat'ions as well as outpatient andl long term care. Joseph A. Callfano; Jr. Chairman and President, iii

THE' IMPACT OF SUBSTANCE' PiDUSE ON MEDICARE INPATIENT HOSPITAL COSTS INTRODUCTION The Annual Report of the Trustees of the Federal Hospital Insurance Trust Fund released ini April 1994 projected that the Medicare program willl run out of money in seven years. This projectiion: of future insolvency for the Fund--which pays the vast majority of hospital costs for the elderly and disabled--is due in large part to the fact that Medicare payments for hospital costs continue : to grow at an alarming rate, outstripping the revenues paid into the Fund. In responding to this crisis, invariably, the proposed solutions involve raising taxes or cutting benefits. In all these discussions, however, little time is spent in, thinking about how we can keep elderly people healthy and avert hospitalizations. The worst example of this is our failure to move aggressively on the pervasave impact of substance abuse, including tobacco, alcohol and drugs, on both ]II edicrrre and overald heqlth co5ts. Based on our findings, $20 billion 1994 inpatient Medicare hospital payments will be due to substance abuse and' addiction. If the problems of substance abuse did not exist, we would not now be concerned about, the solvency of the Hospital Trust Fund. Over the next seven years, substance abuse will cost the Trust Fund almost $170 billion. For future generations worried about the continued survival of this program, over the next 20 years, Medicare will pay out more than $1 trillion for hospirtall care related to substance abuse. Past studaes" have provided evidence of the impact of substance abuse on healtth care. Further. these studies have tended to underestimate the full magnitude of the problem because thev.either focus on only one substance or have not takenn fuff advantage oft'hef epiderniologic research that relates substance abuse to virtually even, major disease category.

Despite such limitations, these studies still provide a powerful' argument for the inclusion: of substance abuse in the cost containment debate. In addition, they demonstrate the need to understand more fully just how critical this issue is' if we are to address seriously not only the concerns over the sol vency of the Medicare Trust Fund, but health care reform in general. Th e CASA Study In 1992, CASA--The Center on Addiction an& Substance! Abuse at Columbia. University--initiated a comprehensive study documenting the full extent to which all substance abuse, including alcohol; drugs and tobacco, contributes to ~ the costs of the health care system. Combining a critical review of the medical andl epidemiologic literature linking substance abuse as a risk factor for a: wide variety of' medical condirtions,, with extensive consultation with physicians and researchers knowledgcablie in this area, CASA is in the process of estimating the magnitude of this problem and its associated costs. The first phase of this project, which examined the extent to which Medicaid hospital costs might be attributed directly or indirectly to substance abuse,, was completed in July of 1993.`' This study found~ that at least one in five hospital days under Medicaid, or $7.4 bildion of Medicaid hospital costs in 1994, could be 1'ink~edh wi'th theu5eor abuse ofalcohof~ tobacco or drugs. For diseases and health conditions as disparate as cancer, stroke, heart disease, AIDS, trauma, andl birth complications, substance abuse has been documented to be & major risk factor. When these health effects are considered, substance abuse takes a major toll on the Medicaid program. And these estimates are undoubtedly stilt low because of both the underreporting of the problem and the fact that the aNailable research, partiicularly forr alcohol and dhugs, is incomplete in documenting the full i~mpact of substance abuseonmorbidity.. 2

In add'ition, while many had argued that the effects of these substances on disease were long-term, and the results of efforts to control abuse and addiction would not be seen for many years, the CASA study found the opposite to be the case. In facty two-thirds of the costs of substanee abuse to Medicaid were related to short-term health problems including those associated with traunla; AIDS and birthi complications, where the impact on health can be seen almost immediately. Efforts to cont.rol' the use of these substances can lead to immediate savings to the health, care system. The eurrentphase of CASA's work deals with the impact of substance abuse on the use of inpatient hospital services under Medicare. As suggested ini a recent study reported' inn the Journal of the American Medical Assoeiation3 which examined alcohol4el'ated hospitalizations in the elderly, the costs of alcohol abuse to Medicare can be significant. But, when all substances--as well as all the heal th problems related to them--are considered, the costs to Medicare are astronomically higher: more than 50 times as much as was estimated in that earlier study. Using the methodology from the previous CASA study of Miedicand. (descrihedl in Appendix I); but accounting for the differential impact of these substances on the elderly, as wi th Medicaid, substance abuse proved to be a rnajor contributor both to morbidity and to the costs of health care for the elderly and disabled.

RESULTS The High Cost of Shbstance Abuse In 1991'; there were 2:2 million tobacco, alcohol, or drug-related! Medicare admissions which accounted for 20% a ~ of all Medicare hospitalizations. Biecause these substance abuse-related cases tend to ~ be more expensive to treat than the average hospital case, the amount actually paid out by Medicare for substance abuse-related care was even higher, accounting for 23% or nearly one-fourth of the total Medicare payments for hospital care.' Substance abuse-related cases cost more to treat because they required alcnost26% more hospital staff and'other resources than Medicare discharges that are unrelated to substance abuse. We estimatedi that Medicare discharges for co ditions where: substance abuse was a major risk factor had a Case Mix Index (CMI - a measure of resource use) of about 1.51, compared to a CMI of 1.21 for diagnoses not related to substance abuse. As displayed! in Graph 1, in dollars, Medicare spent over $13 billion of its $57' bi'lliion~ inpatient short-stay hospitali expendltures on substance abuse-related care. These amounts exceed the I out of 5 d'ollars spent in the Medicaid program for substance-abusee related conditions. Based upon these results, it is estimatedl that, for 1994, substance abuse-related Medicare hospital costs wiIll rise to $20 billiom These costs include substance abuse-related~ care for both elderly and disabled Medicare recipients, with the disabled comprising 12% of these costs. a 1991 is the most recent year that National Hospitall DischargeS'urve}° data is available. bSee Methods section for discussion of hov.^ payments were calculated. 4

Graph 1: Nearly 1 Out of 4 Medicare Dollars for Hospital Care Associated with Substance Abuse Medicare Payments Substance-related 23% Non-substance related 77% National Hospital Discharge Survey, 1991