Who Pays For The Cost Of Alcohol and Other Drug Abuse?
When we wrote describing a community based approach to ameliorate the issue of alcohol and other drug abuse and addiction, we said that every system is perfectly designed to get the outcomes that it does. One implication of that statement is that there are benefits distributed across that system that outweigh the costs of that system. Shortly after publishing that article we were challenged with defining the costs. Our thought, in turn, is that if we define the costs, who pays those costs, who benefits from the use of alcohol and other drugs, that we may find a nexus that would tailor nicely with a proposed, community based solution.
In our last article we reviewed various studies that attempted to define the costs to American society and specific sectors in America. We did not attempt to drill down to the last dollar or replicate any of those studies. Rather, our attempt is to provide credible information for the larger society that, in our view, does not understand the issue very broadly or deeply.
We found that the studies vary widely as they review this issue from different perspectives. The costs are usually defined in business costs from healthcare and productivity losses, healthcare in emergency department visits, inpatient stays, follow-up outpatient care, residential and outpatient substance abuse treatment, criminal justice including law enforcement, courts, and local, State and federal incarceration. The specific cost estimates vary widely within these categories, but we believe that the total costs that are usually defined in excess of $750 billion annually are reliable.
A few studies attempted to quantify the quality of life losses that result from alcohol and other drug abuse. We did not include those costs in our review. In reviewing studies of who pays the costs we encountered that issue again and will discuss it further here.
The studies of cost for employers from alcohol and other drug use and abuse congregate near $160 billion. Those costs are defined in turnover, absenteeism, direct healthcare expense, insurance premiums, workers compensation contracts and payouts, safety/accidents, and employee theft.
The National Safety Council reported that in the four year period ending in 2018 employer costs from alcohol and other drug use increased 400%. Their research indicates that between 5% and 19% of employees varying by industry have abused alcohol and/or drugs in a fashion that interfered with work.
Obviously, these costs come at the expense of profit or price. If the former then investors pay that price or in the case of the latter consumers pay that price regardless if the cost increase is from business-to-business purchases or, eventually, the consumer.
A review of healthcare spending in the U.S by the Center for Medicare and Medicaid Services reports that total U.S. healthcare spend in 2022 of $4.5 trillion was growing slower than Gross Domestic Product but still accounting for 17% of GDP. In our previous article we reported on studies suggesting that direct spending on alcohol and other drug abuse in hospital settings alone totaled $35 billion.
The cost of providing healthcare in 2022 was shared among private insurance, federal government, and individuals in these proportions:
Private Health Insurance accounted for 29% share of total spending, increasing 6% in 2022 to $1.3 trillion fueled in part by a 1.5% increase in enrollment
Medicare accounted for 21% of total national spending, increasing 5.9% to $944.3 billion including an enrollment increase of 1.9%
Medicaid share totaled 18% share in 2022 increasing 9.6% to $805.7 billion including a 7.2% increase in enrollment. Medicaid cost is shared between the federal and state government
Out-of-Pocket spending by individuals increased by 6.6% in 2022 to $471.4 billion, accounting for 11% of total spending.
In 2022, the federal government (33%) and households (28%) accounted for the largest shares of national health spending followed by private businesses (18%), state and local governments (15%), and other private revenues (6%).
The direct cost of treatment is, in itself, substantial. A recent study by the National Center for Drug Abuse Statistics updated cost and enrollment data from their own 2016 study. They report that :
· 71,060 people enrolled in detoxification programs at a cost of $10.01 billion
· 102,934 people enrolled in residential treatment programs at a cost of $5.19 billion
· 276,027 people enrolled in outpatient services at a cost of $2.31 billion
· 431,780 people enrolled in methadone services at an estimated cost of $3.22 billion.
The breakdown among payors is not readily available.
Using the estimate from our previous article, the cost of criminal justice attributable to alcohol and other drug abuse including costs for policing, judiciary and prison can be reasonably estimated at $131 billion. Reviewing expenditures by local, State and federal government the Urban Institute reports that in 2021 state and local governments spent $135 billion on police (4 percent of state and local direct general expenditures), $87 billion on corrections (2 percent), and $52 billion on courts (1 percent). That report noted that the federal government directly spent $30 billion on police, $7 billion on corrections, and $15 billion on courts in 2017, the most recent data available at that time.
We noted earlier that we have not attempted to quantify the costs to quality of life for the person suffering from substance use disorder or for their loved ones. We have found several studies attempting to do so but they seemed nascent, widely varying and inconclusive. Further, that analysis was not necessary for the purpose of this series of articles.
Nonetheless, speaking of the burden of alcohol and other drug use, abuse and addiction in America we would be neglectful not to spend some time reminding ourselves of those costs borne by the person suffering from substance use disorder and their loved ones. We are demonstrating the cost to society and the sources of payment and they are staggering. Yet the erosion of personal quality of life is tragic.
Alcoholics and drug addicts suffer physical health deterioration from the first use and deteriorate rapidly with frequent and sustained heavy use. We have written elsewhere that the reported “J-shaped” prophylactic effects of alcohol were a misinterpretation. The physical health effects of alcohol and drugs include cancers, lung disease, heart disease, liver and kidney disease as well as neurologic disorders. Behavioral health damage is normally not onset initially but can be especially in the case of certain schedule 1 and schedule 2 narcotics. Long term use will often cause behavioral health issues including depression and anxiety. Anyone with a predisposition to personality disorders will certainly increase their chance of evidencing those issues and increase the pace of development of those diseases.
We have also written elsewhere about the role of alcohol and other drugs in crime. The role of driving alone remains a devastating cost of substance abuse. Additionally, alcohol and other drug fueled crimes include domestic violence, property damage, theft, and homicide. Arrest for these crimes results in incarceration and long term, personal losses due to conviction such as employment difficulties. Abusers are not only subject to committing these crimes but greatly increase their likelihood of being victims.
The financial burden is also very real. Alcoholics and drug addicts as well as heavy users who are not technically addicted spend inordinate amounts of money on their drug of choice. Eventually abuse leads to under achievement in careers and jobs and unemployment that wrecks economic havoc. Alcohol and other drug abuse and addiction significantly impacts productivity in the workplace, often leading to absenteeism and lower performance. Studies show that individuals battling addiction are almost three times more likely to miss work than their peers. Frequent absenteeism leads to stagnation in career progression and, in some cases, job loss, perpetuating financial instability. There are estimates that 30-40% of homelessness results from alcohol and/or drug abuse (although, obviously, but for clarity, we are not saying that 30-40% of alcohol and drug abusers end up homeless).
Beyond these tangible repercussions lies the hidden emotional cost. Many individuals living with alcohol and other drug addiction suffer from stigma, shame, and isolation, which can prevent them from seeking help. This leads to a vicious cycle of deteriorating mental health and eroded self-esteem. The personal costs, while intangible, are deeply felt, contributing to decreased quality of life and sense of fulfillment.
As we tend to center our attention on the afflicted individual, we do so at the expense of overlooking the burden on families – particularly spouses and children – that are also devastating. For partners, living with an addict often involves feelings of neglect, frustration, and emotional exhaustion. Trust becomes fragile, easily eroded by lies, broken promises, or erratic behavior. Financial strain caused by addiction can add further stress, creating a breeding ground for resentments. Isolation and withdrawal from family, professional, social and community activities occurs in the vast majority of cases.
In addition to similar problems to the spouse or partner, children of alcohol and/or other drug dependent parents often face their own unique, emotional challenges. According to the National Association for Children of Alcoholics, these children are significantly more likely to experience anxiety, depression, and behavioral problems. Growing up in an unpredictable or abusive environment can lead to long-term emotional trauma, impacting their ability to form healthy, trusting relationships in adulthood.
Thinking about the economic burden on the nation and the sources of revenue to afford those costs, it is quickly clear that the taxpayer and businesses pay the lion’s share. If the cost to American businesses is approximately $160 billion, and the total cost to American society is in excess of $750 billion then business bears approximately 20% of the cost. If nothing else were to change except reduction in that cost, then either the investors, owners or customers would reap the benefit.
If the reports cited here are accurate, and the federal and state and local government pay 48% of the healthcare spend directly attributable to alcohol and other drug abuse, which we previously estimated at $35 billion for hospitals, then the taxpayer accounts for $17-18 billion in hospitable healthcare spend. Further, the taxpayer affords the $131 billion criminal justice cost either through federal, state and local taxes. The estimated $18.2 billion spent on direct substance use disorder treatment is likely shared similarly to the total healthcare spend meaning that the taxpayer accounts for 48% of that cost.
Finally, individuals with a substance use disorder and their families also pay both financially and in their personal lives. Sharing 11% in the total in hospital healthcare spend, and the $18.2 billion substance use disorder treatment cost, individuals pay approximately $6 billion. This is perhaps much less significant than the tragedy of personal loss to the sufferers and their families,
We have discussed the total cost of substance abuse and addiction. We have reported on who pays that bill. Now to the difficult subject of who benefits.
Gene Gilchrist
November 2025
