236 



THE COST OF SUBSTANCE ABUSE TO 

 AMERICA'S HEALTH CARE SYSTEM 



Report 2i Medicare Hospital Costs 

 May 1 994 



THE IMPACT OF SUBSTANCE ABUSE ON MEDICARE INPATIENT HOSPITAL COSTS 



INTRODUCTION 



The Annual Report of the Trustees of the Federal Hospital Insurance Trust Fund 

 released in April 1994 projected that the Medicare program will rxin out of money in seven 

 years. This projection 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 pervasive impact of substance abuse, including 

 tobacco, alcohol and drugs, on both Medicare and overall health costs. Based on our fmdings, 

 $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 ahnost $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 hospital care related to substance abuse. 



Past studies'' have provided evidence of the impact of substance abuse on health 

 care. Further, these studies have tended to underestimate the full magnitude of the problem 

 because they either focus on only one substance or have not taken full advantage of the 

 epidemiologic research that relates substance abuse to virtually every major disease category. 



