Economic Downturns and Substance Abuse Treatment: Evidence from Admissions Data

An extensive economics literature has emerged demonstrating, perhaps counter-intuitively, that economic downturns are associated with reduced mortality and improved physical health outcomes.  Ruhm (2000) was the first to show that mortality rates decline during economic downturns, and his results suggest that the association is true for a wide range of causes of death.  More recent work has examined associations between economic downturns and health behaviors including substance use. And indeed there is evidence that economic downturns lead to improvements in many of the studied health behaviors. 

In this study, we provide the first evidence on the relationship between economic downturns and admissions to substance abuse treatment in the American medical system.  The question of whether economic downturns lead to more or less substance abuse treatment is relevant not just because of an interest in understanding the association of the business cycle and a particular health behavior.  Unlike other areas of medical care, the federal, state, and local governments fund the majority of substance abuse treatment in the United States today.  Spending on substance abuse treatment is predicted to reach $35 billion by 2014, of which 83% will be paid for by public payers (Levitt et al, 2008).  The ACA lists substance abuse treatment as one of the ten elements of essential health benefits and is predicted to expand access to substance abuse treatment to millions of Americans. Thus, future public payments for substance abuse treatment will likely be substantially higher than suggested by current predictions. 

We make use of nationally representative data from the Treatment Episode Data Set and construct measures of admissions to substance abuse treatment for both alcohol and illicit drug abuse by state and year between 1992 and 2010.  Given differences between alcohol and illicit drugs, we analyze these substances separately.  Because changes in admissions may be driven by changes in demand and supply side determinants of substance abuse treatment, we include proxies of supply side variables in our regressions to isolate the role of demand. To gain insight on mechanisms for the net relationship, we consider heterogeneity in the relationship by client and treatment characteristics, and across the distribution of admissions.

We find that admissions to substance abuse treatment, both alcohol and illicit drug, decline in economic downturns.  Although our data prevent us from definitively identifying mechanisms, we speculate that fear of job loss among employed persons, a lowered return on employment-promoting health investments for those outside the labor market, and changes in income that are not captured by measures of household income (perhaps perceived or expected income reductions) are important pathways.  We find some evidence that reductions in supply side determinants may limit availability of treatment during economic downturns.  Finally, unconditional quantile regressions reveal that our findings are driven by low admissions states.  Our findings shed new light on the relationship between economic downturns and substance abuse, and have implications for public health policy and prioritization of government spending particularly during economic downturns when tax-based revenues decline.