Facing the Costs

Nashville Tennessean USA TODAY NETWORK - TENNESSEE

Substance abuse annually costs Tennessee more than $2 billion — more than half of which is attributed to lost income from people who have fallen out of the the labor market, according to an economist.

The substance abuse epidemic — most notably involving opioids — raises questions about access to treatment, how to stem the illicit use of prescription painkillers and staunch the use of illegal drugs.

But the economic impact is less understood and not generally a component of policy discussions.

Teresa Waters, chair of preventive medicine at University of Tennessee Health Sciences Center who leads a policy research group, dug into the costs associated with substance abuse.

The $2 billion cost to Tennessee includes:

❚ $46 million for babies born in the state with neonatal abstinence syndrome,

❚ $422.5 million for hospitalizations associated with opioid abuse, and

❚ $138 million for hospitalizations with alcohol listed as the first diagnosis.

But, at $1.29 billion, the lost income from having an estimated 31,000 people, or 1 percent of the workforce, out of jobs is the biggest component.

Waters expected the economic impact to be sizable but was still surprised by the final tally — especially given the decision to take a conservative approach to the analysis. “When I put it all together, I was like, ‘wow.’ It’s striking. It’s a wake-up call that this is not just a sad story. This is an economic story,” said Waters.

Epidemic brings higher medical, jail costs, drops work productivity

Waters started her analysis after talking with Dr. David Stern, vice-chancellor for clinical affairs for the University of Tennessee’s College of Medicine and the University of Tennessee Health Sciences Center.

Stern wants to create a program for new physicians to be trained in addiction medicine, and wanted to put the cost of his proposal in context with what abuse costs the state.

Waters said she took a conservative approach to the analysis so the overall economic impact and state spending is likely higher. In fact, she didn’t include costs associated with substance abuse overdoses because of debate over how to estimate economic impact from early loss of life.

“I don’t think this is completely comprehensive. It’s really the most obvious areas,” said Waters.

Nationally, the opioid epidemic cost the U.S. economy more than $504 billion in 2015, the White House’s Council of Economic Advisers projected in a November study. In most states there is a dearth of qualified physicians with training in addiction medicine — and there are expensive ramifications, said John Donahue, CEO of Axial Healthcare, a start-up in Nashville that works with insurers to identify over-prescription and people at risk for addiction.

Patients that Axial has identified as high risk for opioid abuse use 300 percent more health care services than patients who are seeking opioids, Donahue said. The spending comes down when people get into treatment.

Waters spends a lot of her time looking at health care financing and the cost effectiveness of medical treatment. She’ll be leaving Memphis soon to be the chair of of the department of health management at policy at University of Kentucky College of Public Health.

The disconnect between treatments for physical and mental health is an impediment to getting people help, said Waters.

She wants people to understand the nexus between health and economy — the costs it brings to the state.

In a separate analysis, Waters estimates the state spends $273 million annually on drug/alcohol-related health problems and crimes. When combined with lost sales tax revenue, the cost is $513 million to the state budget.

❚ TennCare spent $41.4 million on incremental costs related to babies born with NAS, according to a 2017 report — a figure that’s been on the rise over the last several years.

❚ Hospitalizations associated with opioid abuse cost TennCare $76.9 million, per 2015 data.

❚ Adult incarceration for drug and alcohol related offenses cost nearly $123 million in 2015.

‘Substance use disorder is killing our future’

With 1 percent of the workforce out of work due to substance abuse, the state loses out on $239.4 million in annual sales tax revenue.

And Waters thinks there are probably more people out of work because of substance abuse, or at least working at lower levels of productivity.

Having people in the prime of work years, ages 20s through their 40s, out of work brings long-term consequences for the state and families.

“These folks are losing their education, losing their ability to work productively,” said Waters.

“That’s a huge, huge loss.”

Waters hopes the economic impact of the epidemic drives more state lawmakers to think of the issue as more than tragedy for families but as a roadblock to a healthy state in the coming years.

“It’s really our future. Substance use disorder is killing our future. We want to bring in more jobs to Tennessee. We want to have a stronger workforce,” said Waters.

“If we want to attract Amazon, these big companies, we have to have a strong workforce.”

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