Cost of Treatment for Alcoholics Scrutinized

Times Staff Writer

A decade ago, it was something that not even Madison Avenue could sell. But now treatment for alcohol and drug abuse is advertised prominently on radio and TV, and when an ad runs, switchboards light up like fireworks.

And as treatment becomes more common, the people who pay for it are beginning to scrutinize what they are buying. Employers, who pay for about half of all alcoholism treatment through company health plans, are becoming increasingly sophisticated. To cut costs, they are pressing for treatment that is carefully tailored to individuals’ needs.

Moreover, the federal government last week proposed limiting to $3,028 the amount of money it will pay hospitals to treat the elderly who are covered by Medicare. Those regulations probably will have a broad effect on how much private insurers are willing to pay for any services.

Expected to Slow


Those in the alcohol and drug treatment industry say its growth will slow as employers quit sending workers for unnecessarily elaborate treatment. The outcome, said Trey Cryer, president of Washington-based Recovery Centers of America, will be a “general shakeout” in the industry.

That, in turn, is affecting the enormous number of Americans--an estimated 2 million in 1982, according to the National Institute on Alcohol Abuse and Alcoholism--who seek treatment for alcohol and drug addiction.

“Fifteen years ago we couldn’t find any treatment programs,” said James Franczek, head of Exxon’s employee assistance program. “Now they’re all over.”

In just the five years from 1978 to 1983, for-profit alcohol and drug treatment in hospitals grew nearly five-fold, according to the American Hospital Assn. Meanwhile, free-standing rehabilitation clinics and outpatient programs were also on the rise, although there are no nationwide statistics on their growth.


Industry revenues reached $1 billion in 1983, according to Ken Estes, public relations director of Comprehensive Care Corp., a Newport Beach-based provider of alcoholism treatment. He estimated that his own firm--the biggest in the business, managing alcoholism treatment units in 117 hospitals and operating an additional 17 free-standing clinics--is growing at a rate of 25% a year.

But there is plenty of room for further growth. Only about 15% of all workers--mainly with large, sophisticated corporations--were insured for alcoholism and drug treatment at all in 1982, despite accumulating research showing that treatment saves employers money in the long run by preventing the illnesses, accidents and deaths that stem from alcohol and drug abuse.

Heavy Cost

Max Schneider, president of the American Medical Society on Alcoholism and Other Drug Dependencies, estimates that 20% of all health care costs are alcohol-related.


“We still haven’t been able to communicate that this illness contributes to a lot of other costs,” said Orville McElfresh, president of Parkside Medical Services in Chicago, an alcoholism treatment provider.

In a 1981 study of California state employees and their families, the National Institute on Alcohol Abuse and Alcoholism said the health costs of alcoholics and their families were reduced after alcoholism treatment. An AT&T; study of 110 recovered alcoholics showed huge reductions in accidents on the job, absences, disability and visits to the company’s medical services, adding up to a savings of about $1 million from 1979 to 1984.

There is wide disagreement about what kind of rehabilitation works best for what kind of patient--and how much it should cost.

In a free-standing clinic, the price of rehabilitation averages $265 a day, or $7,420 for a 28-day stay, according to Michael Ford, executive director of the National Assn. of Alcoholism Treatment Programs.


Hospital Costs Higher

In a hospital, the price is usually somewhat higher. Some hospitals provide treatment themselves, but more frequently they turn over blocks of beds to firms such as Comprehensive Care Corp., which is paid $80 per patient per day by the hospitals. The hospitals, in turn, charge patients somewhere between $200 and $350 a day, Estes said. The hospitals generally use the profits to cover overhead costs, to subsidize treatment for uninsured patients or to support such unrelated, money-losing units as cobalt scanners and emergency rooms.

This arrangement is beginning to concern employers who pay for the insurance policies under which their workers are covered.

“Hospitals took advantage of insurance carriers like ours,” said Jack Guest, head of the employee assistance program at Hughes Aircraft.


Newly proposed Medicare regulations would clearly have an impact on costs. Despite the proposed $3,028 limit, however, Medicare would still pay only for treatment in hospitals--encouraging the elderly to avoid less expensive types of treatment.

Inpatient Care

Like Medicare, most private insurance plans now pay only for hospital inpatient care, the most expensive form of rehabilitation. Clinic operators and employers blame insurance companies for emphasizing hospital care; insurance companies say they are only providing what their customers want.

But Virginia Paukstys, head of alcoholism research at Blue Cross-Blue Shield, said some insurance companies are beginning to turn to outpatient services and to cover a wider range of providers. But she noted that Blue Cross-Blue Shield got only a small response in 1983 when it test-marketed a broad-based plan in Alabama, northeastern New York and Philadelphia. Most companies, she said, lacked their own programs to identify alcoholics and to encourage them to seek treatment. She said they thought it a waste of money to buy insurance for treatment that was not used.


Comparison Shopping

At the same time, employers are beginning to shop for insurance that covers outpatient care, not only because it is cheaper, but because it keeps workers on the job. For many patients, said Exxon’s Franczek, “there’s a benefit to having people deal with their everyday life while they deal with their recovery.”

Hughes, which is self-insured, has negotiated cut-rate contracts with 52 programs that offer a complete range of types of treatment, from hospital detoxification to outpatient rehabilitation counseling. It will pay all the cost of treatment at one of those programs but only 80% at others. Guest estimates that Hughes, with 78,000 employees worldwide, has cut costs in half from the days when it used private insurance.

A Treatable Disease


Already, the burgeoning alcohol and drug treatment industry has expanded the care available for alcoholics and drug users. Even the advertising, while designed to increase the treatment industry’s profits, has helped to spread awareness that the nation’s 8.7 million alcoholics have a disease that can be treated.

“Those ads go right into your living room, and tell you there’s something you can do,” said Loran Archer of the White House Drug Policy Program. “They tell you there’s hope.”