An analysis of short-term alcoholism treatment cost functions

A number of alcohol treatment studies have documented variations in the average cost of treating alcoholics. However, these studies have provided little explanation for these variations. In this study, three major issues in the measurement of alcoholism treatment costs are investigated: 1) choice of treatment location, i.e., inpatient versus outpatient; 2) interaction of treatment locations in the estimation of costs; 3) impact of type of alcohol problem and comorbidities on treatment costs. The study includes an integrated framework that jointly estimates treatment location and treatment costs conditional on treatment location, concentrating on short-term alcoholism treatment and using insurance claims data to specify a 6-month period beginning with each individual's first treatment for alcoholism. The different treatment types subsumed in the categories alcohol abuse and alcohol dependence are also addressed. Results indicate that comorbidities are crucial in determining treatment location. Once treatment location is determined, however, their effects on treatment costs, while measurable, are statistically insignificant. Partial treatment effects, conditional on treatment location, differ substantially from full treatment effects, which are determined jointly with treatment location.