Economic Consequences of the Opioid Epidemic

4.24.2019 Blog

In March of 2018, the Centers for Disease Control and Prevention reported there were 63,632 drug overdose deaths in 2016; 42,249 (66.4%) involved an opioid. The CDC also reported America’s overdose epidemic was spreading geographically and increasing across demographic groups. Overdose deaths increased in all categories of drugs examined for men and women, people ages 15 and older, all races and ethnicities and across all levels of urbanization. But beyond the human cost, are there economic consequences as well?

Douglas Sutherland, senior economist at the Economics Department of the Organization for Economic Cooperation and Development (“OECD”), reported the American experience stands out with respect to dealing with the consequences of opioid abuse due to significantly higher economic costs.[1] He noted the opioid crisis had negatively impacted the U.S. economy in the form of lost wages and productivity resulting from death, incarceration and decreased productivity. He reported estimates suggest this could amount to $40 billion annually. Lost productivity also impacts tax revenue and estimates suggest the combined impact reduced federal, state and local tax revenue by almost $16 billion in 2016.

He noted significant costs also arise from providing health care to victims. In 2014 alone, there were over 80,000 emergency room visits and over 60,000 hospitalizations due to opioid overdoes. Medicare and Medicaid were the primary payers in approximately two thirds of those cases.

Mr. Sutherland reported, according to the OECD’s Economic Survey of United States, opioid use and opioid-related death rates appear to be considerably higher in the U.S. than in other countries.[2] This was partly explained by the greater prevalence of opioids in the U.S. where prescription rates are four times higher on average. While it was acknowledged that causation was difficult to establish, the correlation with the proportion of people unemployed or not looking for work in the U.S. in areas most affected by opioids suggested this can ultimately lower participation in the labor force. He relied upon findings of economist Alan Krueger who found around 20% of males between the ages of 25 and 54 who were either not working or not looking for work were regularly taking opioid pain killers.

He also observed when addiction leads to criminality resulting in a felony conviction, employment options are reduced and much of the costs incurred in policing, law enforcement and other public services in dealing with drug overdoses and addiction treatment is borne by state and local governments.

The OECD also reportedly highlighted several immediate policy steps which can be taken to help mitigate the crisis, such as making the drugs that can reverse the effects of overdoses more widely available as this will help reduce avoidable deaths, tighten access to opioids as this will reduce the inflow of patients and other developing opioid dependence, expand the reach of medically-assessed treatment for those already suffering from addiction and re-integrate former addicts into employment and housing to prevent relapse.

Mr. Sutherland concluded given the economic impact of the current crisis inaction is simply not an option. So what is being done in the U.S. to stem the crisis?

According to the Secretary of Health and Human Services, Alex M. Azar II, HHS has a five point strategy to end the opioid crisis which uses the best science and evidence to directly address this public health emergency and combat opioid abuse, misuse and overdose:

Access: Better prevention, treatment and recovery services. HHS issued over $800 million in grants in 2017 to support treatment, prevention and recovery, while making it easier for states to receive waivers to cover treatment through their Medicaid programs.

Data: Better Data on the Epidemic. HHS is improving our understanding of the crisis by supporting more timely, specific public health data and reporting, including through accelerating CDC’s reporting of drug overdose data.

Pain: Better Pain Management. HHS wants to ensure payments, prescribing guidelines and more promotes healthy, evidence-based methods of pain management.

Overdoses: Better Targeting of Overdoes-Reversing Drugs. HHS is working to better target the availability of lifesaving overdose-reversing drugs.

Research: Better Research on Pain and Addiction. HHS supports cutting edge research on pain and addiction, including through a new NIH public-private partnership.

Most employers, claims adjusters and attorneys involved in workers’ compensation and liability settlements are also aware of the impact costly narcotic medications can have on Medicare set-aside allocations. These excessive allocations are the result of current Centers for Medicare and Medicaid Services (“CMS”) policy which provides for pricing all Medicare-covered prescription drugs for the beneficiary’s life expectancy. This policy also ignores the effects of long-term use of narcotics on individual health. However, in what many in the Medicare Secondary Payer community saw as a potential solution to this difficult problem, CMS issued the following statement in December of 2017:

CMS understands the concerns regarding the opioid crisis occurring in the United States. We are committed to ensuring the determination of Workers’ Compensation Medicare Set Aside Arrangement (WCMSA) amounts are an adequate projection of claimant’s needs for future medical services and prescription drugs. CMS continually evaluates all policies and procedures related to WCMSA amounts. Any changes that Medicare pursues related to this issued will be reflected in our WCMSA amount review process.

To date, however, we have not seen CMS take any actual steps to change its practice of allocating for opioid medications.

Mr. Sutherland noted the opioid crisis will only become manageable if our leaders at all levels of government work in concert with partners in the private sector and in local communities across the country to address not only the symptoms of this epidemic but the many complex underlying problems as well. The MSA Team at Nyhan, Bambrick, Kinzie & Lowry agrees with Mr. Sutherland that inaction is simply not an option and will continue to advocate for a change in CMS policy.

[1] Sutherland, Douglas. “The Severe Economic Costs of the US Opioid Crisis, The Hill, 14 June 2018, Op-ed.

[2] OECD (2018), OECD Economic Surveys: United States 2018, OECD Publishing, Paris

The NBKL blog is provided for informational purposes; we are not giving legal advice or creating an attorney/client relationship by providing this information.  Before relying on any legal information of a general nature, you may consider consulting legal counsel as to your particular facts and applications of the law.