The role of Medicaid in addressing the opioid epidemic

Introduction

Estimated drug overdose deaths in 2023, the last complete year of reporting, were 107,543 (24 per 100,000 population), with roughly 76% of those deaths linked to opioids.¹ In addition, there were 296,323 visits to emergency departments for nonfatal opioid overdoses in 2023 (129.3 per 100,000 population) across 26 states with data. About 39% of the nonfatal overdoses in emergency departments were paid for by Medicaid, accounting for an outright majority of such visits among insured patients.

Medicaid represents the largest commitment by the federal government to the treatment of people with opioid use disorder (OUD) and other types of substance use disorders (SUDs). In this paper, we review Medicaid’s role in treating OUD and the lessons learned from the impact of Medicaid expansion on the treatment of OUD in the U.S.

The national SUD and OUD context 

National estimates of the prevalence of SUDs and OUDs are largely based on information collected by the National Survey on Drug Use and Health (NSDUH). The NSDUH reports that there was a prevalence rate for all SUDs of 17.1% among people 12 years of age or older, which translates into 48.4 million people. The prevalence rate for adults 18 years and older was reported to be 18%, which implies 46.3 million people. The corresponding estimates for OUD in the U.S. were a 2% prevalence rate for people 12 years and older or 5.7 million individuals, and a prevalence rate of 2.1% or 5.4 million adults aged 18 and above. The national estimates of OUD prevalence have been shown to underestimate the magnitude of the problem.

The NSDUH reports that 2.04 million people ages 12 or older received treatment for OUDs of any kind in 2023—which amounts to about 35%. Of the 2.04 million people, about 50% received evidence-based treatment. Taken together with the prevalence estimates above, these estimates imply that about 18% of people with an OUD get evidence-based treatment.

Medicaid and OUD

We use data from the Transformed Medicaid Statistical Information System (T-MSIS) reported in the Substance Use Disorder Data Book: Treatment of SUD in Medicaid, 2021. Those data are based on Medicaid claims and encounter data. The T-MSIS data indicate that the total number of people treated for OUD covered by Medicaid in 2021 was nearly 1.82 million. (If the NSDUH estimate of the number of people treated for OUD in the U.S. in 2023 that was cited above is correct, this would imply that about 89% of all OUD treatment was paid for by Medicaid. While Medicaid plays a large role in the treatment of OUD, this estimate is implausibly high and likely results from the tendency of NSDUH to underestimate the prevalence of OUD.)

Table 1 shows the distribution of Medicaid beneficiaries treated for OUD by eligibility category. Over half of the Medicaid beneficiaries treated for OUD were eligible due to Medicaid expansion, indicating that Medicaid expansion is playing a central role in directing treatment resources to low-income adults with OUDs. An additional 23.5% of those in treatment covered by Medicaid were non-disabled adults eligible through non-expansion pathways. The five states with the highest rates of Medicaid beneficiaries treated for OUD are West Virginia (7.5%), New Hampshire (7.5%), Maine (6.9%), Delaware (6.2%), and Maryland (6.2%).

Table 2 shows data from expansion states that have an especially large number of beneficiaries being treated for OUD (over 20,000 in treatment for OUD). The table shows that the 18 expansion states reported in Table 2 account for 793,974 people in treatment for OUD paid for by Medicaid. That represents 43.7% of all Medicaid beneficiaries receiving treatment for OUD.

Medicaid’s growing role in OUD treatment

Medicaid’s role in financing OUD treatment has grown markedly in recent years, driven by Medicaid expansion. Research by Andrews et al. finds that in Medicaid expansion states, the share of people receiving OUD treatment in the prior year who were covered by Medicaid rose from 26% in 2014 to 43% in 2017, with a corresponding reduction in the share uninsured from 35% in 2014 to 16% in 2017. By contrast, there was little or no change in non-expansion states, indicating that these trends were driven by Medicaid expansion.

The growth in Medicaid’s role in OUD treatment is mirrored in hospital utilization data. Table 3 reports visits to emergency departments for treatment of OUD. From 2012 to 2021, the share paid for by Medicaid increased from roughly 30.7% to 48.0%, while there was a decline in the share that was uninsured from 29.0% to 19.4%, patterns likely driven by Medicaid expansion. The table also illustrates the increasing demands being placed on hospitals by the opioid epidemic; this period saw a 64% increase in OUD-related emergency department visits.

Table 4 shows that similar trends hold for inpatient treatment. From 2012 to 2021, the share of inpatient stays paid for by Medicaid increased from 31.3% to 39.6%, while the share of uninsured declined from 13.2% to 6.6%, again likely driven by expansion. Additionally, as with emergency department visits, the total number of stays increased markedly during this period.

Medicaid has spent increasingly large amounts of money on the treatment of OUD. KFF reported that Medicaid spent $9.4 billion on treatment of opioid use disorder in 2013. There have been large increases in Medicaid-funded treatment of OUD since then. The Bipartisan Policy Center opioid task force estimated that in 2019, Medicaid spent $23 billion, and that figure has surely continued to grow as more states have expanded Medicaid and the opioid epidemic has continued. Updating the 2019 estimate by applying the growth in the Consumer Price Index and the actual number of people treated implies Medicaid spending of about $29 billion in 2023. Putting Medicaid spending in perspective, in 2020, the total Department of Health and Human Services spending on the opioid crisis through programs other than Medicaid, including targeted grants, amounted to slightly more than $4 billion.

Policy considerations

With a new administration and a new Congress in place, new policies toward Medicaid are being proposed. Most recently, a set of reform options outlined by Congressman Arrington would reduce Medicaid spending by $2.3 trillion over 10 years. Several of the options under consideration would result in significant reductions in enrollment (e.g., through work requirements) or alter the incentives for states to continue to participate in the Affordable Care Act Medicaid expansion (e.g., eliminate the higher matching rate available for the expansion population). Since Medicaid payments for treatment of OUD dwarfs all other public sources of funding for OUD care, significant reductions would substantially reduce the nation’s economic commitment to addressing the opioid epidemic.

Given the central role that Medicaid expansion plays in Medicaid’s coverage of OUD treatment, it is instructive to consider the potential consequences of eliminating Medicaid expansion, recognizing that the combined effect of the policies outlined by Congressman Arrington would likely be larger than this. As reported in Table 1, the expansion population accounted for over 50% of people treated for OUD or 930,910 in 2021. The average spending on opioid treatment by Medicaid per treated person has been estimated to range from $5,874 to $15,183.² Thus, if Medicaid were to no longer pay for the expansion population, treatment funding would be reduced by between $5.4 billion and $14.1 billion per year. The research by Andrews et al. cited above suggests that the overwhelming majority of those who gained Medicaid coverage due to expansion would otherwise have been uninsured, so little of this funding would likely be replaced by other insurance coverage. The higher of these figures is more than three times more than the entire annual discretionary set of grants the Department of Health and Human Services provides.  

Eliminating expansion coverage would have similarly dramatic effects on hospital finances. Table 3 reports that Medicaid paid for 362,000 emergency department visits for opioid-related problems in 2021. Suppose Medicaid expansion accounts for 51.2% of those encounters, mirroring its overall share of Medicaid-financed OUD treatment as documented in Table 2. At a cost of $1,832 per visit, hospitals would have lost Medicaid payments of $339.5 million ($1,832 x 51.2% x 362,000) in 2021 without expansion. A similar calculation using the tabulations of inpatient stays tabulated in Table 4, and an average cost per stay of $14,510 implies that hospitals would have lost $2.4 billion in Medicaid payments in 2021 without expansion ($14,510 x 51.2% x 327,750). As noted above, few of those losing expansion would be likely to gain other coverage, suggesting that many of these services would become uncompensated care—in instances where hospitals continued delivering them at all.