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Texas Commission on

Alcohol and Drug Abuse

Economic Costs of Alcohol


and Drug Abuse in Texas:
1997 Update
Economic Costs of Alcohol and Drug
Abuse in Texas: 1997 Update

Liang Y. Liu, Ph.D.


© September 1998, Texas Commission on Alcohol and Drug Abuse (TCADA),
Austin, Texas. TCADA grants full permission to reproduce and distribute any part of
this document for non-commercial use. Appropriate credit is appreciated. TCADA is a
state agency headed by six commissioners appointed by the governor. TCADA provides
educational materials on substance use, develops prevention, intervention, and
treatment programs, and conducts studies on the problems of substance use in Texas.

Texas Commission on Alcohol and Drug Abuse


9001 North IH-35, Suite 105
Austin, Texas 78753-5233
(512) 349-6600 n (800) 832-9623
Web site: www.tcada.state.tx.us

C This document was printed on recycled paper.


Economic Costs of Alcohol and
Drug Abuse in Texas: 1997 Update
The adverse health and social consequences of substance abuse extensively increased costs
to the state. The total economic costs of alcohol and drug abuse in Texas were estimated at
$19.3 billion in 1997, the most recent year for which data are available. More than 60
percent of the costs resulted from lost productivity ($8.1 billion) and premature death
($3.9 billion) caused by substance abuse. On a per capita basis, the 1997 amount trans-
lates to $1,001 per man, woman, and child in the state.

COST ESTIMATES FOR The total economic costs of combined category of “alco-
1997 alcohol and drug abuse in hol and drug abuse” cost $1.5
Prior to this study, the most Texas were estimated at $19.3 billion (7.8 percent), as
recent indepth estimates of billion for 1997 (Table 1). By shown in Figure 1. The
costs of substance abuse in category, alcohol abuse cost combined “alcohol and drug
Texas were based on data for $11.7 billion (60.5 percent), abuse” category includes
1989. 1 In 1989, alcohol and illicit drug abuse cost $6.1 costs due to individuals
drug abuse cost an estimated billion (31.6 percent), and the having both alcohol and
$12.6 billion and in 1994 an
estimated $17.0 billion Figure 1. Alcohol and Drug Abuse
Costs in Texas by Disorder, 1997
(Appendix A). This report
(Total $19.3 Billion)
will provide an update of the
7.8%
costs of alcohol and drug 60.5%

abuse for 1997. The 1997 Alcohol Abuse


costs were estimated by 31.6%
Drug Abuse
multiplying the percent Combined Alcohol
changes in various socioeco- and Drug Abuse*

nomic factors (Appendix B)


from 1989 to 1997 by the 1989
cost estimates.
*Costs in this category can not be separated into
primary drug of abuse

Texas Commission on Alcohol and Drug Abuse • 1


Table 1. Economic Costs of Alcohol and Drug Abuse in Texas, 1997a

Amount ($ in millions)
Combined
Alcohol Drug Alc & Drug
Type of Cost Total Abuse Abuse Abuse b

Total $19,323 $11,697 $6,111 $1,514


Core Costs $13,470 $9,275 $2,781 $1,414
Treatment $1,510 $468 $1,042 –
Morbidity (lost productivity) $8,067 $6,119 $534 $1,414
Mortality (premature death) c $3,893 $2,688 $1,205 –
Other Related Costs $4,940 $1,826 $3,113 $0.6
Direct Costs $2,870 $1,145 $1,725 $0.6
Crime $2,393 $687 $1,706 –
Motor Vehicle Crashes $427 $409 $17 $0.6
Social Welfare Administration $16 $15 $1 –
Fire Destruction $34 $34 – –
Indirect Costs $2,070 $681 $1,388 –
Victims of Crime $257 $103 $154 –
Incarceration $1,468 $579 $889 –
Criminal Careers $345 – $345 –
Special Disease Groups $913 $596 $217 $100
AIDS (IVDU) $160 – $160 –
Hepatitis B (IVDU) $14 – $14 –
Perinatal Substance Exposure $739 $596 $43 $100

Percent Distribution (%)


Combined
Alcohol Drug Alc&Drug
Type of Cost Total Abuse Abuse Abuse b

Total 100.0 100.0 100.0 100.0


Core Costs 69.7 79.3 45.5 93.4
Treatment 7.8 4.0 17.0 –
Morbidity (lost productivity) 41.7 52.3 8.7 93.4
Mortality (premature death) c 20.1 23.0 19.7 –
Other Related Costs 25.6 15.6 50.9 0.0
Direct Costs 14.9 9.8 28.2 0.0
(crime, MV crashes, social
welfare adm., fire destruction)
Indirect Costs 10.7 5.8 22.7 –
(victims of crime, incarceration
criminal careers)
Special Disease Groups 4.7 5.1 3.6 6.6
AIDS (IVDU) 0.8 – 2.6 –
Hepatitis B (IVDU) 0.1 – 0.2 –
Perinatal Substance Exposure 3.8 5.1 0.7 6.6

a
Based on adjustment factors applied to 1989 updates and estimates.
b
Costs in this category can not be separated into primary drug abuse.
c
Discounted at 4 percent.

2 • Texas Commission on Alcohol and Drug Abuse


illicit drug problems, and Figure 2. Alcohol and Drug Abuse
Costs in Texas by Cost Category, 1997
cannot be separated into (Total $19.3 Billion)
either alcohol abuse or drug 4.7%
7.8% 41.7%
abuse alone.
Treatment Costs
10.7%
Morbidity Costs
Of the total economic costs of
Mortality Costs
$19.3 billion in 1997, morbid-
Other Related Direct Costs
ity costs (the value of lost
productivity) accounted for 14.9% Other Related Indirect Costs

Special Disease Groups


the largest share of the costs
at 41.7 percent, while mortal-
20.1%
ity costs (the loss of future
lifetime earnings due to amounted to $1.5 billion in non-response, adjustments
premature death) accounted 1997, about two times that of for program non-response,
for 20.1 percent (Figure 2). the 1989 estimate ($0.7 and adjustments to control
Other related direct costs billion). The large increase in for client relapse to treat-
(crime expenditures, motor treatment costs was a result ment.3
vehicle crashes, social wel- of the increase in the number
fare administration, and fire of clients entering alcohol The morbidity costs resulting
damage) accounted for 14.9 and drug treatment pro- from reduced productivity
percent, and other related grams and inflation of were estimated at $8.1 billion
indirect costs (victims of medical care costs. Based on in 1997, compared to $5.6
crime, incarceration, and the national Uniform Facility billion in 1989 and $7.0
criminal careers) accounted Data Set (UFDS) Survey,2 the billion in 1994 (Figure 3).
for 10.7 percent. The distribu- estimate of annual Both growth of the civilian
tion by category type also unduplicated clients in Texas labor force and wage infla-
shows that treatment costs alcohol and drug treatment tion contributed to the
comprised 7.8 percent of the units was 195,678 (67,118 for increase in morbidity costs.
total and costs for special alcohol and 128,560 for drug)
disease groups, 4.7 percent. in 1997 versus 143,272 The 1997 costs of alcohol-
(60,348 for alcohol and 82,924 and drug-related deaths
MAGNITUDE OF THE for drug) in 1989. Three amounted to $3.9 billion,
COSTS AND EXTENT OF kinds of adjustments were which is 56 percent higher
THE PROBLEM made to obtain the number than in 1989. These mortality
Treatment costs of alcohol of unduplicated clients: costs represented the present
and drug abuse in Texas adjustments for survey item value of forgone earnings

Texas Commission on Alcohol and Drug Abuse • 3


discounted at 4 percent. In at $4.9 billion for Texas in expenditures for state and
1989, an estimated 9,746 1997. Within this category, local criminal justice systems
Texans died from alcohol- direct costs (for which actual over the past eight years.
and drug-related causes, 7.8 payments are made) and Public safety data also
percent of total resident indirect costs (for which showed that in Texas about
4
deaths. By 1996, the esti- resources such as income are 37-42 percent of fatalities and
mated number of alcohol- lost) were $2.9 billion and 9-14 percent of non-fatal
and drug-related deaths $2.1 billion, respectively. Of injuries in motor vehicle
increased to 12,702, about 9.1 the total other related direct accidents involved alcohol
percent of total resident costs, crime costs accounted and drugs in recent years.
deaths. Four-fifths of these for $2.4 billion, with motor
deaths were caused by vehicle crashes, social wel- Among the total other re-
alcohol abuse and one-fifth fare program administration, lated indirect costs, $0.3
by drug abuse. An estimated and fire destruction account- billion accounted for the
357,000 years of potential life ing for the remaining $0.5 productivity losses of crimi-
were lost5 due to premature billion. Crime costs associ- nal victimization, $1.5 billion
mortality of alcohol and drug ated with alcohol and drug for the productivity losses of
abuse in 1996. abuse rose 81 percent be- individuals incarcerated as a
tween 1989 and 1997. The result of criminal offense,
Other related costs of sub- increased crime costs majorly and $0.3 billion for the
stance abuse were estimated reflected the higher direct opportunity costs6 of time for
persons engaged in criminal
careers rather than legal
Figure 3. Core Costs Related to Alcohol and Drug
Abuse in Texas: 1989, 1994, and 1997 employment. Compared to

1989* 1994** 1997


1989, the incarceration costs
$10,000 related to substance abuse
increased more than three
(in millions of dollars)

$8,067
$8,000
$7,011 times in 1997. Much of the
$6,000 $5,632 increase in incarceration
$3,893 costs was attributable to the
$3,671
$4,000
increased number of
$2,501

$2,000 $1,510 incarcerees in state prisons


$1,029
$695 and local jails7 between 1989
$0 and 1997. Prevalence data
Treatment Morbidity Mortality
(Lost Productivity) (Premature Death)
from the Texas Survey of
*Mortality costs were updated from the 1989 study.
**Treatment and mortality costs were updated from the 1994 study. Substance Use Among Adults

4 • Texas Commission on Alcohol and Drug Abuse


showed that an estimate of ADJUSTMENT FACTORS nents. Supposing the causal
65,000 adults aged 18 and AND DATA SOURCES relationships of alcohol and
over were considered to be To provide more recent cost drug abuse to their conse-
past-month cocaine and/or estimates than were given in quences have remained the
heroin users in 1997.8 It is the earlier study, a method same over time, two major
estimated that about half of was used which incorporated adjustment factors — one to
these current drug users who timely adjustments in the reflect real change in popula-
were not incarcerated would values based on a few factors tion and the other to reflect
engage in crime to support that have known relation- changes in prices and wages
9
their drug habits. ships to the cost estimates. (inflation) — are specified to
The adjustment factors for update estimates for most
Three specific disease groups Texas are identified and cost components. For ex-
associated with substance presented in Appendix B. ample, the percent change in
abuse cost Texans $0.9 billion They include statewide data the number of persons
in 1997. Of this total, the for health, the labor force, comprising the civilian labor
costs of perinatal substance crime, public safety, and force and in average weekly
exposure comprised the social welfare, as well as earnings are used to update
largest amount—$0.7 billion. consumer price indexes in the morbidity costs, which
However, the costs for AIDS major markets. By multiply- are the costs of reduced
related to intravenous drug ing the percent changes in productivity due to sub-
us (IVDU) tripled during the adjustment factors from 1989 stance abuse.10 Also, the
eight-year period, rising to 1997 by the 1989 cost percent change in the num-
from $56 million in 1989 to estimates, the costs of alcohol ber of alcohol- and drug-
$160 million in 1997. Contrib- and drug abuse for 1997 related motor vehicle injuries
uting significantly to this were obtained. and the transportation
increase were the growing inflation rate are incorpo-
number of Texas AIDS cases Different sets of adjustment rated to update the costs of
reported and the rising price factors were used for the motor vehicle crashes.
index for medical care in different types of cost com-
recent years. Health data ponents. The rationale of this The 1997 data were readily
showed that Texas had a total method is that between 1989 available from various
of 2,594 reported AIDS cases and 1997, proportional sources and agencies for all
in 1989, compared to 5,474 changes in the adjustment adjustment factors (see
cases in 1994 and 4,704 cases factors were related to Appendix B) except for the
in 1997. proportional changes in the number of alcohol and drug
values of the cost compo- abuse deaths, the alcohol-

Texas Commission on Alcohol and Drug Abuse • 5


treatment admissions per year.
and drug-related motor updated estimates clearly 4
The most recent 1996 death data
vehicle injuries, social wel- show that the measurable were used in the current cost
study. The methodology for
fare expenses, fire losses per economic costs of alcohol estimating the alcohol- and drug-
related mortality in Texas has
capita, and resident births. In and drug abuse continue to
been revised since 1994. See
order to complete the infor- be high for the state, which Current Trends in Substance Use,
Texas 1996, Austin, Texas: Texas
mation, the 1996 values of makes prioritizing substance Commission on Alcohol and
Drug Abuse, 1996, pp. 167-168.
alcohol and drug abuse abuse issues important for 5
The number of years of potential
deaths, alcohol- and drug- the future health of Texas life lost was measured by
multiplying the number of deaths
related motor vehicle inju- residents. These findings by the life expectancy in years
per age and sex category. Life
ries, and total resident births challenge both the public and
expectancy is the average number
were used for the current private sectors to work of years that a person can expect
to live after a given age. Life
cost version. The social together towards solutions to expectancy data are based on
vital statistics from Texas
welfare expenses for 1997 minimize the economic
Department of Health.
6
were obtained by adjusting burdens of substance abuse Opportunity cost refers to the
value of foregone benefits
the inflation rates to the in Texas. because the resource is not
available for its best alternative
previous expenses.11 Like-
use. In this case, it is the mon-
wise, the 1995 figure for Endnotes etary value given to time
1
Liu, Liang Y. , Economic Costs of misspent on criminal careers.
structural fire losses per Alcohol and Drug Abuse in Texas —
7
The total number of incarcerees in
1989, Austin, Texas: Texas state prisons and local jails is the
capita was applied to the
Commission on Alcohol and combination of (100 percent of
study. 2
Drug Abuse, April 1992. total prison population) and (47.5
UFDS is the only national census percent of total jail population).
of specialty substance abuse (i.e., In order to calculate incarceration
alcohol or other drugs) treatment costs, the concept of person-
CONCLUSION facilities. Before 1995, the national years served must be employed.
This paper presents the 1997 survey was called National Drug The calendar time served for state
and Alcoholism Treatment Unit prisoners is 1 year and for local
update of economic costs of 3
Survey (NDATUS). jail inmates, 0.475 year or 5.7
To adjust for survey item non- months.
alcohol and drug abuse; that response, the imputed values
8
Texas Surveys of Substance Use
is, the economic burden were derived by regressing Among Adults were conducted by
unduplicated clients on current the Texas Commission on Alcohol
resulting from health prob- clients. Then, the estimate of and Drug Abuse in 1988, 1993,
unduplicated clients was and 1996. The 1997 figure for
lems, incapacitation, prema- adjusted up. For example, in cocaine/heroin users was
ture death, crime, and motor 1997, by 51.1 percent (computed estimated by multiplying the
as 100/66.2 percent, where 66.2 1996 past-month cocaine/heroin
vehicle crashes due to alco- percent was the overall response prevalence rate by the 1997 adult
rate in Texas) for program non- population.
hol and drug abuse in Texas. response. This estimate was then
9
Harwood, H. J., Napolitano, D. M.,
It employs readily made adjusted downward to account Kristiansen, P. L., and J. J. Collins,
for clients who might receive Economic Costs to Society of Alcohol
adjustments for the most multiple types of treatment and/ and Drug Abuse and Mental Illness:
or relapse in a year (assuming 1980, Research Triangle Park,
fundamental and significant that about 75 percent of the cases North Carolina: Research
changes without completely reenter the same treatment Triangle Institute, June 1984.
10
program). On average, alcohol The adjustment formula for the
recalculating the costs. The and drug clients had about 1.33 updated value of this example,

6 • Texas Commission on Alcohol and Drug Abuse


morbidity costs, can be: ment insurance, worker’s
[MBC in 1997] = [MBC in 1989] x compensation, public assistance,
[CLF in 1997 / CLF in 1989] x supplemental security income,
[AWE in 1997 / AWE in 1989]; food stamps, veterans pensions
where MBC are morbidity costs and rehabilitation, and so on. The
of alcohol and drug abuse in years 1993, 1995, or 1996 are the
Texas, CLF is the Texas civilian most recent years for which these
labor force, and AWE is Texans’ social welfare programs were
average weekly earnings in the available. The 1997 expenses
manufacturing sector. were then adjusted by using the
11
Social welfare expenses include inflation rates correspondingly.
OASDI payments, unemploy-

Appendix A: Economic Costs of Alcohol and Drug Abuse in Texas: 1989, 1994, and 1997

1989 a 1994 b 1997 c 1989-97


Type of Cost ($ in millions) ($ in millions) ($ in millions) % change

Total $12,639 $17,016 $19,323 52.9%

Core Costs $8,829 $11,891 $13,470 52.6%


Treatment $695 $1,209 * $1,510 117.1%
Morbidity (lost productivity) $5,632 $7,011 $8,067 43.2%
Mortality (premature death) d $2,501 * $3,671 * $3,893 55.7%

Other Related Costs $3,303 $4,297 $4,940 49.6%


Direct Costs $1,703 $2,671 $2,870 68.5%
Crime $1,323 $2,204 * $2,393 80.8%
Motor Vehicle Crashes $338 $424 $427 26.4%
Social Welfare Administration $11 $15 * $16 45.5%
Fire Destruction $31 * $30 * $34 9.4%
Indirect Costs $1,600 $1,626 $2,070 29.4%
Victims of Crime $176 $267 * $257 45.8%
Incarceration $416 $1,002 * $1,468 252.8%
Criminal Careers $1,008 * $356 * $345 -65.7%

Special Disease Groups $508 $828 $913 79.9%


AIDS (IVDU) $56 $167 * $160 184.9%
Hepatitis B (IVDU) $14 $15 $14 5.6%
Perinatal Substance Exposure $438 $646 $739 68.7%

a
Liu, L. Y., Economic Costs of Alcohol and Drug Abuse in Texas - 1989, Austin, Texas:
Texas Commission on Alcohol and Drug Abuse, April 1992.
b
Liu, L. Y., Economic Costs of Alcohol and Drug Abuse in Texas - 1994 Update, Austin,
Texas: Texas Commission on Alcohol and Drug Abuse, September 1995.
c
Based on adjustment factors applied to 1989 updates and estimates.
d
Discounted at 4 percent.
* Updated from 1989 and 1994 economic cost studies.

Texas Commission on Alcohol and Drug Abuse • 7


Appe ndix B: Adjus t me nt Fa c t ors f or Upda t ing Cos t E s t ima t e s of Alc ohol a nd Drug Abus e

Cos t
Compone nt Adjus t me nt Fa c t or Da t a S ourc e
Treatment • Number of Annual Unduplicated Clients in Alcohol • Uniform Facility Data Set (UFDS) for Texas,
and Drug Treatment Units, Texas SAMHSA, US Department of Health and Human
Services
• Consumer Price Index: Medical Care (1982- • Bureau of Labor Statistics, US Department of
84=100) Labor
Morbidity • Texas Civilian Labor Force • Labor Market Information Department, Texas
(Reduced Workforce Commission
Productivity)
• Texas Manufacturing Average Weekly Earnings • Labor Market Information Department, Texas
Workforce Commission
Mortality • Number of Resident Deaths from Alcohol- and • Bureau of Vital Statistics, Texas Department of
(Premature Drug- Related Causes by Age and Gender, Texas Health; Analysis by Texas Commission on Alcohol
Deaths) and Drug Abuse
• Texas Manufacturing Average Weekly Earnings • Labor Market Information Department, Texas
Workforce Commission
Crime • Direct Expenditures for State and Local Justice • Sourcebook of Criminal Justice Statistics, Bureau
System Activities by Type of Activity, Texas of Justice Statistics, US Department of Justice
• Anti-Drug Abuse Act Funds: Law Enforcement, • Sourcebook of Criminal Justice Statistics, Bureau
Texas of Justice Statistics, US Department of Justice
• Value of Property Stolen by Type of Crime, Texas • Uniform Crime Reporting Section, Texas
Department of Public Safety
• Ratio of Victimizations Resulting in Damage • Criminal Victimization in the United States, Bureau
Losses and Theft Losses by Type of Crime of Justice Statistics, US Department of Justice
• Consumer Price Index: All Urban Consumers • Bureau of Labor Statistics, US Department of
(1982-84=100) Labor
Motor Vehicle • Number of Alcohol and Drug-Related Motor • Accident Records Bureau, Texas Department of
Crashes Vehicle Injuries, Texas Public Safety; Analysis by Texas Commission on
Alcohol and Drug Abuse
• Consumer Price Index: Transportation (1982- • Bureau of Labor Statistics, US Department of
84=100) Labor
Social Welfare • Total Social Welfare Expenses, Texas (OASDI, • Statistical Abstract of the United States, Bureau
Administration Food Stamps, Workers' Compensation, of the Census, US Department of Commerce
Unemployment Insurance, Supplemental Security
Income, etc.)
Fire Destruction • Texas Total Population • Texas Health and Human Services Commission
• Structural Fire Losses Per Capita • Statistical Abstract of the United States, Bureau
of the Census, US Department of Commerce

8 • Texas Commission on Alcohol and Drug Abuse


Appe ndix B: Adjus t me nt Fa c t ors ( c ont inue d)

Cos t
Compone nt Adjus t me nt Fa c t or Da t a S ourc e
Victims of Crime • Texas Known Offenses by Type of Crime • Uniform Crime Reporting Section, Texas
Department of Public Safety
• Ratio of Victimizations and Known Offenses by • Criminal Victimization and Sourcebook of Criminal
Type of Crime Justice Statistics , Bureau of Justice Statistics,
US Department of Justice
• Average Loss of Time from Work Among • Criminal Victimization in the United States, Bureau
Victimizations by Type of Crime of Justice Statistics, US Department of Justice
• Texas Manufacturing Average Weekly Earnings • Labor Market Information Department, Texas
Workforce Commission
Incarceration • Texas Prison Population (On-Hand Inmates) • Texas Department of Criminal Justice
• Texas Jail Population (Convicted Felons in County • Texas Commission on Jail Standards
Jails)
• Length of Sentence for Jail Inmates • Profile of Jail Inmates, Bureau of Justice
Statistics, US Department of Justice
• Texas Manufacturing Average Weekly Earnings • Labor Market Information Department, Texas
Workforce Commission
Criminal Careers • Texas Adult Population by Age and Gender • Texas Health and Human Services Commission
• Cocaine/Heroin Use Prevalence Among Texas • Texas Survey of Substance Use Among Adults,
Adults Texas Commission on Alcohol and Drug Abuse
• Texas Prison Population (On-Hand Inmates) • Texas Department of Criminal Justice
• Texas Jail Population (Convicted Felons in County • Texas Commission on Jail Standards
Jails)
• Length of Sentence for Jail Inmates • Profile of Jail Inmates , Bureau of Justice
Statistics, US Department of Justice
• Texas Manufacturing Average Weekly Earnings • Labor Market Information Department, Texas
Workforce Commission
AIDS (IVDU) • Number of AIDS Cases Reported, Texas • HIV/STD Epidemiology Division, Texas
Department of Health
• Consumer Price Index: Medical Care (1982- • Bureau of Labor Statistics, US Department of
84=100) Labor
Hepatitis B • Number of Hepatitis B Cases Reported, Texas • Infectious Disease Epidemiology and Surveillance
(IVDU) Division, Texas Department of Health
• Consumer Price Index: Medical Care (1982- • Bureau of Labor Statistics, US Department of
84=100) Labor
Perinatal • Number of Resident Births, Texas • Bureau of Vital Statistics, Texas Department of
Substance Health
Exposure
• Consumer Price Index: Medical Care (1982- • Bureau of Labor Statistics, US Department of
84=100) Labor

Texas Commission on Alcohol and Drug Abuse • 9