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Options for Residential and Inpatient Treatment of Substance Use Disorder

A Report for the Department of Health Care Policy and Financing Conducted by CHI
Date last updated: February 7, 2018

Increased attention to substance use disorder (SUD) has led to interest at both the federal and state government levels in expanding the range of treatment services available through Medicaid. 

SUD is a chronic, relapsing condition that requires professional, evidence-based treatment to sustain recovery, and more is being learned about SUD and its treatment options every year. Only about 10 percent of people nationally with SUD receive any type of treatment. Of those receiving treatment, fewer still are receiving quality, evidence-based care. 

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CHI studied access to SUD treatment for the Colorado Department of Health Care Policy and Financing (Department). Experts interviewed for this report agree that Health First Colorado has a gap in the range of covered SUD services. Less intensive treatments, such as outpatient therapy, are covered, as is inpatient detoxification for patients with the most acute medical problems. But residential and other inpatient treatment programs are not covered because of a federal prohibition on the use of matching funds for services in certain settings. 

Residential treatment provides a safe and stable 24-hour environment for patients who do not need acute medical support but do need the structure of this type of environment, including treatment for any co-occurring mental health and general health needs. Inpatient treatment is more medically intensive and includes 24-hour nurse monitoring to stabilize people in acute withdrawal. 

Federal guidance issued in 2015 points the way for states to obtain waivers to offer residential and inpatient treatment for SUD and receive federal matching funds for these services. Colorado’s General Assembly passed House Bill 17-1351 directing the Department to study this option. The Department contracted with the Colorado Health Institute to help examine the issue. 

This report fulfills HB 17-1351’s charge to the Department. It examines the problem of SUD in Colorado; the state’s capacity to address the problem through residential and inpatient SUD treatment services under Health First Colorado; the evidence behind treatment programs; a look at the current regulatory landscape; estimated costs and benefits of adding the services; and potential steps to implementing a waiver to cover residential and inpatient services if the legislature chooses to authorize these services. 

It concludes there is a gap in the continuum of care for Health First Colorado enrollees age 21 or older with SUD and lays out numerous considerations for adding residential and inpatient services for SUD to the program.

CHI's Work and Conclusions

CHI undertook a detailed study under a tight deadline to complete this study. After conducting research of the evidence, interviewing stakeholders and experts across the state, and creating a predictive model of the costs and benefits, this analysis finds that Colorado could potentially benefit from an adult SUD residential and inpatient treatment benefit in Health First Colorado.

CHI estimates that a benefit potentially could be implemented as soon as July 1, 2020. State costs could grow an estimated $34 million in the first year to serve approximately 17,000 Medicaid enrollees and up to $43 million by year five to serve 20,800 people. We estimate this could result in 7,600 fewer ED visits and 1,700 fewer hospitalizations in the first year following the benefit implementation.

The estimate includes a series of assumptions that are detailed in Appendix F. Any changes to the assumptions could lead to significantly different cost estimates. Research suggests there may be savings to employers and the criminal justice system (see page 21), but we are unable to quantify them with the available data. 

How We Created the Model

CHI developed a model to estimate the potential costs and savings of adding inpatient and residential substance use treatment as a covered benefit for adult Health First Colorado enrollees. The model is based on data from the Department of Health Care Policy and Financing, the Office of Behavioral Health (OBH) and the Bureau of Labor Statistics, combined with findings from peer-reviewed literature. CHI estimated the administrative costs associated with developing and implementing a new waiver. The analysis also accounts for the different federal matching rates available in Medicaid and OBH for these services and provides sensitivity analyses based on a range of projected utilization.

For other examples of CHI's consulting work, see our Services page.