Association for Public Policy Analysis & Management

This paper explores how a shock to the demand for substance abuse treatment (SAT) due to Medicare Part D caused an increase the supply of treatment capacity. Previous work has already documented that Part D exacerbated national upward trends in opioid-related treatment admissions and mortality by allowing for greater ease of access to prescription narcotics. However, there is still little research on how SAT providers respond to increases in demand for their services, especially regarding the addition of new facilities and services. It is important for policymakers to understand these dynamics when determining how best to increase access to SAT for needy individuals. To analyze the impact of Medicare Part D on SAT capacity, I compare states with higher shares of the population aged 65+ (and therefore Medicare-eligible) to states with lower shares, before/after Part D was implemented.

I obtain the following results. First, I confirm that Medicare Part D caused SAT admissions to increase, this time using client count data from the N-SSATS. Second, states with higher shares aged 65+ saw increases in the number of inpatient SAT facilities, and beds dedicated to SAT, per 100,000 population. A similar increase was not found among outpatient facilities, possibly leading to additional crowding of patients. Lastly, SAT facilities in states with higher shares aged 65+ also became more likely to offer at least one form of medication-assisted treatment for opioid-use disorder, with the effects concentrated in improving offerings of Naltrexone.