Private financing for the treatment of addiction and mental-health disorders continues to drop, with government taking an increasingly prominent role in providing care for behavioral health problems, according to a new study published in the journal Health Affairs.

From 1991 to 2001, private insurance payments for addiction treatment fell 1.1 percent, even as overall healthcare spending rose 6.9 percent, according to the report, "National Expenditures for Mental Health Services and Substance Abuse Treatment 1991-2001." Total spending on addiction treatment rose from $11 billion to $18 billion between 1991 and 2001, but fell as a percent of all healthcare spending, from 1.6 percent to 1.3 percent.

The study, commissioned by the federal Substance Abuse and Mental Health Services Administration (SAMHSA), said that only 13 percent of private expenditures for addiction treatment came from insurance in 2001, down from 24 percent in 1991. Eight percent came from out-of-pocket payments, down from 9 percent in 1991. All private sources combined accounted for only 24 percent spent on substance-use disorders.

"During the first five years [of the study period], private insurance spending for substance abuse fell 2.4 percent annually; during the second five years, it grew only 0.1 percent annually," the report noted. "This trend clearly raises questions as to why substance-abuse spending under private insurance is not keeping pace with inflation. It cannot be explained by a change in substance abuse benefits. According to the U.S. Bureau of Labor Statistics, in both 1991 and 1997 most firms offered such benefits."

One likely culprit, the report said, was growing use of managed care, "which can have a dramatic effect on substance-abuse treatment." Another: a 30- to 40-percent increase during the study period in the number of Americans who lack private health insurance, and thus must rely on the public sector for treatment.

"It's reasonable to conclude that managed care, and the fact that 13 million more American have lost their health insurance, could be what is causing the private sector to fall off," said Rick Harwood, vice president of The Lewin Group and one of the co-authors of the study. "But do we have proof? No."

Growing Role for Publicly Financed Programs

In contrast, public financing for treatment accounted for 76 percent of treatment dollars in 2001, up from 62 percent of treatment dollars in 1991. Of that, state and local sources other than Medicaid accounted for 38 percent; Medicaid, 19 percent; Medicare, 5 percent; and other federal sources, including the SAMHSA block grant and the Veterans Administration, 14 percent.

Again, the report said that managed care played a role, with private industry taking steps to control treatment spending through utilization review and other case-management tools not commonly used in the public sector.

The study said that the overall declines in addiction spending reflected lower utilization of inpatient treatment and declining lengths-of-stay. Less certain, the authors said, was whether admission rates have declined as well, which also would result in lower treatment expenditures.

"This decrease in the proportion of care being provided in hospital settings is primarily caused by reduced care in specialty psychiatric hospitals," the study noted, pointing out that states have been closing such hospitals -- which often provided both addiction and mental-health care -- and shifting resources to community-based services. Also, "managed care has been shown to reduce the use of inpatient services, through prior approval for inpatient admission, utilization review to shorten inpatient stays, and payments limited to a fixed number of days of care," the report said.

Non-hospital based treatment centers received the greatest share of expenditures in 2001, at 39 percent, up from 33 percent in 1991. Meanwhile, proportional spending on hospitals decreased from 40 percent to 34 percent. Inpatient care dropped from 46 percent to 30 percent of the total, while outpatient spending increased from 29 percent to 40 percent. Residential care rose from 20 percent to 24 percent of all treatment spending.

Many general hospitals have also been eliminating specialty mental-health and addiction units to cut costs, the report said. "One question raised by these trends is what impact the increased provision of acute inpatient services and treatment in less-specialized settings has on access to specialty services and the quality of clinical care," according to the Health Affairs study.

Harwood expressed hope that the report would prompt policymakers to back future studies on whether treatment quality is declining along with private expenditures, and whether declining insurance enrollment is pushing more Americans into public-sector programs. "It is a critical public-policy question," he said.