As fiscal constraints limit the amount of research and treatment dollars, better methods of showing cost-effectiveness and positive net benefits are necessary. Treatment evaluators must devise methodologies so that easy, reliable measures of cost-effectiveness and net benefits can be made on a routine basis. At a basic level, policymakers and treatment practitioners need guidance in formulating and investing in treatment strategies. Policymakers want information on the types of clients that are most costly to treat and the client types that benefit most from treatment. They also need to know what benefits or outcomes should be emphasized in treatment and how long before a treatment investment “pays off” for a typical client. Treatment practitioners require a different level of information. They are more concerned with questions such as, what is the total and per-client costs of providing treatment? What are the primary funding sources for treatment services? How do benefits compare to costs? Policymakers and practitioners alike need more treatment evaluation research to help answer these questions. By determining cost effective and efficient ways of delivering treatment services to specific clients, economic analysis plays an important role in evaluating existing treatment regimens, designing new treatment methods, and revising established ones.

Given the rapid expansion and substantial changes in drug abuse treatment, evaluating the economic merits of established and newly developed treatment options is important. Research is lacking in this area primarily because the costs and dollar benefits of treatment are difficult to conceptualize and even harder to estimate. However, administrators and policymakers must consider the costs and benefits of treatment alternatives when designing responsive treatment systems and programs. For example, if improving the health status of the drug-using population yields a significant dollar benefit, drug treatment regimens should include a health-care component. If certain populations (e.g., low-to-moderate users, first time in treatment clients) produce better outcomes than other populations (e.g., criminal justice clients), then resources should be targeted to those populations with the highest net benefits and perhaps diverted from others. By quantifying and comparing the costs and benefits of treatment in dollar units, economic analysis can improve the methods for allocating and using private and social treatment resources.

Millions of dollars are spent each year for drug abuse treatment services. In 1987 the specialized drug treatment sector had revenues of $1.3 billion (30). Despite continued investments in drug abuse treatment, an accepted methodology does not exist for analyzing the economic merits of these programs. Because society does not possess the resources to support all desirable treatment activities, we must choose which projects to support and at what level. As resource allocation becomes more important, policymakers and program administrators need decision-making tools to evaluate their options for providing and funding treatment programs. Economic analysis can play a large role in these resource allocation decisions.

More information is needed on the utilization, cost, financing, and effectiveness of drug abuse treatment (54). Some of the existing economic studies use different methods of cost accounting and evaluation (e.g., Refs. 6, 8, 24, 43, 48, 57). Any new study in this area should try to bridge this gap by first designing an economic evaluation and then implementing an economic analysis plan. To design an economic evaluation, economists must first examine key issues for the two audiences that could benefit most from the study results: policymakers and program administrators. Policymakers need broad guidelines, a decision-making framework, and evaluation techniques. Program administrators need program-specific or treatment-modality-specific information, optimal resource allocation guidelines, cost accounting rules, and methods of targeting treatment outcomes.

A carefully designed analysis plan should rely on three types of economic analysis to evaluate private and social programs: cost, cost-effectiveness, and benefit-cost.(*) Although each analysis is unique in terms of estimation procedures and policy significance, a natural progression occurs from cost to cost-effectiveness to benefit-cost analysis. Drummond et al. (12) described the components of an economic evaluation of a health care program like drug abuse treatment as illustrated in Fig. 1.

Few studies have carefully examined the full cost structure of contemporary treatment for different programs and clients. Furthermore, most of the few contemporary cost-effectiveness and benefit-cost studies of drug abuse treatment are plagued by methodological problems and data limitations. Clearly, new efforts to study the costs, effectiveness, and dollar benefits of treatment would greatly improve our understanding of “what works” at the client, program, and system level. Cost-effectiveness and benefit-cost comparisons of treatment for clients and programs could provide needed guidance for future treatment investments.