The Economic Cost of the Opioid Crisis

January 2020 -

The human toll of the opioid crisis is unquestioned and devastating. Nationwide, more than 130 people overdose on opioids each day, according to the National Institute on Drug Abuse. All told, the U.S. Centers for Disease Control and Prevention (CDC) estimates that around 400,000 lives have been lost since the crisis began, including nearly 48,000 in 2018 alone.

The nation’s opioid epidemic has been especially devastating for rural communities. According to the CDC, drug overdose deaths have been more common by population size in rural areas than in urban ones. Rural doctors prescribe opioids more often by far, despite a nationwide decline in prescribing rates since 2012. Meanwhile, rural Americans have fewer alternatives to treat their very real pain, and they disproportionately lack access to effective addiction medication such as buprenorphine, according to a December 2019 Health Affairs journal article.

The crisis also exacts significant economic costs on the United States, through everything from taxpayer dollars supporting local and federal treatment programs to rising health care costs. Businesses, too, pay a heavy price, according to Stoddard Davenport, co-author of “Economic Impact of Non-Medical Opioid Use in the United States,” a comprehensive 2019 study by the Society of Actuaries. Opioid use has caused billions of dollars in lost worker productivity, higher disability claims, and other problems.

Against that backdrop, OUTLOOK turned to Davenport for a closer look at the costs that businesses and the economy bear, what companies are doing to counter the challenge, and where the crisis may be headed next.

OUTLOOK: When did the U.S. opioid crisis begin?

Davenport: Drug overdose deaths have been on the rise in the United States since as far back as the 1980s. But many consider the current crisis to have begun around 1999. Early in that decade, there was a movement to address concerns about undertreatment of pain, and then the number of opioids prescribed in the United States increased steadily through 2011, when opioid prescriptions peaked. Yet while the number of opioids prescribed since then has been falling, the crisis has continued, thanks largely to heroin and fentanyl.

OUTLOOK: What’s the economic toll on the country?

Davenport: Just within the range of economic costs that we considered, the economic toll has been at least $631 billion over the past four years, with as much as $214 billion coming in 2019 alone. The biggest costs involve mortality and health care, as well as those related to loss of productivity and criminal justice activities, various forms of governmental assistance and education costs.

But the full costs of the opioid epidemic actually go much higher. There are a great many difficult-to-quantify factors. To name just a few: The cost to families due to lost household work, the cost to victims of crimes, the hidden cost of undiagnosed addiction and even the money that people spend on drugs instead of saving or spending on other things. None of these generates economic activity that’s readily measurable, so they fell outside the scope of our analysis. But they are very real costs. Another is lost tax revenue. We’ve seen estimates that the opioid crisis cost states nearly $12 billion in lost taxes from 2000 to 2016.

Trends in Total Costs of Opioid Use Disorder

OUTLOOK: How does the opioid crisis affect businesses?

Davenport: Businesses experience lost productivity in a variety of ways. We estimate that absenteeism, reduced labor force participation, incarceration and disability and worker’s compensation claims added up to about $96 billion in lost productivity costs from 2015 through 2018. Of those, reduced labor force participation and absenteeism were the biggest costs. But that’s just a portion of the overall toll. Companies also lose productivity through “presenteeism” – people who still go to work while not feeling well and are much less productive than they otherwise would have been. There’s the expense of finding and hiring qualified candidates to replace those lost to the crisis or who fail drug screens. This comes at a time of a very low unemployment, when companies already struggle to fill all of their positions and meet production demands. Another cost is unemployment compensation for employees who have been terminated for opioid-related offenses.

U.S. Lost Productivity Costs Due to Non-Medical Opioid Use, 2015-18

OUTLOOK: Are particular industries suffering disproportionately?

Davenport: Evidence suggests that physically demanding industries such as construction, resource extraction and manufacturing have been particularly hard hit. Some of that might be related to a higher incidence of work-related injuries in those fields, which can lead to pain reliever prescriptions or selfmedication with non-prescription drugs. Agriculture may also be affected because of the physical nature of much of that work.

OUTLOOK: What are companies doing to combat the problem?

Davenport: What we’re hearing from a lot of companies is that they’re focusing on supporting and maintaining the workforce they already have, to get those who are dealing with substance abuse problems back to being able to work well and to prevent those who may be at risk from starting. One thing they can do is use the influence they may have with insurance providers to make sure the company health plans include access to good, robust benefits for the treatment of substance use disorders and other behavioral and mental health problems.

Other companies are trying to help people even before they become part of part of the workforce. I know of one manufacturer that’s providing free treatment to help candidates who are in their employment pipeline, but are being held back by opioid addiction. If candidates are otherwise qualified but have failed a drug screening during the interview process, they’re referred into a treatment program paid for by the employer. Candidates have the promise of a job once they successfully complete the program. In the meantime, they might be given light-duty jobs around the shop while they get on their feet.

Employer Costs Related to OUD, 2015-18

OUTLOOK: What costs of the crisis have been rising most quickly?

Davenport: The biggest increases have come in mortality costs and health care. Mortality costs went up from $47.3 billion in 2015 to an estimated $74.1 billion in 2019. Health care costs jumped from $36.7 billion a year to $65.1 billion a year during that same period.

OUTLOOK: What do mortality costs include?

Davenport: Some are related to end-of-life medical expenses, such as emergency services and coroner medical exams. But the primary component is lost lifetime earnings for those who die prematurely because of opioid overdoses. Folks in their early working years, ages 25 to 34, have been particularly hard hit, with a loss in earnings they would have had over a normal, healthy life expectancy. In that age group alone, lost earnings for those who died from 2015 through 2018 totaled $93 billion. Lost earnings for all age groups during that period were more than $250 billion.

That affects others, too. For example, there are the people who might have been supported by that lost income. And when you remove from the economy the people who have died, there’s an impact on GDP overall, because of lower economic participation and productivity.

The risk of overdose is much higher in areas with more fentanyl activity. I think that’s what finally pushed this problem into the public eye.
OUTLOOK: How do these deaths break down demographically?

Davenport: In 2017, when there were just shy of 48,000 opioid overdose deaths, 13,000 were 25- to 34-year-olds. There were more than 11,000 35- to 44-year-olds who died and more than 10,000 45- to 54-year-olds, with another 7,000 deaths of 54- to 65-year-olds. These are mostly folks in their working years, which is why the total for lost lifetime income is so high.

OUTLOOK: What does this crisis cost taxpayers in the form of law enforcement, criminal justice and government assistance?

Davenport: We found that about 30% of the economic burden, or about $186 billion in 2015 through 2018, was borne by federal, state and local governments. During that period, total criminal justice costs, which include the cost of police protection, property lost to crime and incarceration and other expenses, were almost $39 billion; the cost of child and family assistance was $33.4 billion; and additional health care costs for people with opioid use disorder that are covered by Medicare, Medicaid and other public insurance added up to almost $106 billion. There’s also government support for food and nutritional assistance, income assistance, housing or homeless assistance and education.

OUTLOOK: What are the costs to the education system?

Davenport: We estimated that the opioid crisis has cost the education system around $5.2 billion over the past four years. But that reflects only federal expenditures on special programs in elementary and secondary education. It doesn’t include spending on higher education or state and local expenditures, which generally make up about 90% of the day-to-day funding for public schools.

Most federal spending is on special programs, either for special needs students, low-income students or others. That relates to the opioid crisis because many of those students now have greater needs. In some cases, federal education money is directly focused on grappling with substance use problems.

A (fentanyl) bust in California recently involved 18 pounds, which could probably fit in a couple of shoe boxes. But that was enough for a lethal dose for four million people.
OUTLOOK: How did non-medical use of opioids become such a major problem so quickly?

Davenport: The opioid crisis has been developing since the 1990s. But the significant increase in public visibility over the past two years is likely tied to the dramatic increase in deaths occurring when the crisis entered its second and third waves, marked by significant increases in overdoses from heroin and illicitly manufactured fentanyl. Fentanyl, in particular, really just sort of took off beginning in 2013. It’s far more potent than other common opioids, and the risk of overdose is much higher in areas with more fentanyl activity. I think that’s what finally pushed this problem that had been developing for a long time into the public eye.

OUTLOOK: What makes fentanyl so dangerous?

Davenport: Primarily its potency. Just two milligrams or so can be a lethal dose. And because it’s so potent, it’s easy to transport. A bust in California recently involved 18 pounds, which could probably fit in a couple of shoe boxes. But that was enough for a lethal dose for four million people.

OUTLOOK: Are there specific parts of the country or demographic groups that have been particularly affected by this crisis?

Davenport: The effects have really been pretty widespread. But in general it seems that men – particularly young men in their 20s and 30s – have been at higher risk than women. A number of studies have found that socioeconomic circumstances also play a role. People who are uninsured or on Medicaid or who are disabled are also at higher risk. And then areas where fentanyl activity is high have been particularly hard hit. In parts of the Northeast, fentanyl really has become a major problem.

If you map out the prevalence of opioid use disorder, the incidence of opioid-involved emergency room visits and overdose death rates, you get three somewhat different looking maps. That highlights some of the differences across the country in the prevalence and the severity of the crisis. There are certain places where the prevalence of opioid use disorder isn’t notably high, but because of the types of drugs that are being used, those are hotspots for overdose deaths, for example. In other areas, the prevalence is relatively high but there aren’t as many deaths, because there’s not as much fentanyl or other illicit drugs showing up in the mix.

Death rates may have plateaued in 2018 or may even be declining now. It’s not clear yet whether this is just a statistical anomaly or whether we’ve finally begun to turn the corner on this crisis.
OUTLOOK: What kinds of solutions have proved the most effective in countering the crisis?

Davenport: We obviously haven’t found a silver bullet yet. But I suspect that the best solutions will have to be complex and multifaceted in order to address all of the different risk elements of the crisis. We need approaches that address the drug environment to make the drugs that are out there less risky. We need responsible prescribing practices. And we also need to work on improving access to treatment, and of course to help prevent problems for those with health conditions or socioeconomic circumstances that place them at higher risk.

A leading clinical intervention is called medication-assisted treatment, which involves administering certain drugs – methadone, buprenorphine and naltrexone – that can help patients in recovery manage their withdrawal symptoms. In a heroin epidemic in France in the 1990s, buprenorphine was widely credited with reducing France’s fatality rate by almost 80% after it was made more widely available. So there are things like that to keep folks alive while we work on addressing some of the deeper determinants that put people at risk.

OUTLOOK: What do your projections show happening in this crisis in the years ahead?

Davenport: The estimates in our report go only through 2019. But we’re at an interesting juncture now where it’s not really clear where things may go from here. The provisional estimates from the CDC suggest that overdose death rates may have plateaued in 2018 or may even be declining now. It’s not clear yet whether this is just a statistical anomaly or whether we’ve finally begun to turn the corner on the crisis.

One thing to keep an eye on is overdose deaths involving fentanyl, because those are still on the rise. And if fentanyl activity expands westward, things could take another turn for the worse.

Also in this issue:

  • Interest Rates and Economic Indicators
  • CoBank Board Approves Special All-Cash Patronage Distribution, Elects Officers

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