Full Text PA-96-075 ECONOMICS OF DRUG TREATMENT SERVICES NIH GUIDE, Volume 25, Number 32, September 27, 1996 PA NUMBER: PA-96-075 P.T. 34 Keywords: Drugs/Drug Abuse Treatment, Medical+ Health Care Economics National Institute on Drug Abuse PURPOSE This program announcement encourages research on the economics of drug abuse treatment services. This field of economic research is concerned with the behavior of consumers, providers, governments, and third party payers, and how they respond to economic incentives related to drug abuse treatment services. Applications are sought that would employ the methods of economic analysis to the most pressing problems facing the financing and delivery of drug abuse treatment services in the United States. Particular concern is directed to understanding the structure of public and private drug abuse treatment markets at a time when new insurance benefits and alternative organizations for service delivery are being created. Applied research on alternative payment systems, public and private financing systems, and the design of insurance for drug abuse treatment is of special interest. HEALTHY PEOPLE 2000 The Public Health Service (PHS) is committed to achieving the health promotion and disease prevention objectives of "Healthy People 2000," a PHS-led national activity for setting priority areas. This program announcement, ECONOMICS OF DRUG TREATMENT SERVICES, is related to the priority area of Health Promotion/Alcohol and Other Drugs. Potential applicants may obtain a copy of "Healthy People 2000" (Full Report: Stock No. 017-001-00474-0 or Summary Report: Stock No. 017-001-00473-1) through the Superintendent of Documents, Government Printing Office, Washington, DC 20402-9325 (Telephone 202-512-1800). ELIGIBILITY REQUIREMENTS Applications may be submitted by domestic and foreign for-profit and nonprofit organizations, such as universities, colleges, hospitals, laboratories, units of State and local governments, and eligible agencies of the Federal government. Racial/ethnic minority individuals, women, and persons with disabilities are encouraged to apply as Principal Investigators. Foreign institutions are not eligible for the First Independent Research Support and Transition (FIRST) (R29) award. MECHANISM OF SUPPORT Research support mechanisms include the research project grant (R01), small grant (R03), and FIRST awards (R29). There are special requirements for FIRST and R03 mechanisms; the applicant intending to apply utilizing either of these mechanisms, should contact the program officer under INQUIRIES for further information. Because the nature and the scope of the research proposed in response to this announcement may vary, it is anticipated that the size of an award will also vary. RESEARCH OBJECTIVES Summary. Research studies are sought on (1) financing of drug abuse treatment services, including health insurance and/or payment mechanisms, (2) alternative delivery systems and managed care, (3) cost-benefit, cost-effectiveness, and cost-utility analysis, (4) cost of drug abuse treatment, and (5) methodological research. Studies of financing include issues of health insurance and/or payment mechanisms. Background. Economic research on drug abuse treatment services has the goal to inform society about fundamental issues in health care reform and managed care as restructuring of the health care system proceeds at a rapid pace. In this environment of social experimentation and institutional change, there are numerous natural experiments available for the application of economic analysis that would increase understanding of the demand and supply for drug abuse treatment and the unique factors that contribute to public and private markets for drug treatment. Applied research on alternative payment systems, public and private financing systems, and the design of insurance for drug abuse treatment must be grounded in sound microeconomic principles. The economics of drug abuse treatment services studies factors that determine supply such as: (1) the price of drug abuse treatment; (2) technological factors in drug abuse treatment; (3) price of resource inputs; (4) prices of related goods; (5) market organization; and (6) special influences such as government treatment standards, subsidies, insurance, and risk sharing. The economics of drug abuse treatment also studies factors that determine demand for drug treatment: (1) the price of drug abuse treatment; (2) average income of patients; (3) population characteristics and need for treatment; (4) price of related goods; (5) preferences or tastes; and (6) special influences such as patient health, court intervention, family intervention, barriers, drug testing, insurance coverage and benefit structure. Drug abuse treatment services research is complicated by the factor of direct government involvement in the production, financing, and regulation of treatment services. Market segmentation between the private and public treatment providers is another special consideration. There is face validity to the notion of competitive market failure given external costs of drug abuse, imperfect information, insurance coverage, and interdependence of preferences among addicts, families, courts, employers, and treatment providers. Financing of drug abuse treatment is derived from Federal, State, and local government funds and also private sector funds from health insurance, consumer out-of-pocket expenditures, and charity. The scientific inquiry into financing of drug treatment requires normative and positive economic analysis on allocation and distribution issues. For example, because different levels of government are involved in public financing, fiscal federalism is a central issue. For health services needs of the poor, distributive issues must be addressed. Analysis of both public and private provision of health insurance is essential to financing studies. Furthermore, payment mechanisms for drug abuse treatment affect the allocation and distribution of drug treatment resources within specific health care delivery systems that are created through public policy. The history of medical and behavioral delivery systems has been a move from traditional, fee-for-service to alternatives such as Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POS) plans. In the drug abuse treatment field, there has been the rise of the behavioral health care organization, usually for profit, to administer the mental health, alcohol, and drug abuse treatment benefits in private or public insurance plans. Under these organizations, managed care is a set of mechanisms designed to manage the quality, access, outcomes, and costs of service delivery to enhance the efficiency and equity of the system. Managed care systems require research on principal-agent relationships and the design of incentives, contracts, and regulations. Cost-benefit, cost-effectiveness, and cost-utility analyses are collaborative activities by economic and drug abuse treatment researchers who are investigating the effectiveness of innovative medical and behavioral therapies as well as effectiveness in real-world health care delivery systems. Methodological work is needed on measuring common denominators, the costs of services, and benefits. Economic analysis also has a role in interpreting the results of monitoring outcomes to improve the allocation and distribution of resources within a delivery system. Areas of research interest include direct and indirect treatment costs as well as social benefits and costs. Treatment costs for other disease disorders can be increased if a drug disorder is present, and cost savings (or "cost-offsets") are recognized as a major consideration in integrated health care networks. From a social viewpoint, measurement of cost-offsets in criminal justice populations is also needed. Unfortunately, information on the unit service costs of drug treatment has been rudimentary, which has hampered full cost pricing of service delivery for innovative and standard drug abuse treatments. Conceptualizing and measuring the relationships among accounting costs, marginal costs, average costs, and total costs in drug treatment programs and systems has received little attention. Research in these areas is needed so that a precise measurement of treatment costs can be established and further economic analysis be stimulated in such areas as the drug abuse treatment cost function. Researchers are encouraged to develop rigorous designs for studies in the economics of drug abuse treatment services. The following are illustrative of problem areas that may be addressed under this announcement. The examples are not exhaustive, and other types of studies are anticipated to be submitted. Financing of Drug Abuse Treatment Services Research is needed on financing of public and private drug abuse treatment. For analysis, such fundamental questions must be asked: (1) What criteria should be applied in judging budget policies?; (2) What are the social, political, economic, and historical forces which have formed the shape of the present funding pattern and which will determine the formulation of contemporary and future funding patterns?; and (3) What are the interactions between the private and public treatment sectors as various funding plans are devised? Research topics in this broad area may be further refined into two subtopic areas: Health Insurance. Research is encouraged on issues concerning the provision of private and public health insurance for drug abuse treatment. Examples of research topics include: o Incentives, structure, and behavior of private and public insurers; o Incentives and behavior of patients with insurance coverage and those patients without coverage; o Analysis of market functioning, moral hazard, adverse selection, and risk pool development; o Design of drug abuse treatment benefits in public and private health insurance packages; o Economic evaluation of regulatory controls and mandates; o Analysis of the prevalence of drug treatment insurance coverage and types of coverage among the insured, underinsured, as well as studies about the uninsured in need of treatment; o Economic barriers to the adoption of effective pharmacotherapies in standard drug treatment services; o Insurance studies related to patients with HIV/AIDS; and o Prevalence impact and consequences of cost shifting among various payers. Payment Mechanisms. Payment mechanisms affect the delivery, access to services, utilization, and quality of drug abuse treatment services. Examples of such studies include: o Federal and State health care reform and payment mechanisms; o Prepayment, fee-for-service, capitation, and price regulation; o Risk sharing, coinsurance, deductibles, catastrophic limits, stop-limits, and reinsurance; o Risk adjustment methods; and o Reimbursement levels and service adjustments. Alternative Delivery Systems and Managed Care Studies of managed care and behavioral health care organizations are encouraged. Some illustrative, but by no means exhaustive areas of consideration are: o Economic evaluation of well-defined managed care systems on quality, access, outcomes, and costs of service delivery; o Managed care effects on clinical decision making and on the structure and function of the treatment provider organization; o Organization of drug abuse treatment delivery that is either "carved-out of" or "integrated into" a managed care system; o Impact of managed care systems on Medicaid or Medicare; and o Economics of drug abuse treatment to HIV/AIDS patients under a managed care system. Cost-Benefit, Cost-Effectiveness, and Cost-Utility Analysis The analysis of the economic costs and benefits of drug abuse treatment has been derived in conjunction with effectiveness studies. Additional studies are needed to assess the economic benefits and costs of a variety of treatment interventions. Cost-effectiveness studies are useful in comparing novel treatment technologies to a standard treatment technology. Examples of such studies include: o Cost-benefit or cost-effectiveness of innovative treatment methods, targeted at special populations of injection drug users, women, pregnant women, and women with children, correction's populations, adolescents, and patients with co-occurring disorders; o Cost-benefit or cost-effectiveness analysis of the utilization of new or alternative medications for treating drug disorders and other brain and behavioral disorders; o Cost-benefit or cost-effectiveness of medical, mental health, alcohol, and drug treatment service integration; and o Cost-benefit or cost-effectiveness of integrating drug abuse treatment with criminal justice interventions. Cost of Drug Abuse Treatment Improved measures of costs are needed for management decisions that will assist clinical and program treatment staff as well as local, State and national health policy makers. For scientific research, measures of costs must be improved both conceptually and operationally so that precise costs of treatment interventions may be determined. Examples of such cost research include: o Estimation of the direct and indirect costs of treatment as well as the cost of ancillary services; o Measurement of component unit service costs and full costs of drug abuse treatment services that comprise standard and innovative treatments; and o Cost-offset studies of integrated drug abuse treatment and other health services. Methodological Research Research is encouraged that will develop and test the application of new methods of economic analysis in drug abuse treatment services research. Examples include: o Improvements for assessing economic efficiency and equity associated with the problems of drug abuse treatment; o Improvements in health insurance theory and practices associated with drug abuse treatment services; o Improvements in assessing the impacts of alternative delivery systems and managed care; o Development of new statistical methods associated with economic analysis of drug abuse treatment studies; o Development of simulation models that advance analysis of drug abuse treatment financing at the national and State levels; and Improving methodologies of cost-benefit, cost-effectiveness, and cost-utility analysis. INCLUSION OF WOMEN AND MINORITIES IN RESEARCH INVOLVING HUMAN SUBJECTS It is the policy of the NIH that women and members of minority groups and their subpopulations must be included in all NIH supported biomedical and behavioral research projects involving human subjects, unless a clear and compelling rationale and justification is provided that inclusion is inappropriate with respect to the health of the subjects or the purpose of the research. This new policy results from the NIH Revitalization Act of 1993 (Section 492B of Public Law 103-43) and supersedes and strengthens the previous policies (Concerning the Inclusion of Women in Study Populations, and Concerning the Inclusion of Minorities in Study Populations), which have been in effect since 1990. The new policy contains some provisions that are substantially different from the 1990 policies. All investigators proposing research involving human subjects should read the "NIH Guidelines For Inclusion of Women and Minorities as Subjects in Clinical Research," which have been published in the Federal Register of March 28, 1994 (FR 59 14508-14513) and reprinted in the NIH Guide for Grants and Contracts, Volume 23, Number 11, March 18, 1994. Investigators also may obtain copies of the policy from the program staff listed under INQUIRIES. Program staff may also provide additional relevant information concerning the policy. APPLICATION PROCEDURES Applications are to be submitted on the grant application form PHS 398 (rev. 5/95) and will be accepted at the standard application deadlines as indicated in the application kit. Application kits are available at most institutional offices of sponsored research and may be obtained from the Grants Information Office, Office of Extramural Outreach and Information Resources, National Institutes of Health, 6701 Rockledge Drive, Bethesda, MD 20892, telephone 301-710-0267, email: ASKNIH@ODROCKM1.OD.NIH.GOV. The title and number of the program announcement must be typed in Item 2 on the face page of the application. FIRST award applicants must include at least three sealed letters of reference attached to the face page of the original application. FIRST award applications submitted without the required number of reference letters will be considered incomplete and will be returned without review. The completed original and five legible copies must be delivered to: DIVISION OF RESEARCH GRANTS NATIONAL INSTITUTES OF HEALTH 6701 ROCKLEDGE DRIVE, ROOM MSC-7710 BETHESDA, MD 20892-7710 BETHESDA, MD 20817 (for express/courier service) REVIEW CONSIDERATIONS Applications that are complete will be evaluated for scientific and technical merit by an appropriate peer review group convened in accordance with the standard NIH peer review procedures. As part of the initial merit review, all applications will receive a written critique and undergo a process in which only those applications deemed to have the highest scientific merit, generally the top half of applications under review, will be discussed, assigned a priority score and receive a second level review by the appropriate national advisory board or council. Small grants do not receive a second-level review. Review Criteria o scientific, technical, or medical significance and originality of proposed research; appropriateness and adequacy of the experimental approach and methodology proposed to carry out the research; o qualifications and research experience of the Principal Investigator and staff, particularly, but not exclusively, in the area of the proposed research; o availability of the resources necessary to perform the research; o appropriateness of the proposed budget and duration in relation to the proposed research; and o adequacy of the plans to include both genders and minorities and their subgroups as appropriate for the scientific goals of the research. The initial review group will also examine the provisions for the protection of human and animal subjects, and the safety of the research environment. AWARD CRITERIA Applications will compete for available funds with all other approved applications assigned to the Institute. The following will be considered in making funding decisions: quality of the proposed project as determined by peer review, availability of funds, and program priority. INQUIRIES Inquiries are encouraged. The opportunity to clarify any issues or questions from potential applicants is welcome. Direct inquiries regarding programmatic issues to: William S. Cartwright, Ph.D. Services Research Branch National Institute on Drug Abuse 5600 Fishers Lane, Room l0A30 Rockville, MD 20857 Telephone: (301) 443-4060 FAX: (301) 443-2317 Email: WC34B@NIH.GOV Direct inquiries regarding fiscal matters to: Gary Fleming, J.D., M.A. Grants Management Branch National Institute on Drug Abuse 5600 Fishers Lane, Room 8A-54 Rockville, MD 20857 Telephone: (301) 443-6710 Email: GF6S@NIH.GOV AUTHORITY AND REGULATIONS This program is described in the Catalog of Federal Domestic Assistance No. 93.279. Awards are made under authorization of the Public Health Service Act, Title IV, Part A (Public Law 78-410, as amended by Public Law 99-158, 42 USC 241 and 285) and administered under PHS grants policies and Federal Regulations 42 CFR 52 and 45 CFR Part 74. This program is not subject to the intergovernmental review requirements of Executive Order 12372 or Health Systems Agency review. Grants must be administered in accordance with the Public Health Service Grants Policy Statement, (DHHS Publication No. (OASH) 82-50-000 GPO 0017-020-0090-1 (rev. 10/01/90). The PHS strongly encourages all grant recipients to provide a smoke-free work place and promote the non-use of all tobacco products. In addition, Public Law 103-227, the Pro-Children Act of 1994, prohibits smoking in certain facilities (or in some cases, any portion of a facility) in which regular education, library, day care, health care or early childhood development services are provided to children. This is consistent with the PHS mission to protect and advance the physical and mental health of the American people. References Cartwright, W.S. and Ingster, L. "A Patient Based Analysis of Drug Disorder Diagnosis on Length of Stay and Total Charges for the Medicare Population," Health Care Financing Review, 15, 1993, pp. 89-101. Feldstein, P.J. Health Care Economics, 4th Edition. New York: Delmar Publishers Inc., 1993. Frank, R.G. and Manning, Jr., W.G. Economics and Mental Health. Baltimore: The Johns Hopkins Press, 1992. Gerstein, D.R. and Harwood, H.J. (Eds.) Treating Drug Problems, Volumes 1 and 2. Washington, DC: National Academy Press, 1990. Ginzberg, E.(ed.) Health Services Research, Key to Health Policy. A report for the Foundation for Health Services Research, Cambridge: Harvard University Press, 1991. Greenberg, W. Competition, Regulation, and Rationing. Michigan: Health Administration Press, 1991. Institute of Medicine, Broadening the Base of Treatment For Alcohol Problems. Washington, DC: National Academy Press, 1990. Hu, T. and Rupp, A (Eds.). Advances in Health Economics and Health Services Research, Volume 14. Greenwich: JAI Press Inc., 1993. Musgrave, R.A. and Musgrave, P.B. Public Finance in Theory and Practice. New York: McGraw-Hill Book Company, 1973. National Institute on Drug Abuse. "Recommendations" in Economic Costs, Cost-Effectiveness, Financing, and Community Drug Treatment. NIDA Research Monograph 113. DHHS Pub. No.(ADM)91-1823. Washington DC: U.S. Government Printing Office, 1991, pp. 205-211. Rice, D.P.; Kelman, S.; Miller, L.S.; and Dunmeyer, S. The Economic Costs of Alcohol and Drug Abuse and Mental Illness: 1985. Report submitted to the Office of Financing and Coverage Policy of the Alcohol, Drug Abuse, and Mental Health Administration, U.S. Department of Health and Human Services. San Francisco: Institute of Health and Aging, University of California, 1990. .
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