Outcome-Based Insurance Reimbursement: America’s Drug Fix

Opioid prescribing continues to fuel the epidemic and now accounts for 144 deaths per day in the United States. And those are the reported numbers; it’s presumed that the picture is a lot bleaker when including unreported numbers. But the official numbers should be more than enough to warrant a widespread systemic change.

To put these numbers in perspective, opiates alone kill more Americans per year than guns, than cars, than natural disasters, than terrorism.

Notwithstanding the deaths and trail of devastation left in the wake of addiction, this still isn’t enough for the insurance industry or the government to take adequate action in America. Addiction treatment continues to fall below par, meaning millions of sufferers and their families are being let down on a grand scale.

Economics of substance use disorders

Let’s talk economics. Substance use disorder costs the country over $750bn a year. This number is not surprising if we consider that over 50% of the U.S. prison population is incarcerated on drug charges (up from 16% in 1970, and not including other crimes perpetrated for drug-related purposes). The economic picture begins to worsen upon considering the cost of addiction on productivity - both for individuals with substance use disorders and for their families who are trying to get them help. Coupled with the economic burden on emergency rooms, police departments, and local government the scale of this problem is rapidly spiraling out of control.

Furthermore, there’s the cost of overpriced or fraudulent billing practices from unethical treatment centers offering pseudo drug treatment services that sell the ‘miracle cure’, which realistically doesn’t exist. The treatment and recovery model as it stands is wholly reliant upon the patient’s economic circumstances - whether families have the resources to sustain the cost of repeated and continuous treatment – along with the robustness of an insurance policy.

So far attempts to stop the practices within the treatment industry have largely been ineffective.


A solution being proposed out of Florida Atlantic University’s Research Park is outcome-based reimbursement, which is a simple financial model that rewards successful outcomes over repeated ineffective treatment episodes. How it works is insurance providers pay 50% of the single code billable rate during the course of treatment and then pay an additional 100% of the billable rate (for a total of 150%) if there are no acute level care episodes in the following twelve months after the initiation of treatment.

If another acute care treatment episode is required, the treatment facility keeps the 50% of the billable rate that it has already been paid for services, does not collect the additional 100% of the billable rate for producing a successful outcome, and a new treatment episode begins either at the same facility or a different facility depending on the clinical needs of the client.

The outcome-based reimbursement model not only relieves pressure from already strained insurance providers and families but also means that resources are allocated efficiently to the best treatment practices. If a treatment facility is consistently successful, then it will have an increased number of reimbursements. These funds can be used to improve services, produce more successful outcomes, and develop innovative treatments that address the stressors of modern-day life. It also stifles the ability of fake treatment centers to commit fraud and pushes business models built on generating repeated failures out of the market. In short, the financial model pays for treatment centers to facilitate the process of achieving sustainable wellness rather than simply maintaining an individual sickness.

Economically, this financial model most significantly reduces cost over multiple treatment episodes. Recovery itself is relatively cheap to initiate and extremely inexpensive to maintain, but the costs of multiple ineffective acute care treatment episodes rapidly builds to something significant and unmanageable to most American families.

Insurance providers who are at this moment paying out even for poor treatment and outcomes, will, under the proposed model, make fewer payments for ineffective treatment episodes. It incentivizes the implementation of effective clinical interventions within the treatment industry. From a humanitarian perspective, for the families facing crippling debt as a result of a loved one’s addiction, it dramatically reduces out-of-pocket expenses, deductibles and highly motivates treatment centers to support effective subacute-level support services such as recovery high schools, alternative peer groups, collegiate recovery communities, and recovery community centers.

Final thoughts

The concept of paying for results isn’t unique and has been adopted in many other areas - particularly the education sector. We simply cannot continue to overpay for ineffective results. With the proper support mechanisms, those struggling with addiction can turn their lives around, and it is entirely possible for them to recover and go on to lead deeply fulfilling lives, while simultaneously contributing massively to our society. Every single human being deserves a chance, but if we don’t implement a sensible, overarching solution soon, one, which benefits all parties, the consequences for society will be even more catastrophic.

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