Preface

This document was commissioned by the Center for Substance Abuse Treatment to provide State alcohol and other drug agencies with background information and advice in using actuarial studies to predict the costs of contracting with managed-care organizations to provide publicly funded chemical dependency treatment services.

Actuarial studies similar to the one described in this report should also be useful to States that are planning changes in funding chemical dependency treatment, including health care reform, expansion of medicaid benefits, and changing mandated insurance coverage for chemical dependency treatment. With a few adjustments, the approaches described herein could be useful for estimating the costs of mental health services as well.

This report relates the experience of one State, Washington, in conducting an actuarial estimate of the cost of chemical dependency treatment. It describes both the basic lessons that the State learned about actuaries and actuarial studies and the policy debates and analysis problems that the State encountered. The report includes a description of actuarial studies in general and Washington's in particular, including the data and calculations used to obtain actuarial estimates and how and when assumptions are employed. The final chapter discusses options and considerations for States that plan to procure such studies themselves.

Included as appendixes are two relevant documents from Washington's experience: the description of the benefit package that the State desired and the final report of the actuary.

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