$35 Billion Annual Cost of Workplace Substance Use Disorders is just the Tip of the Iceberg

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For Employers
5 min read


In the largest study of its kind to date, CDC researchers recently found that treating substance use disorders (SUDs) costs employers more than $35 billion annually. That’s not counting the associated health, economic, and societal costs—including mental illness.

The study, titled Medical Costs of Substance Use Disorders in the US Employer-Sponsored Insurance Population, represents new, independent research and a huge dataset—162 million individuals with employer-sponsored health insurance—that shows the gravity of the problem. The study reported the average annual cost attributable to SUD diagnosis is $15,640 (per affected enrollee), with alcohol use disorder and opioid use disorder being the two biggest contributors. These costs are just the tip of the iceberg; the scope and impact of SUDs within the U.S. workforce is likely much larger than previously recognized.

Overall, the CDC study authors concluded:

  • Per-person and total medical costs of SUDs are substantial
  • Costs reported represent the minimum direct costs of SUDs faced by employers and insurers due to underdiagnosis, absenteeism, presenteeism, job retention, and mortality
  • SUD prevention and treatment by employers and payers can support employees and their dependents and help offset the existing high medical cost of SUDs

SUD burden and potential cost savings 

One of the most alarming findings in this study is the hidden cost of substance use either from underreporting or job-related costs. The $35 billion annual medical cost of SUDs for U.S. employers, employees, and their health insurance payers represents the minimum direct cost.

The CDC research discovered that while only 1% of employer plan members are diagnosed with SUDs, 11% self-report that they have struggled with SUDs—meaning the magnitude of the problem may be more than ten times greater than reported.


Medical expenditures for SUDs represent the minimum direct cost that employers and health insurers face because not all people with SUDs have a diagnosis, and costs related to absenteeism, presenteeism, job retention, and mortality are not addressed.
– CDC study authors


Barriers to care 

Breaking down barriers to care by improving care access, quality, and equity represent three important ways employers and health plans can help address the ongoing SUD challenge.

We know that 70% of those with an SUD are in the workforce today, yet only around 10% of people who need SUD care access any kind of specialty treatment. This helps explain why this problem directly affects today’s workforce and health plans from both a personal and financial standpoint. Beyond access, the stigma and fear surrounding SUDs often keeps employees from asking for help at all, while many employee assistance programs simply aren’t purpose built to deal with SUD treatment and recovery.

Care quality is another challenge. The National Academy of Medicine reports that quality care is increasingly difficult to find due to a lack of evidence-based practices at SUD treatment facilities as well as a shortage of qualified, trained professionals. Furthermore, traditional rehab treatment centers can be costly and limited in their effectiveness, contributing to high relapse rates. An Optum Behavioral Health study found that costs for out-of-network residential treatment totaled more than $44,000 per 90-day episode, compared to $13,000 for the same treatment delivered by in-network providers. The same study found 30-day and 90-day readmission rates at destination facilities were 100 percent higher when compared with in-network facility discharges.

In terms of equity, SUDs have been characterized by racial, class, and geographic inequities. National Institutes of Health research has revealed a widening racial disparity in opioid overdose death rates. The rate of deaths among Black people increased by 38% from 2018 to 2019, while rates for other racial and ethnic groups did not rise. Disparities in overdose education and naloxone distribution and medications for opioid use disorder delivery by race/ethnicity are also well documented. For rural individuals seeking opioid treatment, barriers to equitable care include lack of public transportation, longer travel distances, and health workforce shortages.

Substance use management

As overwhelming as this problem may seem, the CDC research on SUD costs concludes that employers and health plans hold the key to solving the substance use crisis, asserting that “employers and health insurance payers can support employees and their dependents to prevent and treat SUDs…”


Given the substantial annual direct medical cost that SUD incurs in the U.S. population with employer-sponsored health insurance, all employers and health insurance payers can consider the potential cost-effectiveness of prevention and treatment strategies
– Cora Peterson, Ph.D., senior health economist at the CDC’s Division of Injury Prevention and co-author of the study.


Employers and health plans can take steps to manage these costs by implementing substance use management programs that focus on prevention, early identification, and treatment of substance use disorders. These programs may include screening and assessment tools, employee education and awareness campaigns, and access to evidence-based treatment options such as medication-assisted treatment and cognitive-behavioral therapy.

Technology can also play a key role in improving the accessibility and effectiveness of substance use treatment. For example, telemedicine platforms and digital health tools can provide remote access to care and support for individuals struggling with addiction, reducing the need for in-person appointments and improving the overall quality of care.

By investing in substance use management and technology-enabled treatment, employers and health plans can not only save money but also address care disparities while improving the health and well-being of their employees and members.

Finding the hidden costs of SUDs

Untreated SUDs lead to annually compounding health costs, absenteeism, lower productivity, and increased turnover.

Fortunately, cost-effective, value-based, substance use management from Pelago can help your organization identify and tackle the high costs of employee substance use, including physical and mental health problems and costly job-related impacts.

If your benefits team or health plan is looking for ways to significantly decrease the direct and hidden costs of employee substance use, contact us for a free claims analysis and ask about our 100% of fees-at-risk ROI guarantee.

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