How Methadone Treatment is Funded in OTPs

fundingOver the years AT Forum readers have asked how methadone maintenance (MM) treatment in opioid treatment programs (OTPs) is funded, and why some patients pay for their treatment while others receive it free.

The answer depends on the patient’s income and insurance status, the state’s funding scenario, and even the program’s status (profit or not-for-profit).

MM treatment is usually financed from a combination of public and private sources and patient self-pay, and the combination varies by state and by OTP.

“Public” funding includes funding from the federal Substance Abuse Prevention and Treatment block grant, the state block grant match, Medicaid, and other state, county, and local funding. Some states have no “public” funding for OTPs.

“Self-pay” means the patient pays out-of-pocket (for some or all of their treatment).

“Private” is what is paid by private insurance companies, private managed care companies, or directly by employers, or by a combination of these.

Public Funding

Medicaid coverage of addiction treatment varies from state to state, according to a 2008 report prepared for the National Council of State Legislatures: Medication-Assisted Treatment (MAT)for Opiate Addiction and the Public Financing of that Treatment. Author Suzanne Gelber, PhD, Avisa Group, tells AT Forum that not all states offer Medicaid funding for OTPs. States can opt not to offer Medicaid substance abuse coverage, even under parity. The most recent data were
collected by Dr. Gelber of Avisa in 2005 and published in 2008 by the Avisa and the National Council for State Legislatures on a special website ( At that time  36 states used Medicaid funding, at least in part, for methadone treatment in OTPs (for the table, go to

Federal Substance Abuse and Mental Health Services Administration (SAMHSA) funding to each state comes via the Substance Abuse Prevention and Treatment block grant (see sidebar). Block grants allow states to fund treatment for patients who are not covered by Medicaid, or to supplement Medicaid funding. There is no requirement that any block grant money be used for OTPs or MAT for opioids. Block grant funds from SAMHSA require a state contribution through a complicated formula that varies state by state.

For Profit = Patient Self Pay

Today, some patients are paying for their OTP treatment. Many are going to private for-profit OTPs, a trend that started in the 1990s and has gathered speed in recent years. In 1994, Rick Harwood, now director of research for the National Association of State Alcohol and Drug Abuse Directors, wrote a definitive analysis of MM funding ( At that time, only 17 percent of the total estimated cost of MM treatment was funded by patient self-pay. Thirty percent was paid by the block grant, 31 percent by state funds, 12 percent by Medicaid, and 7 percent by local funds, for a total of 80 percent of MM paid by public funds. Only 2.5 percent was paid by private insurance.

But a lot has changed in the MM treatment field since then, and a much bigger portion is now paid by patients directly, Mr. Harwood says. “A whole wave of private for-profit clinics have opened, and their patients pay, often in cash,” he tells AT Forum. Of the 286,000 patients in OTPs in 2008, approximately half attended private for-profit programs, and paid for their treatment out-of-pocket, at posted fees ranging from $13 to $25 a day or more. In fact, he says, due to sliding scales, the fees paid may be lower than advertised rates.

Mr. Harwood confirms that patient fees today definitely represent a bigger slice of the pie, and the pie itself has grown: $480 million a year was spent on MM in 1992, compared to Mr. Harwood’s estimate of about $1 billion a year today. But he points out that nobody really knows, because the information isn’t routinely collected. “It’s disappointing, because this is an important and very understudied topic.”

Only recently has SAMHSA resumed collecting financial data from a sample of its treatmentprograms. But there will be very few OTPs in this system, says Mr. Harwood. Furthermore, there will be no separate estimates for medication-assisted treatment.

Health Care Reform Will Increase Medicaid and Private Insurance Coverage

By 2014, the funding scenario will change once again. Under health care reform, virtually everyone in the country will be eligible to be covered by Medicaid, Medicare, or private insurance–at least, that is what the planners at SAMHSA say. In states that have health care reform now, such as Massachusetts, public funding has still been necessary for substance abuse treatment, since many people who need that treatment have not purchased health insurance. Payers know that MM is cost-effective when it’s part of a system of health care and behavioral health care; using it reduces unnecessary hospitalizations, ambulance costs, mortality, and emergency department visits. Theoretically, OTPs will receive more funding from Medicaid and private insurance, and fewer patients will have to dig into their own pockets to pay. All OTPs, whether for-profit or not-for-profit, will have to be able to bill Medicaid and private insurance companies by 2014.


For an analysis of how much money is spent per patient per year, depending on whether a program is public, private not-for-profit, or for-profit, see Wechsberg WM, Kasten JJ. Methadone Maintenance Treatment in the U.S.: A Practical Question and Answer Guide, New York, NY: Springer Publishing Co; 2007 (not available online).

Additional information on types of payment sources accepted by OTPs, showing a clear pattern of self-pay, can be found at the Substance Abuse and Mental Health Services Administration website (

Also see the National Drug Abuse Treatment Utilization Survey (NDATUS), (For a summary of NDATUS gathered financial information circa 1996 based on the work of Rick Harwood and others. For the methadone data, see