Employment Reductions and Government Revenue Losses from Opioid Misuse

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By Amanda Honeycutt

The economic burden of the U.S. opioid epidemic likely exceeds $78.5 billion per year when considering its impact on healthcare, substance abuse treatment, the criminal justice system, and productivity costs. Although medication assisted treatment for opioid abuse (covered previously at our blog) may help to reduce these costs [pdf], the epidemic is likely to continue to negatively impact U.S. families and economic outcomes in our society for many years to come.

In a forthcoming brief report in Medical Care, Dr. Joel Segel and colleagues at Pennsylvania State University view the economic burden of the opioid epidemic through a different lens. Rather than asking how much state governments are spending to address the opioid crisis, they analyzed the losses in state and federal tax revenues resulting from opioid misuse.  Their analysis focused on the time period from 2000 through 2016, and found that state governments had losses in income and sales tax revenues of almost $11.8 billion. Additionally, the U.S. federal government lost almost $26 billion in income tax revenue over the same time period.  The authors point out that quantifying these losses may help state governments as they move to seek damages from opioid manufacturers. Legal strategies are likely to be similar to those pursued by states for the master tobacco settlement [pdf].

Interestingly, a key assumption of their analysis is a decline of 1.55 percentage points in labor force participation among 25-54 year-old adults attributed to prescription opioid misuse. This assumption derives from a 2018 study by economist Dr. Alan Krueger [pdf], whose unexpected death last weekend has saddened all of us who had long admired his commitment to applying economics to address pressing societal problems.

In that study, Dr. Krueger had analyzed the decline in U.S. labor force participation from its peak in 1997.  He noted that people who were not in the labor force (i.e., people who were neither now employed nor looking for work) were more likely to have poor self-reported health and at least one disability than employed or unemployed people (see Tables 4 and 5).

He further identified that 25-54 year-old men who were not in the labor force were more likely to experience pain and had higher reported pain levels than men in the labor force (see Table 6). He then sought to understand whether prescription opioid use/misuse might be tied to recent declines in labor force participation. He found that up to 43 percent of the decline in male labor force participation between 1999 and 2015 could be accounted for by the rise in opioid prescriptions during this time.  Dr. Krueger notes in his conclusion:

“[A]ddressing the decades-long slide in labor force participation by prime age men should be a national priority. Prime age men express low levels of SWB [social well-being] and report finding relatively little meaning in their daily activities. Because nearly half this group reported being in poor health, it may be possible for expanded health insurance coverage and preventive care under the Affordable Care Act to positively affect the health of prime age men. The finding that nearly half of prime age, NLF [not in the labor force] men take pain medication on any given day and that 40 percent report that pain prevents them from accepting a job suggests that pain management interventions could potentially be helpful.” (p. 55)

The opioid crisis in America continues to have devastating impacts for individuals, the families of people suffering from opioid misuse, local, state, and federal governments, and health care and social services providers and payers. My hope is that research, such as the important work by Dr. Krueger during his lifetime and current research by Dr. Segel and his colleagues will continue to move us toward policy that will reduce the burden of opioid misuse and improve the lives of those affected.

Lastly, Dr. Krueger’s important work on this and so many other issues is a legacy worth pausing to remember.

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