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How to target opioid funding to states that need it most

How to target opioid funding to states that need it most
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More than 840,000 Americans died from drug deaths in the past two decades, and 60 percent of those deaths involved opioids. One recent study estimated the societal costs of opioid use disorder and fatal opioid overdoses at over $1 trillion in 2017 alone. 

This national crisis has spurred state and local governments to foster opioid misuse prevention, treatment, education and monitoring. The federal government has responded to the situation in a range of ways, including by offering financial support to states for their efforts. However, until recently, it was not well understood how well these federal funds were targeting the geographic areas with the greatest need.

A study that I conducted with Bradley Katcher aimed to close this knowledge gap. In it, we compared the amount of federal grant money awarded to each state in 2017 and 2018 to the severity of the states’ opioid problems. To do this, we constructed a database of opioid-related grants from the federal government that were geographically targeted. Using our preferred measure of opioid severity — which combined the prevalence of opioid-involved drug deaths with the level of opioid misuse — we determined that around one-sixth of the funds meeting our inclusion criteria, or approximately $1.5 billion, would have needed to be reallocated in order to distribute funding in a way that was actually equitable.

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When compared to the severity of opioid problems, the most poorly funded states tended to be in the Rust Belt, Appalachia, the Northeast and Florida, and the most generously funded were the northern mountain states, parts of New England, Alaska and Hawaii. Funding generosity differed more than eightfold between Alaska, which received more than 486 percent of the national average, and Pennsylvania, which obtained just 59 percent of it. Less populous states were consistently overfunded, compared to the national average, and the six most generously funded states were all among the 10 least populous.

Three main factors cause unequal funding levels across states. First, some major grant programs contain a minimum amount of funding that each state is eligible for, and these amounts frequently exceed what these states would receive based on the size of their opioid problems alone.

Second, special set-asides are sometimes reserved for a limited number of states with especially severe opioid problems. These allocations not only have the potential to destabilize funding levels over time, but they also can create sharp disparities between states with similar levels of severity, when those states sit just above or below the threshold for receiving these extra resources.

Third, awards are sometimes based on indicators of opioid problems (such as rates of opioid use disorder or unmet treatment need) that are poorly measured in the available data. This introduces discrepancies between funding awards and actual level of need.

Our analysis suggests several ways to improve the targeting of federal grants that aim to assist states with opioid problems.

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Lesson 1: Audit yearly. We recommend an annual review that looks at the distribution of awards across geographic locations, similar to the one conducted in our study. While some disparities in funding may be appropriate and desirable, differences that are systematically linked to broad factors such as state population may be problematic, since they favor some locations for reasons unrelated to the severity of opioid problems.

Lesson 2: Allocate with precision in mind. Our research suggests that benchmarks for state allocations should be more carefully developed. A greater emphasis should be placed on data such as opioid death rates, which are more accurately determined. More imprecise measures — levels of untreated opioid use disorder, for example — should be weighed more lightly.

Lesson 3: Avoid standardizing award amounts. While minimum distribution requirements and special set-asides may be politically attractive, they should be avoided where possible, since they often result in funding inequities. The development and application of appropriate formula-based distributions will likely achieve at least some of the same goals — and result in much more equitable targeting.

Christopher J. Ruhm is a professor of public policy and economics at the University of Virginia’s Frank Batten School of Leadership and Public Policy. He has received external research funding from several organizations, including the National Science Foundation, the National Institutes of Health and Arnold Ventures. He previously was senior economist on President Clinton’s Council of Economic Advisers and president of the Southern Economic Association.