Is Medical Marijuana the Answer to Lowering Healthcare Costs?

Comparatively speaking the United States has the highest healthcare costs of all 34 countries in the Organisation of Economic Co-operation and Development. But, relative to the past five decades, healthcare inflation is practically at its low.

Source: OECD Health Statistics, 2013, WHO global health expenditure database. 

According to data from the Commerce Department, healthcare costs for July 2013 rose just 1% over July 2012. To add some context to these figures, the year-over-year increase between the mid-1970s and the mid-1990s ranged between 4% to as high as 12%.

Opioid abuse is on the rise
However, one treatment area where costs aren't declining for consumers and insurers is opioid prescriptions. Opioids are commonly prescribed to patients who are dealing with chronic pain issues. Because the condition is ongoing, there's a propensity for patients to be on these medications for long periods of time. Furthermore, many opioid-based medications, such as Oxycontin and Vicodin, can be quite addictive which can lead to abuse of the medication.

Source: Dawn McIlvain Stahl via Flickr.

According to a clinical review published by Dr. Kathryn Hahn of Oregon State University's College of Pharmacy in 2011, retail sales of hydrocodone, oxycodone, and methadone increased by 244%, 732%, and 1,177%, respectively, between 1997 and 2006. The National Survey on Drug Use and Health also estimated that 5.2 million people aged 12 and older had abused prescription opioids within the past month in a study conducted in 2007.

Opioid abuse costs the healthcare system billions annually
Yet, this isn't just a problem for the abusers and their families. It's a strain on the healthcare system as a whole. Dr. Hahn's analysis shows that the average per-person healthcare cost to payer was $15,884 for opioid abusers compared to just $1,830 for those who didn't abuse opioids – more than eight times higher! These costs stem from higher emergency department and outpatient visits, a greater need for mental health evaluations and substance abuse treatment, and a much higher propensity to need treatment for comorbidities (i.e.,the presence of two more chronic diseases in a patient at the same time) which are considerably more expensive to treat in abusers compared to nonabusers.

In addition, insurers foot a big bill for so-called drug diversion, or the use of prescription drugs in a recreational manner. Based on data from 2008 in Dr. Hahn's review, drug diversion costs the health insurance industry a whopping $72.5 billion per year, of which nearly $25 billion affects the private insurance market.

Long story short, the abuse of opioid medications in this country is turning into a financial black hole for the insurers that pay for these medications.

An unlikely solution
But, that could be about to change potentially thanks to, of all things, medical marijuana.

Source: PabloEvans via Flickr.

According to an abstract published online this past week by JAMA Internal Medicine, the use of medical marijuana in states that have legalized the drug for prescription purposes have led to significantly lower opioid-overdose mortality rates.

The basis of the study was to look at all 50 U.S. states between 1999 and 2010, examine state-level death certificates to determine how many people had died from opioid-induced overdoses, and then compare those states which have legalized medical marijuana to the opioid-induced overdoses to determine if there were any discernable trends.

Their findings showed that states which had medical cannabis laws in place over this time period (13 states in total, 10 of which enacted medical marijuana laws between 1999 and 2010) had, "a 24.8% lower mean annual opioid overdose mortality rate compared with states without cannabis laws." In other words, when medical marijuana was an option for physicians to turn to, there were fewer opioid-abuse deaths.

As you can probably surmise by now, a nearly 25% reduction in opioid-induced mortality would likely translate into big savings for the healthcare system (although it's hard to know how much for sure, since the JAMA study didn't go into non-mortality specifics).

Source: Mark via Flickr.

Perhaps the most attractive component of this past week's abstract was that the trend toward lowered opioid-induced mortality tended to increase as time went on.

In the first year following medical marijuana approval on a state level the rate of opioid-induced overdoses that led to death dropped by 19.9%. By the sixth year following the passage of medical marijuana laws, this reduction had increased to 33.3%. Secondary analyses of these findings confirmed the initial study. Of course, it's important to note that the study's authors were quite clear about the fact that they do not yet know what the causal link is -- so more research is needed. 

One big hurdle remains
While it's possible studies like this one and many more might push additional states toward passing similar medical marijuana legislation – and it already has with 23 states and Washington D.C. now allowing medical marijuana to be prescribed by physicians, up from just 13 in 2010 – one key hurdle remains which could stymie this movement.

Specifically, marijuana remains a schedule 1 drug according to the federal government and the Drug Enforcement Agency. Thus far the move by individual states to legalize the use of cannabis within their respective states hasn't been hampered by the federal government which has largely kept its distance. However, the move by a select few states to legalize marijuana for recreational purposes, and recent plans by some marijuana plant growers to expand their operations beyond their own state's borders, will leave the federal government with some interesting choices. If the government's reaction isn't favorable, the expansion of medical marijuana to additional states could stall or stop altogether.

Regardless of where you stand on this issue it remains a hot-button topic worth monitoring as it has the potential to drastically alter the healthcare treatment landscape.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 31, 2014, at 2:17 PM, nicholas8887 wrote:

    Medical cannabis has already proven to lower healthcare costs, and the facts continue to prove that the anti-pot side never had an argument to begin with, so all they really have left are insults.

  • Report this Comment On August 31, 2014, at 4:08 PM, abobinmn wrote:

    To think that in 2014 marijuana remains a Schedule 1 drug is absolutely ludicrous. The drug companies must have strong lobbies.

  • Report this Comment On September 03, 2014, at 9:14 AM, mm2014 wrote:

    Abodinmn, I completely agree with you 100%. With all the true stories related to how much Medical Marijuana is so helpful in treating many conditions it should be classified as the lowest Narcotic medication, even though it's only a herb, the government will never accept just that, in my opinion.

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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