The Opioid Epidemic: An Economic Overview in the State of California

By Thomas Hale and Sarah DiSalvo


The opioid epidemic has been on a dangerous rise in the last two decades that can most prominently be seen in the State of California. With an average of over 1,600 opioid overdose deaths per year since 1999, and over 2,000 in 2016 alone, this epidemic has grown into a significant economic burden on California. (See Figure 1.) The State’s health care costs, prison overdoses, and labor force participation rate are all indicators of this burden.

Health Care Costs

While California has one of the lowest rankings for overdose death rates, it has the highest health costs in the U.S. and the fifth highest health costs per capita. (See Figure 2.)

According to the National Center on Addiction and Substance Abuse (NCASA), 19.5% of the state budget goes to substance use and addiction. Of that amount, only 2% goes to treatment and prevention, whereas the other 98% goes to prescribing opioids and other medications, which can lead to more addictions. [i]

Prison Impact

According to NCASA, over 65% of all U.S. inmates meet the medical criteria for substance abuse addiction and only 11% receive any type of treatment. [ii] Given that the U.S. Justice Department specifies a California correctional population of nearly 600,000 (the second largest among states behind only Texas) [iii], it follows that many of these individuals are not being given adequate access to appropriate treatment. This raises significant concern based on a National Health and Medical Research Council finding that an inmate is “75% less likely to die […] when being exposed to MAT (Medication Assisted Treatment used to treat opioid addiction).

In addition, a study by the Internal Journal of Law and Psychiatry showed that formerly incarcerated individuals with opioid addiction struggle with finding employment and housing. This can increase an individual’s likelihood of relapse and push him or her back into the prison system. The NCASA study listed above also found that “if we gave quality addiction treatment and aftercare to every inmate who needed it, we’d break even on the investment in only a year if just more than 10 percent were successful in staying employed, out of trouble and drug free. In dollar terms, that translates to an economic benefit for the nation of more than $90,000 annually per former inmate.” [iv]

Labor Force Impact

According to the National Bureau of Economic Research, unemployment and opioid overdose deaths have a direct correlation. An individual who goes through a basic medical procedure often mismanages opioids prescribed to them. After addiction sets in, individuals often have no incentive to work or cannot pass a drug test.

Princeton Economist Alan Krueger published in a Brookings Institute report that two-thirds of prime-age men (25 to 54) who are not in the labor force take prescription pain medication on a daily basis. Additionally, Krueger found that the increase in opioid prescriptions from 1999–2015 could account for about 20% of the observed decline in the men’s labor force participation and about 25% of the women’s labor force participation rate. [v]

There is also a direct link between unemployment and opioid use. According to the National Bureau of Economic Research, opioid related deaths and Emergency Room visits increase during times of economic weakness. [vi] The study found that in any given county, as the unemployment rate increases by 1%, the opioid death rate per 100,000 rises by 3.16% and the opioid overdose emergency room visit rate per 100,000 increases by 7%.


The following solutions should be prioritized when identifying the ways California can end its opioid epidemic.

Increased Treatment Facilities

Medication Assisted Treatment, or MAT, is a program that helps decrease opioid abuse through the use of controlled medication. Addiction recovery can be extremely painful as it can lead to withdrawals and sometimes relapse. Treatment facilities give their patients medications like Buprenorphine or Methadone, drugs that treat the symptoms of withdrawal. MAT is the most recent treatment to be introduced into the State of California to decrease opioid abuse. Unfortunately, these treatment facilities are not very common, and in some cases, people have to travel more than 100 miles to the nearest MAT treatment facility on a daily basis. [vii] In addition, out of the 20 hardest hit counties, only four have some sort of treatment facility that can help individuals manage their addiction. [viii]

Treatment is also extremely important for the individuals in the prison system. In California, there is only one prison that offers substance abuse treatment: The California Substance Abuse Treatment Facility and State Prison in Corcoran, CA. The prison’s maximum capacity can hold 3,434 people, but unfortunately this is not enough to treat all the people in California going into the prison system with an opioid addiction. Without proper treatment, individuals are at a high risk of dying due to withdrawal or staying in the dangerous cycle of addiction.

Limiting Prescription Opioids

Blue Shield California has launched a program that has targeted the end of 2018 as the time by which the number of opioids prescribed to patients should drop by 50 percent. The plan is to help patients who are on high dosages shift to reduced, safer dosages and to provide patients who have not been prescribed opioids with alternatives. [ix] This would drastically reduce the number of individuals with opioid addictions.

Another necessary measure is limiting the length of opioid prescriptions. According to the Center for Surgery and Public Health at Harvard Medical School, the duration of the prescription is key to pain management, but no guidelines exist for the appropriate opioid prescribing methods out of surgery. The Centers for Disease Control and Prevention (CDC) examined the risk of addiction after a certain number of days and found that after five days, the likelihood of addiction is already at 10% and after a 30 day supply the risk goes up to almost 50%. [x]

It is critically important that California takes a stance in the reduction of opioid prescriptions as well as opioid prescription lengths.


California’s opioid problem is already serious and could become an even greater issue for the State’s health care system, prisons, and labor force. It has huge socio-economic implications. The problem’s severity calls for the State to adopt solutions, which can meaningfully begin with a significant increase in treatment facilities and a major reduction in opioid prescriptions.

Thomas Hale is Senior Research Associate at the Fermanian Business Economic Institute. Sarah DiSalvo is an undergraduate researcher at the Fermanian Business Economic Institute. The opinions in this article are presented in the spirit of spurring discussion and reflect those of the author and not necessarily the treasurer, his office or the State of California. Job data used in this article is compiled by the Fermanian Business and Economic Institute for Point Loma and is not meant to be used as an official State of California source or replace official information released by the State of California and/or State Department of Finance.

[i] “State Spending on Addiction and Substance Use.” The National Center on Addiction and Substance Abuse, 14 Apr. 2017,

[ii] New CASA* Report Finds: 65% of All U.S. Inmates Meet Medical Criteria for Substance Abuse Addiction, Only 11% Receive Any Treatment. The National Center on Addiction and Substance Abuse, 16 Feb. 2016,

[iii] Mostly True: America’s prison population has skyrocketed 500 percent in 40 years.

[iv] New CASA* Report Finds: 65% of All U.S. Inmates Meet Medical Criteria for Substance Abuse Addiction, Only 11% Receive Any Treatment. The National Center on Addiction and Substance Abuse, 16 Feb. 2016,

[v] Krueger, Alan. Where Have All the Workers Gone? An Inquiry into the Decline of the U.S. Labor Force Participation Rate. Brookings Institute, 7 Sept. 2017,

[vi] “Are Opioid Deaths Affected by Macroeconomic Conditions?” NBER Bulletin on Aging and Health, National Bureau of Economic Research, 2017,

[vii] PIERCE, HAROLD. “ANALYSIS: California Locales with Highest Opioid Overdose Rates Stranded without Medication Assisted Treatment Facilities.” The Bakersfield Californian, 6 Nov. 2017,

[viii] Baylor, Chanell. National Helpline. Substance Abuse and Mental Health Services Administration, 14 May 2014,

[ix] “Legalizing Medical Marijuana Decreases Use of Opiates: Study.” (July 2016). TeleSUR.Accessed August 31, 2016.