I03-21

Question

From the mid-1980s to the early 2000s, most substance abuse treatment in the U.S. was provided by specialty centers. These centers offered two main types of care:
 
• Outpatient care, where patients receive treatment during scheduled visits and do not stay overnight
 
• Inpatient care, where patients stay at the facility during treatment
 
In the early to mid-1990s, inpatient programs were seen as too expensive and less cost-effective than outpatient alternatives. As a result, there was a general shift toward outpatient care. Private insurers, in particular, began covering fewer inpatient treatments and focused more on outpatient programs.
 
During this period, spending on prescription medications for substance abuse remained a small portion of total treatment costs. Few FDA-approved drugs (the U.S. Food and Drug Administration is the agency that authorizes medications for use in the United States) were available:  disulfiram  and  naltrexone  were already in use for alcohol addiction, and  acamprosate  was added in 2004.  Buprenorphine  was FDA-approved in 2002 for opioid addiction.  Methadone , another FDA-approved medication for opioid treatment, is not sold through regular pharmacies. Instead, it is administered at treatment centers, and its cost is counted as part of spending on those centers.Between 1986 and 2014, the mix of public funding for substance abuse treatment shifted significantly. Programs funded in whole or in part by state and local governments took on a growing share of total spending. Their portion rose from 29% in 1986 to 40% in 2003, and then to 42% in 2006 and 45% in 2014, as shown in the figure below.
  https://gmatclub.com/gmat-focus-tests/resources/import/img/I03-21new.pnghttps://gmatclub.com/gmat-focus-tests/resources/import/img/I03-22.png

Bunuel · Answer

Official Solution:

Statement 1: 
 
Private spending on substance abuse treatment stayed roughly the same, but its share dropped from about 50% in 1986 to around 22% in 2003. That means total spending must have risen by about 50/22 ≈ 2.3, i.e. more than doubled. So, this statement is accurate.
 
 Statement 2: 
 
If private spending was $4.7 billion and made up 25% of the total, then total spending was around $18.8 billion. State and local programs made up 40% of that, or about $7.5 billion—not $18 billion. So, this statement is not accurate.
 
 Statement 3: 
 
Medicare’s share stayed about the same from 1986 to 2003, but since total spending doubled, Medicare spending in dollars also doubled. So, this statement is not accurate.

Correct answer:

Overall spending on substance abuse treatment more than doubled from 1986 to 2003.  "Yes"

State and local government programs (Public Other State and Local) accounted for approximately $18 billion in substance abuse spending in 2003.  "No"

Medicare spending on substance abuse treatment remained unchanged between 1986 and 2003.  "No"

Bunuel · Answer

This MSR question and its solutions have been completely revised and improved.

Edwin555 · Answer

I like the solution - it’s helpful.

heyRaj · Answer

I like the solution - it’s helpful.

Mayank_1206 · Answer

I did not quite understand the solution. Explanation not clear! where does it mention private spending was 4.7 billions usd and made 25%. unclear on all 3 statements please help!

Bunuel · Answer

It's all in the prompt just before the question:

That $4.7 billion is the private spending in 2003. From Tab 2, private spending accounted for about  25%  of total spending in 2003.

So if $4.7B is 25%, total spending was around  $18.8B , which helps evaluate Statements 1 and 2.

Statement 3 is about Medicare. Its  share  stayed constant, but since total spending increased,  actual Medicare dollars also increased  — so "unchanged" is incorrect.

It's all there. You just need to piece it together step by step. Take a moment to go through the details carefully and it will make sense.

Nipunh · Answer

I like the solution - it’s helpful.

fschack · Answer

I don’t quite agree with the solution. Generally I agree with the reasoning for question 1, but private spending grew (though only little) and according to the graph its share of overall spending dropped from 50% to 22%, maybe 23%. This would leave us with a change of total spending from approx. 9.2 billion USD to approx. 20.4 billion USD, an increase of 120%. This is clearly not doubling, not even approximately.

Bunuel · Answer

Thank you for your comment. I’ve edited the question to remove this confusion.

MegB07 · Answer

Hi, 
Could you further elaborate on the 1 and 3 statement? I didnt understand the given solution.

Bunuel · Answer

Sure, here’s a clearer breakdown of Statements 1 and 3:

Statement 1 (Overall spending more than doubled): 
 
 Private spending was about $4.6 billion in 1986 and $4.7 billion in 2003 (basically flat). 
 But in 1986, private spending made up about 50% of the total, while in 2003 it was only about 22%. 
 If the same $4.7 billion is now only 22% of the total, then the total must be around $21 billion in 2003 versus about $9 billion in 1986. 
 That’s more than double, so Statement 1 is correct.  
 
Statement 3 (Medicare spending unchanged): 
 
 Medicare’s  share  stayed about the same between 1986 and 2003. 
 But because the total amount of spending more than doubled, Medicare’s  absolute dollars  also more than doubled. 
 So saying Medicare spending “remained unchanged” is wrong. The share is unchanged, but the dollar amount increased.

Hope it's clear.

VRAJSHETH10 · Answer

I like the solution - it’s helpful.

nbharti · Answer

I did not quite understand the solution. Medicare’s share stayed about the same from 1986 to 2003

From where did we get this information? I see that public medicare percentage increased from 1986 to 2003. But, How do we know overall medicare proportion which would include both public and provate spendings?

Bunuel · Answer

I think you are misinterpreting the chart, and mixing Medicare with Medicaid.

https://gmatclub.com/gmat-focus-tests/resources/import/img/I03-21new.png

Medicare is only public. The chart’s “Public Medicare” bar shows its share, and that slice barely changes between 1986 and 2003. That’s why the solution says its share stayed about the same. Since total spending more than doubled, Medicare’s dollar spending also rose, even though its share didn’t.

Swanoff · Answer

I like the solution - it’s helpful.

I03-21

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