As my last post documented, SUD treatment is both effective for patients and has large, positive spillovers to society. In that post, I promised to return to the question of why treatment for substance use disorders (SUDs) is underfunded and underprovided. That's what I'll cover here. Though treatment works, it's clear that its benefits are diffuse. Some health and income benefits accrue to the individual and his or her family, but a great deal more is captured by society at large. The untreated, even those unrelated to the treated, benefit from reduced crime either directly (averted victimization) or indirectly (lower private and public crime-related expenditure). Other tax-financed federal, state, and local activities are somewhat easier to fund as resources are freed up via reductions in health care costs and criminal justice-related spending. Employers and co-workers benefit when treated employees become more reliable and productive and incur fewer health care costs. Diffuse benefits have weak motivational value. Because most benefits of SUD treatment do not accrue within the purview of systems that provide the treatment, they do not provide a strong incentive for managers of those systems to devote more resources to treatment. As Humphreys and colleagues wrote in a paper last year, “If, for example, one is held responsible to keep a hospital budget in balance, spending scarce funds on SUD treatment does not become more attractive just because it saves money for the prison system.” Consequently, because of its positive externalities, SUD treatment is underprovided relative to its broad benefits. Indeed, as I noted in my prior post, compared to the need for and benefit of treatment, funding for SUD treatment is modest, accounting for just 1.2% of all health spending in 2005. Growth in funding for SUD treatment has been at a rate far below that of total health care spending (4.8% vs. 7.9% over 1986-2005), reaching $22 billion in 2005. Humphreys et al.’s observation is a specific hypothesis. Not only is funding for SUD treatment relatively low, it is so because local managers of health care resources (e.g., hospital directors, state health policymakers and administrators) have a correspondingly local (or myopic) outlook that does not include the wide range of downstream economic, welfare, and societal consequences of substance use. A natural solution, therefore, is to push funding decisions to a higher level, i.e., to place them in the hands of a more centralized authority that has responsibility for all or more of the areas affected by SUD treatment. If successful, centralized funding dedicated to SUD treatment would increase the resources devoted to it. This is precisely what block grants, like the Substance Abuse Prevention and Treatment Block Grants (SAPTBG) administered by the US Substance Abuse and Mental Health Services Administration (SAMHSA), are designed to do. An analogous program of funding directed to SUD treatment exists within the Veterans Health Administration. How effective are these programs at increasing funding for treatment? For SAPTBGs the research results are encouraging, if dated. For the VA program, I'll get back to you when my paper, now under review, is published.