Costs and cost-effectiveness of public sector substance abuse treatment in 2 California counties with similar substance abuse treatment system histories are compared; one county (MidState) has adopted managed care principles. As hypothesized, MidState's costs for the index treatment episode were significantly lower than SouthState's, although unexpectedly because of lower outpatient utilization. Treatment benefits in the 7 Addiction Severity Index functional areas were examined through cost-effectiveness analyses. MidState can claim greater cost-effectiveness for its treatment dollars for significant improvement in alcohol and medical functioning (compared to unsuccessful clients and those reporting no problems). When comparing both improved clients and those maintaining no problems to unsuccessful clients, MidState is more cost-effective for improving alcohol, medical, legal, and family/social functioning; and 3 outcomes important to community stakeholders and taxpayers (legal, medical, and psychiatric functioning) are more cost-effective than alcohol, drug, and employment improvement.