AIMS: To examine whether alcohol and other drug (AOD) treatment is related to reduced medical costs of family members. DESIGN: Using the administrative databases of a private, integrated health plan, we matched AOD treatment patients with health plan members without AOD disorders on age, gender and utilization, identifying family members of each group. SETTING: Kaiser Permanente Northern California. PARTICIPANTS: Family members of abstinent and non-abstinent AOD treatment patients and control family members. MEASUREMENTS: We measured abstinence at 1 year post-intake and examined health care costs per member-month of family members of AOD patients and of controls through 5 years. We used generalized estimating equation methods to examine differences in average medical cost per member-month for each year, between family members of abstinent and non-abstinent AOD patients and controls. We used multilevel models to examine 4-year cost trajectories, controlling for pre-intake cost, age, gender and family size. RESULTS: AOD patients’ family members had significantly higher costs and more psychiatric and medical conditions than controls in the pre-treatment year. At 2-5 years, each year family members of AOD patients abstinent at 1 year had similar average per member-month medical costs to controls (e.g. difference at year 5 = $2.63; P > 0.82), whereas costs for family members of non-abstinent patients were higher (e.g. difference at year 5 = $35.59; P = 0.06). Family members of AOD patients not abstinent at 1 year, had a trajectory of increasing medical cost (slope = $10.32; P = 0.03) relative to controls. CONCLUSIONS: Successful AOD treatment is related to medical cost reductions for family members, which may be considered a proxy for their improved health.