The numbers of children, adolescents, and families affected by substance abuse have sharply increased since the early 1990's, and limitations in existing data-collection procedures suggest that prevalence data likely underestimate the scope of the problem. There is increasing evidence that successful early intervention and treatment has significant benefit for the individual and society. Despite the fact that there is no single treatment approach that works for all patients, standard treatments have produced significant decreases in drug use and in drug-related problems of crime, family violence, unemployment, welfare dependence, underachievement, and other antisocial behaviors. Although most families whose children require substance abuse services experience financial difficulties related to high out-of-pocket expenses, those who are uninsured are at the greatest disadvantage. These families must rely exclusively on publicly funded services through their State's substance abuse and mental health agencies or must pay for care themselves. Many changes must be made to the financing and delivery of substance abuse care to improve the availability of services for all children and adolescents. This requires the participation of a coalition of national and State legislators, public purchasers, employers, health professionals, families, and health services researchers. The American Academy of Pediatrics recommends that Congress authorize the Substance Abuse and Mental Health Services Administration to conduct a comprehensive national study of the supply, distribution, financing, and quality of substance abuse prevention, assessment, and treatment services for children and adolescents. This policy statement offers specific financing recommendations for each of the following groups: all children and adolescents, regardless of insurance status; privately insured children and adolescents; Medicaid and SCHIP insured children and adolescents; and uninsured children and adolescents. 19 references