Spending More Won't Cut Health Care Costs
For decades now, would-be health care reformers have claimed that if we just invest more in preventive care we will cut big chunks of spending out of our health system. In the early 1990s, for instance, Medicaid administrators and hospital executives argued that if we built more satellite health clinics in poorer neighborhoods, residents would get check-ups more often and visit hospital emergency rooms, where care is expensive, less frequently. So hospitals built the clinics, often with government grants, and we got more clinics but just as many emergency room visits, and Medicaid costs continued to spiral upwards.
Still, politicians have remained undeterred. In the 2008 presidential election, John Edwards told us that “study after study shows that primary and preventive care greatly reduces future health care costs,” while Barack Obama claimed that “too little is spent on prevention and public health.” Recently, President Obama claimed at a town hall meeting that by adding preventive care to health reform we’ll cut down on costs, including costs for emergency room visits.
But I would be skeptical of any health reform legislation that projects big savings from preventive care or, even worse, requires new government programs to boost preventive care. As a report issued by the Congressional Budget Office last week reminded us, there are no widespread savings to be expected from increased preventive care. In fact, the report concluded, most preventive care actually adds to health care spending. What a shocker to learn that spending more money actually costs more.
There is a rich literature on this subject which politicians and the press regularly ignore. A review of studies published in 2008 by the New England Journal of Medicine observed that while getting people to cut down on smoking and providing flu vaccines often cuts health costs, more than 80 percent of preventive care services cost more than they save.
To take one example, the CBO report cited a study published in Circulation, a medical journal, which estimated that if everyone in America at risk for developing heart disease received a range of reasonably priced preventive therapies, from monitoring of blood pressure to use of cholesterol-lowering drugs, the savings from treating fewer cases of heart disease would account for just 10 percent of the price of the preventive measures. “As currently delivered and at current prices, most prevention activities are expensive when considering direct medical costs; smoking cessation is the only prevention strategy that is cost-saving over 30 years,” the study’s authors concluded.
One reason preventive measures can cost so much is because they often need to be applied to a big chunk of the population in order to avoid a few cases of a disease. Most of the people receiving the preventive care wouldn’t get sick anyway.
Of course, just because a preventive measure adds to overall costs doesn’t mean it’s not worthwhile. The Circulation study, for instance, estimated that more widespread use of preventive measures against heart disease would reduce heart attacks and strokes in the U.S. When preventive measures accomplish that at a reasonable cost they are said to be cost effective even when they add to overall health spending. It’s important not to confuse the two concepts when you hear health reform debated.
You won’t be surprised to learn that American doctors already tend to prescribe preventive measures more readily than doctors in other medically advanced countries. A recent peer-reviewed paper by Samuel H. Preston and Jessica Y. Ho at the University of Pennsylvania’s Population Studies Center finds, for instance, that U.S. doctors screen more vigorously for cancer than doctors in Europe and administer cholesterol-lowering drugs more commonly, too. About 88 percent of Americans with high cholesterol receive statins and similar drugs, compared to just 62 percent of Europeans, the study found. The more aggressive treatments account for better outcomes in the U.S. for everything from several types of cancer to cardiovascular disease, the authors estimate in their paper, entitled “Low Life Expectancy in the United States: Is the Health Care System at Fault?” (Their answer, by the way, is no.)
If you have followed the health care debate you can see the contradictions inherent in such data. On the one hand, critics of our medical system say that we spend so much more of our gross domestic product on health care than other advanced countries because our doctors overprescribe. But much of what they are overprescribing are tests and other preventive measures--like cholesterol-lowering drugs. Meanwhile, President Obama and others continue to advocate reform that includes even more preventive care, but to save money. It simply doesn’t compute.
Of course the President and his supporters would say we can save big by focusing on those 20 percent of preventive measures that save us lots of money. But for many of these measures, like our current crop of vaccines, we’ve already received the big payoff, while other preventive steps, especially those that require changing people’s attitudes and behavior, like encouraging the poor to use clinics for check-ups and avoid emergency rooms, have yielded few gains even when we’ve built the clinics and tried educational outreach efforts.
Sometimes, things are exactly as they seem and the simplest explanation is the correct one. In most cases, spending more costs more. It’s not that complicated.
This piece originally appeared in RealClearMarkets
This piece originally appeared in RealClearMarkets