Does Prevention Reduce Costs?

One of the common memes in the health debate is the claim that increased spending on preventative medical care (e.g., cancer screening) can reduce overall health spending.

That idea is very attractive, since it seems to offer a free lunch: greater health at lower cost. It has just one small problem, though: it isn’t true.

As the Congressional Budget Office describes in an analysis released on Friday:

Although different types of preventive care have different effects on spending, the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.

That result may seem counterintuitive. For example, many observers point to cases in which a simple medical test, if given early enough, can reveal a condition that is treatable at a fraction of the cost of treating that same illness after it has progressed. In such cases, an ounce of prevention improves health and reduces spending—for that individual. But when analyzing the effects of preventive care on total spending for health care, it is important to recognize that doctors do not know beforehand which patients are going to develop costly illnesses. To avert one case of acute illness, it is usually necessary to provide preventive care to many patients, most of whom would not have suffered that illness anyway. Even when the unit cost of a particular preventive service is low, costs can accumulate quickly when a large number of patients are treated preventively. Judging the overall effect on medical spending requires analysts to calculate not just the savings from the relatively few individuals who would avoid more expensive treatment later, but also the costs for the many who would make greater use of preventive care.

In short, an ounce of prevention may save a pound of cure for the patients it helps. But those ounces of prevention can add up to tons of costs when spread over millions of patients.

And that’s not all.

If you approach this issue from the perspective of costs to the government, you also have to consider another factor:

Even if the provision of preventive medical care saves money, potential savings from expanded federal support might be limited depending on how frequently that service is currently provided. Many studies of preventive care compare the costs and benefits of a preventive service with the costs and benefits of doing nothing. In practice, of course, a great deal of preventive medicine is already being performed—examples include periodic screening for colon or breast cancer, the use of cholesterol-lowering drugs that help prevent serious heart disease, and the use of vaccines—and many insurance plans already cover certain preventive services at little or no cost to enrollees.

Consequently, a new government policy to encourage prevention could end up paying for preventive services that many individuals are already receiving— which would add to federal costs but not reduce total future spending on health care.

In other words, physicians and insurers aren’t complete idiots. Many types of valuable preventative care are already done for a substantial fraction of patients. If the government introduces a new policy to pay for more prevention, there’s a real risk that the government will end up paying for the prevention that would have happened anyway (this is often known as buying out the base). And that extra spending, for no health benefit, may mean that the overall program increases federal health spending — even if the extra preventative services are beneficial.

The bottom line is that increased preventative care can affect the federal budget in three distinct ways. First, there is the happy case, in which the prevention benefits a patient, leading to greater health and lower costs. Second, there is the unhappy case, in which the prevention adds costs but yields no benefit for the patient. Third, there is the buying-out-the-base case, in which the preventative care would have happened anyway, but now the government is picking up more of the tab. Policymakers tend to focus on the happy case. But serious analysts have to consider all three.

This conclusion may seem familiar to regular readers of this blog. As I noted recently, a similar framework applies when thinking about the economics of doing mortgage modifications. Policymakers tend to focus on the potential happy cases (e.g., instances in which a mortgage modification will keep someone in their home and shield the lender from unnecessary costs of foreclosure), but often overlook the unhappy cases (homeowners who can’t be saved) and the buying-out-the-base cases (homeowners who would have been saved anyway).

P.S. For completeness, I should note that CBO also considers another budget impact from prevention: successful preventative health may increase lifespans — a good result, to be sure, but one that may increase spending in other programs such as Social Security and Medicare.

P.P.S. I should also emphasize that the discussion above focuses on what appear to be the typical cases. There may certainly be specific instances in which increased federal spending on prevention could reduce costs, and if there is evidence, CBO will score them accordingly.

14 thoughts on “Does Prevention Reduce Costs?”

  1. Prevention might be more expensive than the CBO scores. For example, take the PSA test – a very common test. To save 1 life from prostate cancer, 1400 tests must be administered. 50 of them will end up with prostate cancer treatments – but 49 of the 50 will be a waste bcs either the disease would remain silent or it was too advanced to do them any medical good.

    But here is the catch. The 49 who had to endure “wasted” treatment end up with negative consequences (urinary leakage, sexual dysfunction, chronic diarrhea, rectal bleeding) as a result of the treatment. These 49 “wasted” treatments end up adding additional costs due to the negative consequences of the treatment (radiation/surgery). And we are not adding any cost for the anxiety and reduced quality of life these 49 end up with.

    And of course, we all know many of these tests are simply ordered for defensive purposes in case of litigation.

  2. Seems the experience of other countries could help here. I know the British government relied on savings from preventive health care in ‘selling’ the national health service in 1947/8. Within a few years they realized the savings weren’t happening and the system required a large infusion of cash. Seems to support your hypothesis.

  3. While preventive CTscans may not be cost-effective, it is hard to believe that tests for early detection of high cholesterol, hyper-tension, blood sugar/diabetes..are not worth it – given the high prevalence of related/resulting problems

    The approach has to be targeted – that is the key.

  4. Sorry about prevention you made a conventionnal error. As illness insurance is not healthcare prevention is not more tets!
    Prevention is either lifestyle modifications (avoiding addictions, eating a diet compatible with our genomics, exercising) to diminish the incidence of diseases or a series of intervention of doctors to track a clinically silent disease or a recurrent known affection (secondary prevention).
    The lifestyle modifications are free for the healthcare system and I would write carry positive externalities. Studies on runners but also on other people exercising regularly showed that their expenses in the healthcare system are lower.
    On the other hand prevention by the healthcare system means more tests, imaging and fees. But contrary to an intuitive thinking it is not always beneficial to the patients.I will do it very short: if you have on a mammogram a tumour it does not mean that you will die of it and you could die of a preventative treatment initiated after this diagnosis. Same reasonning for prostate or lung cancer. In an other field: type 2 diabetes. It is hard to find a definitive proof of the efficiency of drugs when the type 2 diabetes is treated before any clinical signs. On the contrary lifestyle modifications are highly efficient. The first prevention is costless, the second costly…

    1. Thanks Guy-Andre. In its letter, CBO gets at one of the distinctions you are drawing, which is between what it calls prevention programs (which I discussed in my post) and wellness programs, which are more lifestyle oriented. The basic budget issues raised are similar for the two kinds of undertakings, but as you note some aspects differ.

      I agree that self-initiated wellness efforts can be free for the health care system, but there is growing interest in programs that are actually sponsored (and paid for) by private insurers and government programs. That’s where the potential direct budget impact comes in.

      And yes, lots of tests can be wasteful or even harmful (a relative of mine recently got a severe infection from a colonoscopy).

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