Prevention, Health Costs, and Value

Cost has played a leading role in the policy debate over health care / health insurance. That’s appropriate since private health costs put such a burden on workers and families, and public health costs place such a burden on state and federal budgets.

I worry, however, that the focus on costs and spending sometimes overshadows what ought to be the real goal: getting as much value as possible from our health care system.

A case in point is the debate over preventative care.

Policymakers are desperate for painless ways to pay for expanded health care coverage. Many of them have therefore become enamored of the idea that increased spending on preventative care could reduce overall health spending. As I noted yesterday, however, there’s a problem with that idea: it generally isn’t true.

If your only goal is paying for expanded health care, that finding is both unwelcome and fatal – the search for painless pay-fors will have to look elsewhere.

If your goal is increasing the value we get from our health system, however, your inquiry isn’t done. Instead, you should say “That’s too bad; I was hoping it would save money. But while we’re talking about it, do the benefits of preventative care justify the higher spending?”

Good question.

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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.

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