Health Care Reform: CBO to Congress Saving Lives vs. Saving Money
One of the key benefits of health care reform being touted by the Democrat Leadership and President Obama is all the savings that will come from providing expanded preventive medical care. Preventative medical care saves lives but not necessarily saves money.
The Congressional Budget Office’s recently sent a letter to Congress to address a July 16, 2009, committee markup concerning CBO’s analysis of the budgetary effects of proposals to expand governmental support for preventive medical care and wellness services. Below is a brief synopsis of their letter.
Preventive Medical Care
In calculating how preventive care would save money, CBO takes into account any estimated savings that would result from greater use of such care as well as the estimated costs of that additional care. Examples of preventive medical care include services such as cancer screening, cholesterol management, and vaccines. As a result of this methodology CBO made the following conclusion:
“Although different types of preventive care have different effects on spending, evidence suggests that for preventive services, expanded utilization leads to higher, not lower, medical spending overall.”
While many people believe that 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, this idea is problematic because it only looks at the individual. When CBO analyzes 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.
In the case of screening tests, additional spending may arise from treatment of newly diagnosed conditions as well as treatment stemming from tests yielding false positive results—results indicating a disease are present when it is not.
Consequently, CBO found that for a doctor 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. This would then drive up the costs of providing such care, only to result in helping only a few. Moreover, even if such preventive service is low, costs can accumulate quickly when a large number of patients are treated preventively.
In order for CBO to judge 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 that would make greater use of preventive care. In other words, if one doctor was to test many patients and find an acute illness in one, many more people would think that such testing is required, although scientific evidence shows it is not.
Interestingly, CBO does note that preventive care can have the largest benefits relative to costs when it is targeted at people who are most likely to suffer from a particular medical problem, for example the growing number of obese children, adults, and overweight Americans. However, CBO also notes that such targeting can be difficult because preventive services are generally provided to patients who have the potential to contract a given disease but have not yet shown symptoms of having it.
Furthermore, researchers who have examined the effects of preventive care generally find that the added costs of widespread use of preventive services tend to exceed the savings from averted illness. Essentially, the benefits do not always outweigh the costs. According to an article published last year in the New England Journal of Medicine slightly fewer than 20 percent of the preventive services that were examined saved money, while the rest added to costs.
Another recent study conducted by researchers from the American Diabetes Association, the American Heart Association, and the American Cancer Society found that although preventive steps aimed at cardiovascular disease would substantially reduce the projected number of heart attacks and strokes that occurred, these preventive steps would also increase total spending on medical care because the ultimate savings would offset only about 10 percent of the costs of the preventive services, on average. This study was significant because it captured the costs and benefits over a 30-year period.
CBO did note however that roughly 60% of the preventive services examined in the review cited above had additional costs that many in the health care community consider to be reasonable relative to their clinical benefits. Those numbers however are troubling because that preventive care would represent a net use of resources rather than a source of funding for other activities. (About 20 percent of the services reviewed have costs that are large relative to their benefits, and a small fraction actually impairs health while adding to costs.)
As a result, CBO asserts that federal support for a preventive services program is not necessary because a great deal of preventive medicine is already being performed and people are already receiving preventive services—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. Moreover, if preventive services were provided, they would be extremely limited depending on how the frequency of their use.
Additionally, Medicare already covers preventive services that reduce net costs, and legislation last summer authorizes Medicare to add coverage of preventive services that improve health, including those that also reduce costs.
Private insurers on the other hand are likely to cover services that are shown to reduce costs in the short run only because of the turnover for individuals who change jobs and switch insurers. Those kinds of trends are significant because the initial insurers may not be the ones to realize the resulting benefits of covering preventive services. Thus, the potential to increase the use of such services among privately insured individuals is especially limited.
Also, if more preventive services are offered, more people will live longer, and federal spending will be even more uncontrollable in the long run: Social Security outlays rise when people live longer, and Medicare outlays may rise because, even if a preventive service lowers a beneficiary’s risk of one illness, a longer lifespan allows for more time to incur other health care expenses associated with age.
CBO does feel that preventive care such as wellness services, which include efforts to encourage healthy eating habits and exercise and to discourage bad habits such as smoking are reasonable. However, evidence regarding the effect of wellness services on subsequent spending on health care is limited, and CBO is continuing to evaluate the evidence that does exist.
As with preventive medicine, the net budgetary effect of government support for wellness services depends on the balance of two factors—the reduction in government spending for people who reduce their future use of medical care and the costs to the government of providing or subsidizing wellness services.
CBO’s estimates of the budgetary effects of reduced tobacco use (from a higher excise tax, for example) include a reduction in Medicaid spending because less smoking would result in fewer low-birthweight babies, who have higher costs at birth and afterward.
More generally, however, designing government policies that are effective at inducing people to be healthier is challenging. Even successful efforts might take many years to bear fruit and could involve significant costs.
Moreover, many employers already support some wellness services for their employees, and new government efforts to encourage such services could end up paying for services that some individuals are already receiving—which would add to federal costs but not reduce total future spending on health care.
The most pressing issue for healthcare today and in the future for preventive services is handling obesity and overweight Americans, but this task is also the most difficult and complex.
One recent study found that cutting obesity rates in half would reduce total medical spending by the elderly Medicare population by roughly 10 percent in 2030. Another recent study estimated that the annual medical burden of obesity is now almost 10 percent of all medical spending and, specifically, that Medicare and Medicaid spending would be about 10 percent lower in the absence of obesity. However, the article also noted, “The extent to which greater use of obesity treatments would reduce spending in either the short or the long run remains unknown. Many successful obesity prevention efforts are likely to be cost-effective ... but not cost saving.
In an effort to improve health and reduce medical costs, many employers— particularly large employers—offer their workers wellness programs designed to encourage healthy living. Those programs include nutrition and weight loss programs, discounts for gym membership, smoking cessation programs, and other personal health coaching.
In the end, any preventive services legislation would not actually provide funding for prevention or wellness activities, and it could not be credited with savings in mandatory programs. Accordingly, while expanded governmental support for preventive medical care would probably improve people’s health, it would not generally reduce total spending on health care.