Prevention Matters

In 2009, health spending in America as a percentage of Gross Domestic Product (GDP) rose from 16.2% to 17.3%, according to a new paper in Health Affairs. That's the largest one-year increase since such 1960, when such statistics began to be closely tracked. The percentage is still very much higher than that of any industrialized country.

Total health spending in the U.S. amounted $2.472 trillion last year (or, as WSJ's Jacob Goldstein notes, at a rate of $282 million a hour). Health-care prices rose by 3.2% in 2009, significantly above the overall inflation rate, while utiilization of health care rose by 1.5%.

The Health Affairs website offers a study that explores alternative methods of projecting federal health care spending that incorporates actual clinical information.

The study was prepared by Elbert Huang and Anirban Basu, assistant professors of medicine at the University of Chicago School of Medicine; Michael O'Grady, senior fellow at National Opinion Research Center at the University of Chicago; and James Capretta, a principal of Civic Enterprises LLC in Washington, D.C.

"Current federal cost projection methods are constrained by ten-year cost estimates, which capture increases in near-term intervention costs but not changes in long-term costs," they write. "Current methods also cannot easily capture the cost implications of changes in disease progression. Type 2 diabetes is a prime example of a chronic illness with long-term health and cost consequences."

“I’m trying to show (the Congressional Budget Office) that there are other ways to do this, as we face these new challenges from the epidemic of chronic illness,” O'Grady told the Washington Post. “They’re used to thinking like economists. And their friends at Health and Human Services are used to thinking like actuaries. But there’s this third way, which is epidemiological, which shows us how a disease progresses over time.”

CQ Health Day says the chairman of the Senate Finance Committee is complaining that "health care reform is in jeopardy" unless he can convince the Congressional Budget office to to score savings in the health proposals he’s shown them.

Sen. Max Baucus Baucus, D-MT, said at a hearing Thursday that the legislation would be a tough sell to the public if lawmakers and congressional actuaries can’t deliver on one of President Obama’s key promises — that a health care overhaul would lower spending growth.

“The slight challenge we have is getting numbers and estimates from CBO,” Baucus said. “Otherwise, health care reform is in jeopardy.”

Jacob Goldstein at the Health Blog came across a table in the Obama administration's budget outline that lays out pretty clearly what spending cuts are being proposed to help fund a $630 billion “reserve fund” to help pay for health reform. Take a look here.

Folks in Washington have been surprised to see Peter Orszag, the boyish, gangly director of Obama’s Office of Management and Budget, emerge as a central figure and key negotiator in Obama’s economic policy team, Politico reports. Orszag says the recent stimulus package was just a hint of what's to come on Feb. 26, when the administration unveils its first budget.

“What has already been accomplished is a huge start toward a more efficient [health care] system, and I think you’re going to see more in the budget next week,” he said.

When considering the opinions of economists who say prevention costs too much because it makes people live longer, it might be wise to keep in mind these words from from Nobel Prize winner Friedrich A. Hayek’s “Pretence of Knowledge” Speech:

“Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable. And while in the physical sciences the investigator will be able to measure what, on the basis of a prima facie theory, he thinks important, in the social sciences often that is treated as important which happens to be accessible to measurement.“

Prevention critics claim that preventing illness causes people to live longer, which results in costs to Social Security and other social programs that outweigh the savings accrued by preventing the initial illness. But when you suggest that helping people live healthier lives makes them more productive, they respond that they cannot measure that.

Thanks to Healthcare Economist for coming up with the Hayek quote.

The New Republic's health care blog quotes a senior administration official as saying that health care will be a “central focus” of Obama’s first budget proposal.

“I’ve been in meetings with him and it’s clear this guy is committed to getting health care and getting coverage to everybody,” one high-ranking member of the administration told TNR’s Jonathan Cohn. “There’s no question in my mind.”

The statement is meant to reassure reform advocates who had feared that the recent Daschle debacle and subsequent elimination of public health funding in the economic stimulus plan had taken some of the wind out of their sails.

There appears to be much wringing of hands about House Speaker Nancy Pelosi's statement over the weekend that family planning saves the government money. Funny, but no one seemed similarly piqued back in December when the Congressional Budget Office stated that when preventive services reduce mortality among the elderly, "it increases both Medicare’s costs and Social Security spending."

The CBO was specifically talking about adult flu vaccinations in that instance, but it also took a similar stance in the same document on the fiscal consequences of preventive measures overall.

“Savings from preventive services would be offset by certain costs, which could more than offset the savings from prevention or early detection,” the CBO said, adding that such offsetting costs include “the cost of treating unrelated diseases that occur because of an individual’s extended life span (NOTE: italics provided by CBO).”

The notion of discounting prevention because it costs more money by saving and extending people's lives is no small matter. At a time when we're looking for ways to control chronic disases that are causing health care costs to spiral ever upward, such notions ought to get more attention.