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Paul Howard

The Reaper Is Cheaper Preventing disease is praiseworthy, but it may not reduce health-care costs.21 July 2009

President Obama has made many promises about his health-reform agenda, but none

looms larger than: You will save money. Not only has the president promised to lower

consumers health-insurance bills; he says his plan will trim federal spending as well.

Thus, when the head of the Congressional Budget Office (Congresss fiscal watchdog)

testified last Friday that none of the bills under consideration in the House or Senate

would rein in spendingand that all would likely increase itthe presidents reform

push took a heavy hit. The CBOs assessment underscored an important reality about

health care. Lowering health-care costs (which have been rising faster than inflation for

decades, except for a brief period in the 1990s) while improving quality is possible, but

its awfully hard, for one simple reason: when it comes to health-care spending, death is

the only really cheap option.

William Osler, a renowned nineteenth-century doctor and the first physician-in-chief at

Johns Hopkins Hospital, once remarked, Pneumonia may well be called the friend of

the aged. Taken off by it in an acute, short, not often painful illness, the old man escapes

the cold gradations of decay, so distressing to himself and to his friends. If Osler were

alive today, he might call pneumonia the friend of Medicare accountants, since it kills

victims quickly, in contrast with the lingering and expensive chronic illnesses that

account for about three-quarters of all Medicare spending.

Few policymakers working on health-care reform in Washington stop to consider the

obvious corollary: dying early is cheap, and keeping people alive long enough to collect

Medicare is expensive. Instead, experts talking about health spending promulgate what I

call the Eat Your Vegetables Theory: we can save gobs of money by focusing on

technological fixes (like electronic health records) and disease prevention, which will

yield a healthier population that is cheaper to treat. The savings generated can then be

used to subsidize coverage for millions of the uninsured. But this approach is unlikely to

work as advertised: as Oslers dictum suggests, increasing prevention efforts may windup costing more.

Take pneumonia. We have relatively cheap and effective treatments for it, especially

vaccines and antibiotics. As a result, many older Americans who might have died from

pneumonia in Oslers day now live years or decades longerlong enough to qualify for

Medicare and then develop much more expensive ailments like diabetes, cancer, and

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Alzheimers. Researchers at the RAND Corporation noted the conundrum across several

studies and came to roughly the same conclusion: Medical innovations will result in

better health and longer life, but they will likely increase, not decrease, Medicare

spending.

In one study, the researchers postulated three different scenarios for the health costs ofseniors entering Medicare from 2002 to 2030. Scenario A took into account everything

that we know today about the health of the current cohort of seniors entering Medicare

and future enrollees, up to 2030. (This is a mixed bag. Seniors health started improving

in the 1980s, but rates of chronic diseases have been increasing rapidly in recent years,

and newer enrollees are likely to be sicker and thus more expensive.) Scenario B

assumed that future cohorts would be as healthy as those in the 1990s. And Scenario C

(the most optimistic) assumed that seniors health would continue to improve. Under

rosy Scenario C, the researchers found, health spending would be $10,275 per Medicare

enrollee in 2030just 8 percent lower than under Scenario A. Why? Healthier seniors

live longer and accumulate more costs; also, costs are rising faster among less disabledseniors, presumably because they use more new drugs and devices that prevent them

from becoming disabled (knee replacements, for example).

In another study, RAND researchers looked at how ten important medical innovations

likely to emerge in the near future might affect Medicare spending in 2030. These

included anti-aging compounds for healthy people, cancer vaccines, tiny defibrillators

implanted near the heart, better treatments for stroke and cancer, and Alzheimers

prevention. Every hypothetical innovation, the researchers found, would increase

Medicare spending. Even the cheapest, an anti-aging compound taken by healthy people

that would cost just $11,245 per life-year saved, would increase health-care spending by14 percent in 2030because there would be 13 million more beneficiaries collecting

benefits.

Finally, RAND examined the effects of fighting four risk factors for heart disease. If we

could get all the elderly to stop smoking and control their diabetes, their health would

improve, of course, but costs would rise, again because those ex-smokers and diabetics

would eventually be vulnerable to other health problems. If we effectively treated

hypertension and slashed obesity rates by 50 percent, however, health would improve

and costs would fall. Reducing obesity produced the clearest gains because obesity,

though it sharply increases costs, doesnt reduce longevity significantly.

What all three studies suggest, then, is technological innovations or disease prevention

will likely result in slight savings or even increased costs (though obesity may be the

exception to this trend). This doesnt mean, of course, that we shouldnt keep inventing

drugs and devices to keep people alive longer, or that we shouldnt develop better

prevention strategies. It just means that we should stop pretending that good health is

always cheaper. Sometimes, you really do get what you pay for.

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Paul Howa rd is the director of the Manhattan Institutes Center for Medical Progress.