Preventing vs. Postponing - will health care reform save money

I'd love to say that the what you'll read below, about how health care reform, specifically preventive health care, is my work. It is not. It comes with permission from a friend, colleague and brilliant chiropractor.
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Previously I posted a note that suggested that the Congressional Budget Office (CBO) will be the linchpin in health care reform. That Office will be required to calculate the budget implications of any reform package. And if that calculation reveals that the reform is underfunded by about a trillion dollars (as it is right now) this will create insurmountable problems to its passage.

Nervous congressional Democrats are trying to figure out how to circumvent the CBO. One strategy is to bypass the CBO and rely on the administrations calculations from their Office of Management and Budget, a sort of parallel organization to the CBO, the difference being that the CBO can be relied up to come up with whatever number is needed to pass the legislation. One of the areas of contention between the CBO and the OMB is how much to credit preventive care as a money saving element of reform. The CBO credits it with zero dollars and the OMB with hundreds of billions of dollars. Here’s a news item from yesterday that highlights this:

Sen. Barbara Boxer said she would not feel obliged to abide by CBO’s work if it does not take into account savings from preventive healthcare and other reforms.

"I haven’t seen [the CBO score] but if they don’t take into account prevention, I certainly won’t. I will not follow it — we just heard from the CEO of Safeway, who said his insurance costs went steadily down since they instigated incentives for prevention.

Any scoring that doesn’t understand that, is not relevant to the way we work.”

Who’s right, the CBO (zero savings from prevention) or the OMB (hundreds of billions saved from prevention)? The CBO is correct (zero savings). Here’s why—

It is endlessly repeated by politicians, public health advocates, physicians, TV talking heads that we spend a huge percentage (the figure 30%) is often used to treat “preventable” illness. What is usually meant by this are those chronic diseases that are driven by lifestyle—diabetes, heart disease, COPD, smoking-related cancers etc. This is undeniable. This set of conditions easily accounts for at least 30% of our health care budget. There is in fact an exploding industry devoted to both the primary and secondary prevention of these problems, the so-called Disease Management and Wellness industry. These programs target the high risk population and attempt (with varying degrees of success) to change behavior and thereby reduce health care costs. It can be shown that well engineered and properly implemented programs of this type can indeed pay for themselves and even return savings in the form of reduced health care costs. So what’s the problem? If a company of, say, 500 employees can do this, why can’t be implement this on a scale of the entire US population?

Here’s the problem. If I’m an employer considering such a program one of the questions I have to ask is, “Will I, as the employer, realize the savings from such a program? So what if I spend money to get an employee to quit smoking and then he leaves this job to work somewhere else…I’ve just financed the savings for some other company.”

And indeed if a particular company has a high employee turnover rate these programs will not save money. The reduced health care expenditures have to occur under the watch of the employer who paid for the program for this to make sense. There are algorithms that will tell you if a particular employee turn-over rate will or will not allow for such savings. From the employers perspective the healthy employee has to remain in his employ to realize the savings. The key word here is “perspective.” We must always ask from whose perspective are we calculating health care costs or savings.

When doing the calculations that the OMB and CBO are doing the correct perspective from which to view this is the societal perspective. We are interested in the total net costs or savings in our entire health care system for all persons at all stages of their life. An individual might leave and employer but he never leaves the umbrella of the societal perspective.

Ah, but this is good news, you might think. Any ex-smoker, reformed couch potato or otherwise newly healthy person is always under the societal umbrella and thus all savings will eventually accrue at a societal level. Ergo, we save billions.

But this societal perspective is precisely the problem. Let’s consider several scenarios from both the employer’s perspective and from the societal perspective:

Scenario 1. Joe Blow is a 32-year old smoker who works for the Megatron Corp. Joe says the hell with it. I like cigarettes. I’m not quitting. Joe stays with Megatron his whole career. He experiences a variety of smoking-related illnesses (chronic bronchitis) and eventually dies of lung cancer at age 59. The Megatron Corp. spends a good deal on money on Joe’s health care over the years and eventually pays for the the futile treatment of his lung cancer.

Scenario 2. The Megatron Corp. implements a worksite wellness program that includes a tobacco cessation program. After couple of failed attempts Joe eventually quits smoking at age 36 and continues to work productively for Megatron Corp until he retires at age 62. During his employment Joe enjoyed generally good health and had only routine medical care with the exception of knee surgery to repair the ligaments he tore skiing. (Joe really did reform himself…he became an avid outdoorsman, hiker, skier.) The couple of hundred dollars Megatron spent to get Joe to quit smoking saved many tens of thousand of dollars in related health care costs.

Success!! Prevention works. It saves money. At least from the employer’s perspective. But from a societal perspective Joe’s story continues:

Joe enters retirement (and Medicare) in good health. He remains active, but eventually that repaired knee gets worn out and he gets a total knee replacement. By his mid-70s one of his hips is gone and that gets replaced too. But Joe is still going strong. Soon he needs cataract surgery and some lens implants as well. Joe is becoming all spare parts!! In his late 70’s he suffers a mild stroke…his skiing days are over. Two years later he’s diagnosed with colon cancer. Surgery and radiation go pretty well, but one never knows.

What finally gets him, though, is dementia. After a few years his children realize that Joe can no longer care for himself and his children put him in a long-term care facility. He doesn’t last long there, only 3 years, an Joe dies at age 83. Not that anyone is keeping track, but Medicare ended up spending $400k on Joe during his retirement.

Alright, this is all make-believe, but what this illustrates is this: From a societal perspective, prevention of chronic illness is impossible. All that is possible is to postpone chronic illness. Every case of lung cancer that is prevented exposes society to future cases of colon cancer, stroke, Parkinsonism, dementia, and well, everything else. Every premature diabetes-related death that is prevented exposes society to future cases of breast cancer, skin cancer, kidney failure, liver disease, and well, everything else.

Now of course, if we can prevent lung cancer and diabetes and emphysema and other chronic disease, we should. This is the point, after all. But we cannot do so with the illusion that somehow we will never end up spending boat-loads of money as we age and become infirm. In nearly all cases, preventing early chronic illness will end up costing us far more money to treat later-life chronic illness. But that’s the price of success.

Anyway, watch for the battle between CBO (who are professionals) and the OMB (who are political hacks) on this.
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As one who teaches a class in wellness, I certainly thought that prevention saved money. As you can see from what my colleague has written, it all depends upon the perspective of who pays for the prevention on who saves money. Obviously, preventive measures that are effective: proper diet, regular exercise, no smoking, use of seat belts, safe sex, should be implemented.

I often hear people say we all have to die sometime. In fact, someone trying to get me to buy tobacco in Mexico a couple of weeks ago said that to me. But the reduced disability, prolonged and productive life is good for each of us, no?

Frankly, my mother’s death at age 66 from cigarette smoking deprived my children of a grandmother. I was very fortunate that my own grandmother and great grandmother died when they were in their late 90s and early 100s, respectively. I miss them both but have vivid memories as they both died when I was an adult. My children don’t have that. Likewise, my mother’s early death meant she didn’t see my daughters grow to become a bat mitzvah, let alone married and have children.

Thus, I think the benefits outweigh the economic cost and we do need to implement more and better prevention programs. If it takes the deep pocket of the government to do it so be it but let's be honest about the costs unless do we really need a white lie is needed to get the reform package passed.

SMP