August 9, 2009
On Friday CBO released a letter that discusses how the agencys budget estimates reflect potential reductions in federal costs from improvements in health that might result from expanded governmental support for preventive medical care and wellness services.
Preventive medical care includes services such as cancer screening, cholesterol management, and vaccines. In making its estimates of the budgetary effects of expanded governmental support for such care, CBO takes into account any estimated savings to the government that would result from greater use of preventive care as well as the estimated costs of that additional care. 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. 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. 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 of the many who would make greater use of preventive care.
Of course, just because a preventive service adds to total spending does not mean that it is a bad investment. Experts have concluded that a large fraction of preventive care adds to spending but should be deemed cost-effective, meaning that it provides clinical benefits that justify those added costs.
Even in cases where the provision of preventive medical care saves money, potential savings from expanded federal support might be limited depending on how frequently that service is currently provided. Many studies of preventive care compare the costs and benefits of a preventive service to the costs and benefits of doing nothing; in practice, a great deal of preventive medicine is already being performed, and many insurance plans already cover certain preventive services at little or no cost to enrollees. So a new government policy to encourage prevention could end up paying for preventive services that many individuals are already receivingwhich would add to federal costs but not reduce total future spending on health care.
Wellness services include efforts to encourage healthy eating habits and exercise and to discourage bad habits such as smoking. As with preventive care, CBOs estimates of the budgetary effects of expanded governmental support for wellness services endeavor to account for any savings that would result from greater use of those services as well as the costs of those services. However, evidence regarding the effect of wellness services on subsequent health spending is limited, and CBO is continuing to evaluate the evidence that does exist.
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 receivingwhich would add to federal costs but not reduce total future spending on health care. As with preventive medicine, the net budgetary effect of government support for wellness services depends on the balance of two factorsthe reduction in government health spending for people who reduce their future use of medical care, and the costs to the government of providing or subsidizing wellness services.
Although some case studies suggest that certain employer wellness programs reduce subsequent medical care, little systematic evidence exists. The findings from case studies may not be applicable to programs that would be implemented more broadly. Because the evidence about such programs continues to evolve, CBO will continue to examine that evidence closely in evaluating specific proposalsthe effects of which could depend very importantly in the proposals design.