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Why prevention can increase health-care spending

Norman J. Temple
DOI: http://dx.doi.org/10.1093/eurpub/ckr139 618-619 First published online: 13 September 2011

Abstract

This article examines the impact of disease prevention on health-care spending. The relationship between these two variables is more complex than what, at first glance, appears to be the case. Health-care spending would be reduced if more effective means could be found to prevent health problems that are expensive to treat but are generally not fatal, such as dementia, infectious diseases and accidents. The major focus here is on interventions designed to persuade people to quit smoking. Savings on health-care spending in early years after people stop smoking are counter-balanced (often exceeded) by higher spending at a later time. In addition, when people stop smoking there is a significant negative impact on government finances from the double effect of lost tax revenues combined with increased spending on pension payments. Arguments in favour of policies designed to prevent fatal disease, such as by reducing the prevalence of smoking, should be based on improvements to population health rather than on misleading claims that this will reduce spending on health care.

Introduction

Many people assume that a greater emphasis on prevention will save money on health-care spending. In reality, the relationship between prevention and health-care spending is complex. Some preventive activities can be cost saving, especially those that are relatively cheap to implement and that prevent a condition that is generally non-fatal but expensive to treat. Examples include immunization of children1 and policies that prevent traffic accidents, such as mandatory seat belts. In contrast, the prevention of fatal diseases actually leads to an increase in health-care spending.2 This is because the extra years of life generated inevitably result in an increased need for treatment of chronic conditions and for long-term nursing care. Overall, most medical interventions designed to prevent disease or improve health cause an increase in health-care spending.3 The major focus in this article is on interventions designed to persuade people to quit smoking.

Smoking and health-care spending

The major focus here is on interventions designed to persuade people to quit smoking. Several researchers have estimated that efforts within a clinical setting to persuade people to stop smoking can be cost saving.1 But this is based on a cost-effectiveness analysis (CEA) that is seriously flawed.

Let us consider the case of a British man, aged 40 years, who has smoked half a pack a day for the previous 20 years. We shall assume that if he continues smoking, he will die of coronary heart disease (CHD) at the age of 65 years. However, if he quits, he will live to 75 years and then die of CHD. What effect does quitting have on health-care spending? What are the other financial implications of a person ceasing to smoke? There are three ways to answer these questions.

Method 1: the narrow view

If we only consider the next 25 years, then the effect of quitting is clearly to reduce health-care spending. This is because prevention of death from CHD saves the cost of treating the man for terminal CHD. In addition, the man is likely healthier for those 25 years and therefore has less need for medical treatment.

Method 2: the longer-term view

If we take a 35-year viewpoint, to the man’s death at the age of 75 years, then we see that the cost of treating the man for terminal CHD has not been avoided but merely postponed. Moreover, the savings brought about by improved health before the age of 65 years are likely to be cancelled out, perhaps even exceeded, by the increased health-care spending that typically occurs with people aged over 65 years. We see, therefore, that the savings in health-care spending are illusionary.

Variations of this approach have been used in some studies (e.g. reference4). One important variable is the discount rate that is applied. Barendregt et al.5 concluded that with no discounting the break-even year (i.e. when the initial benefit is exactly balanced by the eventual cost) occurs after 26 years of follow-up, but this does not occur until after 37 years with 5% discounting.

Use of Method 1 (instead of Method 2) explains how a CEA can reach the conclusion that anti-smoking actions by physicians can be cost saving. A similar misleading conclusion occurred with a study from California.6 In 1989, that state introduced a major tobacco control program. It was estimated that over the following 15 years, this resulted in a reduction of $86 billion in health-care spending. It can be predicted that these impressive savings will disappear in coming years.

Method 3: the ‘big picture’ perspective

So far, we have only considered health-care spending. But non-medical expenditures also have a major impact on the financial implications of people ceasing to smoke. Because the man in the above example did not smoke between the age of 40 and 65 years, he paid nothing in tobacco taxes during those years. The government therefore loses ∼42 650 pounds (based on 2010 tax rates). In addition, he almost certainly receives a state pension. Assuming he is a married and receives a full pension, the government must therefore pay an additional 29 770 pounds for the 10 extra years he lives after the age of 65 years (2010 rates). In total, the negative impact on government finances adds up to 72 420 pounds.

From a government perspective, therefore, the effect of this man quitting smoking at the age of 40 years is 2-fold. First, as shown in Method 2, there is no saving in health-care spending; rather, each pound in savings that occurs before the age of 65 years leads to a pound—perhaps more—of spending after the age of 65 years. Secondly, as shown in Method 3, there is a significant negative impact on government finances from the double effect of lost tax revenues combined with increased spending on pension payments.

This argument was made as far back as 1971 in an analysis carried out by the British government. However, the report was never officially published but was leaked in 1980.7

Conclusions

The arguments made here also apply to the other medical issues. For example, a CEA reported that treating people with aspirin in order to prevent cardiovascular disease can be cost saving.1 This conclusion can only be reached using Method 1. The application of Method 3 would almost certainly show both an increase in health-care spending and a negative impact on government finances. This error was avoided in an analysis of the effect of the prevention of obesity on health-care spending: using Method 2 (rather than Method 1), the researchers demonstrated that this would increase health-care spending over the long term.8

This examination of health-care spending reveals that what may appear intuitively obvious is often anything but that. If governments want to reduce health-care spending over the long term, the focus should be on finding ways to deliver services and drugs more cheaply and efficiently. Health-care spending would also be reduced if better means could be found to prevent health problems that are expensive to treat but are generally not fatal, such as dementia, psychiatric problems and accidents. But a different story emerges when we look at the prevention of fatal diseases. In some cases, this can reduce health-care spending over the course of 15 or so years. However, it eventually leads to both an increase in health-care spending and a worsening of government finances.

Of course, the prevention of fatal diseases is undeniably of great value with regard to population health. For that reason, interventions that add extra years to life, especially when these are healthy years, should be a high-priority goal, even if this increases health-care spending and in other ways adds to the government expenditures. Moreover, prevention can often be much more cost-effective than medical treatments.9 But, we must be careful to avoid the mistake of assuming that interventions in the area of prevention will automatically lead to a reduction in health-care spending. It is important to be honest when formulating policy. A strong case can be made in support of efforts to reduce the prevalence of smoking, and of other means to prevent fatal disease, but this should be based on improvements to population health rather than on misleading promises of reduced spending on health care.

Caution must be expressed in the estimations made here: others will no doubt look at the same basic facts and draw different conclusions. Variables such as the nature of the diseases examined, the age ranges considered, the discount rate applied will all significantly impact on the conclusions. For example, Lubitz et al.10 demonstrated that a 70-year-old person consumes an equal amount of health care, irrespective of whether he is unhealthy and lives shorter, or he is healthy and lives longer. At older ages, therefore, prevention may allow a longer life, less disability, but without increased health-care costs. Different scenarios such as this require further exploration.

Conflicts of interest: None declared.

Key points

  • The prevention of fatal diseases is of great value for improving population health.

  • The prevention of fatal diseases can reduce health-care spending over the medium term (∼15 years).

  • Over the longer term, there may be increase in both health-care spending and a worsening of government finances.

References

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