Spending Money to Save Money in Health Care

Apr 5, 2013, 9:00 AM, Posted by

Ashok Reddy, MD, is a Robert Wood Johnson Foundation (RWJF) Clinical Scholar in residence at the University of Pennsylvania and a senior fellow at the Leonard Davis Institute of Health Economics.  This is part of a series of essays, reprinted from the Leonard Davis Institute of Health Economics’ eMagazine, in which scholars who attended the recent AcademyHealth National Health Policy Conference reflect on the experience.

With the debate about the fiscal cliff and the sequester hanging so heavily over Washington, it was no surprise that congressional staffers at the AcademyHealth National Health Policy Conference seemed so exclusively focused on cutting health care spending. Some estimated that 30 percent of the $2.5 trillion spent on health care may provide little value; finding interventions that provide high-value care is a top priority that tends to obscure any other possibilities.

In this prevailing atmosphere of stark fiscal reality and gridlocked politics it can be hard to gain traction for the idea that investing in programs that prevent chronic diseases would ultimately decrease the costly long-term expenditures driven by those diseases. But that’s where traction is needed.

Take diabetes for instance. One estimate has the medical treatments for people with diabetes costing 2.4 times more than expenditures that would be incurred by the same group in the absence of diabetes. By preventing the development of diabetes in an individual you decrease the risk of heart attack, kidney failure and amputated extremities.

It is true that, so far, research in cost-effectiveness analyses has not shown that prevention reduces medical costs. Besides childhood vaccination and flu shots for the elderly, few health care services ‘save money.’ A 2010 Health Affairs article calculated that if 90 percent of the U.S. population used proven preventive services, it would save only 0.2 percent of health care spending.

But these statistics ignore two facts: One, the cost and benefit of an intervention can be shifted by selecting populations at high risk of developing a disease and two, the cost of the intervention itself can be reduced. In fact, these are strategies being used in a unique public-private partnership among UnitedHealth Group, the YMCA, the Centers for Disease Control and Prevention, and the Centers for Medicare & Medicaid Services. The entities have partnered to create a low-cost, group-based adaptation of the Diabetes Prevention Program’s lifestyle intervention called the Diabetes Prevention and Control Alliance.

The goal is to target an estimated 79 million Americans who are at very high risk or high risk of developing Type 2 diabetes in the next five to 10 years. You would need to treat seven people with the intervention to prevent one case of diabetes; by comparison, to prevent one case of heart attack with a statin requires treating 60 people.

The cost of this intervention in the original study was $1,500 per person. Surprisingly, these costs can be reduced without lowering the efficacy in the real world. Training non-physicians, such as community members at the YMCA, to deliver the intervention around diet, exercise, and behavioral change can reduce the cost of the intervention to $500 per person. The estimated savings that could be achieved by reducing the number of people with prediabetes who develop diabetes and by reducing diabetic complications overall, which is significant. Estimated net savings to the payer per enrollee at the end of three years is close to $1,000.

In our current political environment the idea of saving money by spending money in health care seems an anathema. But often we apply different standards for health programs that prevent chronic disease. In a recent article in the Journal of the American Medical Association, Kevin Volpp, MD, PhD, George Lowenstein, PhD, and David Asch, MD, MBA, note the “disease fixated” nature of current health care reimbursement logic and practice. They write: “If an employer spends $100,000 treating late-stage emphysema or lung cancer for its employees—an expenditure with a negative return on investment but one that adds value to employees’ lives— should that employer be willing to spend money on smoking cessation programs? The answer is almost undoubtedly yes.”

“If cost is not considered when thinking about the value of covered treatments,” they continue, “it does not make sense to use positive return on investment as a criterion for determining whether promising new delivery system innovations should be covered."

As we move beyond asking whether these interventions produce a positive return on investment, we should ask three questions: Does the intervention work and improve a primary health outcome? Should we target the intervention at a population that may benefit the most from it? And, can we adapt the intervention to reduce the cost without reducing the efficacy?

Learn more about the RWJF Clinical Scholars program.

Reprinted from the Leonard Davis Institute of Health Economics' eMagazine.

This commentary originally appeared on the RWJF Human Capital Blog. The views and opinions expressed here are those of the authors.