Prevention and the Cost of Health Care

by Shiban Ganju

USA_National_Health_Plan One formula to cut the cost of health care: stay healthy until you die. Unfortunately for the payers of health care, disease intervenes between health and death. That costs money. And the more chronic the disease, the more money it gobbles up.

Prevention and management of chronic disease are two important planks of cost-saving in the Obama health plan. But will it reduce the expenditure? Only if staying healthy generates more profits for all compared to profits generated by caring for the sick. And that needs a strong political will for financial reengineering of the system.

A health care system aims to fulfill a need of a society but often falls short of its aspiration. The devil lurks in its delivery. In a simplistic form, a health system aims to achieve the following:

  1. Prevent the preventable.
  2. Cure the curable.
  3. Research the unknown.
  4. Palliate the incurable.
  5. Rehabilitate the disabled.
  6. Minimize suffering when death is inevitable.

We derive maximum value for the money spent on the top three ventures on the list. But we spend disproportional amounts of available money in ‘sick’ care and in trying to cure the incurable. And we spend less in ‘health’ care to keep the population healthy. In the USA, only 2 to 3 percent of health expenditure goes for prevention. The medical industrial complex, which profits by treating the ‘disease’, has little incentive to invest in ‘prevention’, which does not yield high return on investment.

So the often asked question: does prevention decrease the cost of health care? The question has thee dimensions. First: is the question relevant? Second: How does one measure cost? Third: what can we prevent?


The purpose of a health care system is to decrease disease and suffering. An emphasis on reducing health expenditure by prevention needs scrutiny, Any amount of money spent – however small – on prevention is not cost saving but adds to the expenditure. A more relevant question may be: is the expense worth the outcome? Or what preventive measure gives better value for the money? The debate has to be reset in terms of cost vs. benefit of preventive measures.

Measuring cost effectiveness:

Health economists use multiple measures to calculate the value of prevention or therapy. Two are popular: Cost Effective Analysis (CEA) and Quality of Adjusted Life Year (QALY)

An intervention is considered cost effective if the expenditure is worth the outcome. CEA compares cost and outcome of two or more interventions for the same disease. For example: self-management of diabetes versus professional care. CEA does not measure cost saving but value for the money spent.

An intervention is also effective if it enhances life. QALY is value of a year of life adjusted for its quality. A year lived in perfect health is equal to 1.0 QALY. The value of a year lived with sickness has less value – say, 0.5 or less for a person confined to a wheelchair.

Economists have calculated that an intervention for a disease in the USA, which costs 25,000 USD or less for a QALY of one is worth the expenditure. Yet some interventions sold as ‘prevention’ may cost 100,000 USD or more.


Interventions that decrease disease burden are called preventive. Some of these interventions done at a personal level are cost effective: cessation of smoking, exercise, healthy eating, moderation in alcohol consumption, avoiding addicting drugs, safe sex, enough sleep, refraining from risky behavior and spending time with family and friends.

Some equally effective measures work at the community level – clean drinking water, sanitation, immunization, taxes on tobacco, and laws against smoking, drinking, drugs and dangerous driving.

Other preventive measures are expensive because they need professional help, but can avoid suffering and death. In adult age, prevention often depends on early detection of disease by tests like mammogram, Pap smear, cancer screening, colonoscopy and genetic screening. This is the category where the term ‘screening’ for diseases is termed prevention and public debate for the cost effectiveness ensues.

While controversies abound, context, however, is relevant. A few answers are clear. Enough evidence exists to justify the cost effectiveness of the following (the list is an example and not comprehensive):

  • Expenditure in childhood immunization, sanitation, safe drinking water.
  • Personal interventions like physical exercise, maintaining normal weight, healthy diet, cessation of smoking and moderation in alcohol.
  • Professional intervention or screening for diseases (like an annual mammogram or screening colonoscopy) save money to the system in the long run only if the condition is prevalent and the intervention is targeted to the high-risk population.
  • In a developing society, expenditure on public health measures like water, sanitation and immunization take precedence over screening.

Among many solutions, Obama plan targets chronic disease management as an important device in containing costs. The hypothesis is: if we manage chronic diseases differently we can save billions. The plan relies on two instruments: clinical and financial.

Improvement in clinical processes, like use of health IT or quality outcome incentives like ‘pay for performance’ of health care providers, may yield better outcome but evidence of cost saving is lacking. Comparative effectiveness research of various methods to manage chronic disease sounds good in theory but is unlikely to be effective in reducing expenditure. Even the congressional budget office estimates, it may barely reduce in health spending by less than 0.1 percent between 2010 and 2019.

Louise Russell, professor in Rutgers University, says in the February 09 issue of Health Affairs, “ over the past four decades hundreds of studies have shown that prevention usually adds to medical spending. —– Less than 20 percent of the preventive options (and a similar percentage for treatment) fall in the cost saving category – 80 percent add more to the cost than they save.”

Other developed countries have shown cost containment by reforming the financial aspect of health care. Almost all developed countries, with universal health care, wield some form of price control and spending limits. Both supply and demand side regulations work in tandem in the financial structure of payment to the providers and premiums for the insured.

But such controls undercut profits of many. Health care is a public venture where contradicting agendas collide. The brawl has many fighters. Exploding technology, financial resources, profit motive, individual morality, political will, societal values and organizational systems jostle with each other to get the upper hand. The fight is between expenditure for all and revenue of some. Health expenditure translates into revenue for numerous stakeholders in the health industry, which includes insurance companies, hospitals, doctors, pharmaceutical industry, care giver employees, device manufactures, management consultants, home care, hospice, attorneys, marketing experts and many others. In a political economy like the USA, all stakeholders guard their self interest and thwart health care cost reduction, as was witnessed during the Clinton administration and many times before that.

In health care, greed fights goodness and expedience competes with ethics. To reform the system in the past, sometimes we had a road map but no vehicle and other times we have a vehicle but no direction. But now there is hope for change. We are witnessing unusual economic times and the polital atmosphere seems conducive to restructure the health system completely by offering universal care with a single payer. Piecemeal approach of trying to reduce costs by prevention should be but a small step in that direction. We seem to have the vehicle and the road map. But can we drive?