Measuring costs in health care

The New England Journal of Medicine has published an article on their analysis of prevention programs versus treatments.

Indeed, some evidence does suggest that there are opportunities to save money and improve health through prevention. Preventable causes of death, such as tobacco smoking, poor diet and physical inactivity, and misuse of alcohol have been estimated to be responsible for 900,000 deaths annually — nearly 40% of total yearly mortality in the United States.1 Moreover, some of the measures identified by the U.S. Preventive Services Task Force, such as counseling adults to quit smoking, screening for colorectal cancer, and providing influenza vaccination, reduce mortality either at low cost or at a cost savings.2
Sweeping statements about the cost-saving potential of prevention, however, are overreaching. Studies have concluded that preventing illness can in some cases save money but in other cases can add to health care costs.3 For example, screening costs will exceed the savings from avoided treatment in cases in which only a very small fraction of the population would have become ill in the absence of preventive measures. Preventive measures that do not save money may or may not represent cost-effective care (i.e., good value for the resources expended). Whether any preventive measure saves money or is a reasonable investment despite adding to costs depends entirely on the particular intervention and the specific population in question. For example, drugs used to treat high cholesterol yield much greater value for the money if the targeted population is at high risk for coronary heart disease, and the efficiency of cancer screening can depend heavily on both the frequency of the screening and the level of cancer risk in the screened population.4
The focus on prevention as a key source of cost savings in health care also sidesteps the question of whether such measures are generally more promising and efficient than the treatment of existing conditions. Researchers have found that although high-technology treatments for existing conditions can be expensive, such measures may, in certain circumstances, also represent an efficient use of resources.5 It is important to analyze the costs and benefits of specific interventions.
A systematic review of the cost-effectiveness literature sheds light on these issues. We analyzed the contents of the Tufts–New England Medical Center Cost-Effectiveness Analysis Registry (, which consists of detailed abstracted information on published cost-effectiveness studies through 2005. Each registry article estimates the cost-effectiveness of one or more interventions as the incremental costs (converted here to 2006 U.S. dollars) divided by the incremental health benefits quantified in terms of quality-adjusted life-years (QALYs). Low cost-effectiveness ratios are “favorable” because they indicate that incremental QALYs can be accrued inexpensively. An intervention is “cost-saving” if it reduces costs while improving health. Poorly performing interventions can both increase costs and worsen health.
Our analysis was restricted to the 599 articles (and 1500 ratios) published between 2000 and 2005 that properly discounted future costs and benefits. We classified 279 ratios as preventive because they refer to interventions designed to avert disease or injury; all 1221 other ratios pertain to treatments, a category that includes both “tertiary” measures (designed to ameliorate the effects of a disease or condition) and “secondary prevention” measures (designed to reverse or retard progression of an existing condition), such as the use of implantable cardioverter–defibrillators in patients with myocardial disease.

Our findings suggest that the broad generalizations made by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through prevention. Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not. Careful analysis of the costs and benefits of specific interventions, rather than broad generalizations, is critical. Such analysis could identify not only cost-saving preventive measures but also preventive measures that deliver substantial health benefits relative to their net costs; this analysis could also identify treatments that are cost-saving or highly efficient (i.e., cost-effective).
In addition to determining which preventive measures and treatments are most efficient, it will be necessary to identify those that are not yet fully deployed and those that could serve a large population and bring about substantial aggregate improvements in health at an acceptable cost. Findings that some cost-saving or highly efficient measures are underused would indicate that current practice is inconsistent with the efficient delivery of health care. Other services might be identified as overused, and such findings would underscore the importance of fashioning policies that provide incentives to shift practice toward more cost-effective delivery of health care. In the face of increasingly constrained resources, there is a realistic way of achieving better health results: conduct careful analysis to identify evidence-based opportunities for more efficient delivery of health care — whether prevention or treatment — and then restructure the system to create incentives that encourage the appropriate delivery of efficient interventions.

To provide an anecdote to broaden the scope of this analysis, I would like to offer in the second post a story that is true and accurate. about diagnosis, costs, treatments and prevention.