Prevention

You are currently browsing articles tagged Prevention.

Does Prescription Drug Coverage Save Money?

August 30, 2011 in Medicare Part D, Pharmaceuticals | 5 comments

Many experts have claimed that increasing Medicare beneficiary’s access to prescription drugs through Medicare Part D is cost saving.  Even if it does increase cost, by increasing patient adherence to various prescription drugs, Medicare could prevent certain expensive hospitalizations and emergency room visits.

The only problem is that it doesn’t.

According to Liu et al. (2011) :

“After adjustment, Part D was associated with a U.S.$179.86 (p=.034) reduction in out-of-pocket costs and an increase of 2.05 prescriptions (p=.081) per patient year. The associations between Part D and emergency department use, hospitalizations, and preference-based health utility did not suggest cost offsets and were not statistically significant.”

In fact, increased drug coverage could increase the number of prescriptions the elderly take and lead to a higher number of harmful drug interactions, leading to increased hospitalizations.

Another paper, however, disagrees.  Afendilus et al. (2011) use HCUP data and and find that for selected ambulatory care sensitive conditions:

“…our point estimates suggest that Part D reduced the overall rate of hospitalization by 20.5 per 10,000 (4.1 percent), representing approximately 42,000 admissions, about half of the reduction in admissions over our study period…The increase in drug coverage associated with Medicare Part D had positive effects on the health of elderly Americans, which reduced use of nondrug health care resources.”

The debate rages on.

Tags: , , , , , ,

Does Preventive Care Save Money?

December 11, 2009 in Public Policy | No comments

“…the broad generalizations by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through prevention. Although some prevention measures do save money, the vast majority reviewed in the health economics literature do not.”

Tags:

Prevention and Cost

March 23, 2009 in Prevention | 2 comments

More evidence that although preventive may improve patient health, it may also increase costs.  (See also my post from 12 Feb 2008).

  • Afschin Gandjour (2009) “Aging diseases – do they prevent preventive health care from saving costs?”  Health Economics, v18(3): 355-362.

Tags: ,

Publicly Provided Prevention Health Plan

January 15, 2009 in Health Insurance, Public Policy | 3 comments

Most physicians, public health officials and economists believe that most individuals do not receive sufficient levels of preventive care.  Only half of American adults receive all recommended screening and preventive care.

The Partnership for Prevention has a plan to increase preventive care utilization. The organization proposes introducing:

“..federally funded insurance programs [that] would provide highly cost-effective clinical preventive services with no deductibles or co-pays, while Congress would provide incentives to states, health care providers and employers to deliver such services. Meanwhile, a stand-alone revenue source would be established to fund state and local efforts to create healthy environments and promote healthy lifestyles, while a Public Health Advisory Commission would be created to recommend how that funding should be allocated.”

Is this a good idea?  There are benefits to this plan.  Individuals without health insurance would have access to some of these preventive measures.  The Vaccines for Children (VFC) program currently provides free vaccines to poor children, and this program has generally been seen as a success.

Overall, however, I do not endorse this plan.  Here is why:

  • Cost effectiveness: The idea is being presented as a cost saving initiative.  While effective preventive care can increase longevity and improve the quality of life, it often increases health care costs.
  • Carve-out problem.  Enacting a universal, government provided health care system may be a good or bad thing depending out your point of view.  However, a limited, carve-out program for preventive care will be…well…limited.  Let us say the prevention health plan covers mammograms.  If an uninsured individual receives a mammogram using the proposed program and finds a cancerous tumor what is the next step?  The prevention health program will not cover surgery so the uninsured individual will be left with bad news and, if they are poor, few options to treat the disease.  This will lead to…
  • Coverage creep.  In the example above, I anticipate an outcry for individuals from uninsured individuals who have breast cancer.  They will lead to an expansion of coverage to treatments that are less-cost effective.  Physicians will lobby to have certain treatments included in this national prevention health plan.  Thus, what may start out as a health plan which only targets cost-effective treatments, will likely expand into other areas.  For instance, the $700 billion bailout was targeted for financial firms only.  Unsurprisingly, politically powerful sectors (e.g., the auto industry) have been lobbying for their share of the pie.
  • Cost shifting.  Private insurance companies who currently offer preventive services will not be able to shift their costs to the public sector.  A profit-maximizing strategy is to shift as much cost to the public sector as possible.  Thus, insurance companies will try to categorize as much medical as possible under a “prevention-eligible” diagnostic code.
  • Paternalism.  The plan will also pay for health care targeted to reduce tobacco and alcohol use, improve the patient’s diet and increase the patient’s physical inactivity.  Most people know that using less drugs, exercising more and eating less will improve longevity.  I personally do not think that it is the government’s job to tell you how to live your life.  If you want a shorter life filled with more cheesecake, that should be left up to the individual.

Tags: , ,

The paradox of better screening

December 12, 2008 in Economics - General | No comments

Does better screening lead to improvements in health outcomes?  Conventional wisdom holds that this is always true.  For instance, catching breast cancer at an early stage greatly improves survival probabilities.  However, early screening can lead to a statistical anomaly where better screening appears to improve mortality rates even when treatments are entirely ineffective.

Here is an example using the dreaded disease economicitis.  Let us divide people into 3 groups.

  • Healthy: You live forever.
  • 1st stage economicitis is asymptomatic. Life expectancy when 1st stage economicitis begins is 10 years.  One half of economicisits cases are 1st stage.
  • 2nd stage economicitis appears when individuals mysteriously grow a third or possibly fourth hand.  Life expectancy with second stage economicitis is 2 years.  One half of economicitis cases are 2nd stage.

Before any screening was developed, individuals would learn they had  economicitis  when they started growing extra hands.  Thus, documented life expectancy for those with  economicitis was 2 years, since all individuals who were recorded as having  economicitis were in the 2nd stage.

Let us assume that a screening technique is now available.  If the screening device is able to detect 100% of stage 1 and stage 2 economicitis cases, then we will see that life expectancy will increased to 6 years (10/2+2/2=6). Statisticians looking at the data may claim the following: “The economicitis screening test has increased life expectancy after diagnosis from 2 to 6 years!”

This claim, however, is false since there is no effective treatment for  economicitis.  The increase in average life expectancy is not due to any improvement in health care, but only because the relatively healthier individuals with 1st stage economicitis are now being detected by the test.

Tags: ,

China and Universal Health Care

October 21, 2008 in International Health Care Systems | No comments

The Wall Street Journal reports that China is aiming for Universal Health Care.  The Chinese hope to cover 90% of the population within 2 years, and provide health coverage for all Chinese by 2020. 

“This all stands in contrast to China’s current system, which provides little government funding to government hospitals and requires patients to pay heavy out-of-pocket expenses. The WSJ notes that out-of-pocket payments made up more than 60% of health spending in China at the end of the 1990s…The plan doesn’t address how the government would pay for its nationalization program if hospitals are restrained from earning more and tax collection mechanisms remain weak.”

Are you craving more detailed information about health care in China?  The Lancet, Peking University Health Sciences Centre and the China Medical Board have conducted an in-depth study of health system reform in China.  The series examines topics such as preventive care, public health identification of communicable diseases, health insurance, and patient cost sharing.  The full collection of articles is available here or you can check out the a BBC News summary of The Lancet’s China series.

China is a country of great inequality.  The International Herald Tribune reports that “While life expectancy in Shanghai is 78.1 years, that figure is 66.1 in Gansu, one of the poorest provinces.”  Physicians are often poorly compensated and secure most of their income by over-prescribing lucrative pharmaceuticals to their patients.  ”While the country was plagued by infectious diseases before 1990, chronic illnesses are now the main health problem and accounted for 74.1 percent of all deaths in 2005, up from 47.1 percent in 1973.”

Tags: , , , ,

Self-protection and insurance

February 6, 2008 in Economics - General, Health Insurance, Optimal Ins (Theory) | Permalink

Typically, economists when economists look at the health insurance market, they focus on the insurance side of it. By this I mean to define insurance as the purchase of a product which will reimburse the buyer in the case of an adverse event. However, one must also look at the concept of protection. Protection is defined as expending a costly effort to reduce the probability of an adverse event. This costly effort, however, will not effect the amount of the loss, only the probability that it occurs.

A seminal paper by Ehrlich and Becker (JPE 1972) finds the optimal levels of self-protection and how optimal self-protection change when insurance markets are introduced. Let us assume that the probability of a loss is p(e) where e is the effort expended and p’<0. An expected utility maximizer optimizes the following function:

  • maxe [1-p(e)]*U(I -e) + p(e)*U(I – L – e)

The first order condition is:

  • -p’*[U(I -e)-U(I - L - e)]=(1-p)*U’(I -e) + p*U’(I – L – e)

Ehrlich and Becker note that “[t]he term on the left is the marginal gain from the reduction in p; that on the right, the decline in utility due to the decline in both incomes, is the marginal cost.”

When we introduce an insurance market, the expected utility maximizer faces a new objective function.

  • maxe,s ,s [1-p(e)]*U(I-e-s*π(e)) + p(e)*U(I – L – e + s)

Here s is the insurance benefit and π(e) is price of the insurance; s*π(e) is the insurance premium. Let U(0)=U(I-L-e+s) and U(1)=U(I-e-s*π(e)). The first order conditions now become:

  • -(1-p)U’(1) + p*U’(0)=0
  • -p’*[U(1)-U(0)] – (1-p)*U’(1)*[1+s*π'] – p*U’(0)=1

How does self protection change when insurance markets are introduced? According to Ehrlich and Becker “On the one hand, self protection is discouraged because its marginal gain is reduced by the reduction of the difference between the incomes and thus the utilities in different states, on the other hand, it is encouraged if the price of market insurance is negatively related to the amount spent on protection through the effect of these expenditures on the probabilities.”

If insurance companies are actually able to measure self-protection and can price insurance accordingly, then individuals will have some incentive to increase prevention in order to lower their premiums. If insurance is priced in an actuarially fair manner (i.e., π=p(e)/[1-p(e)]) we can show that premiums will drop when self-protection increases:

  • ∂π/∂e=p’/(1-p)2<0

However, if insurance companies are not able to observe self-protection efforts, than it is likely that moral hazard will occur–self protection will decrease. In the words of the authors, “Self-protection would then usually be discouraged by market insurance–moral hazard would exist–because the main effect of introducing market insurance would be to narrow the differences between incomes in different states.”

Tags: ,