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Alumnus co-authors study on whether preventive care results in cost savings

Michael J. O'Grady, Ph.D., Senior Fellow, National Opinion Research Center (NORC) at the University of Chicago, and AU class of 1975, has co-authored a new research study on cost savings from preventive care services for the chronically ill.

The study was reported in a number of media outlets, including The Washington Post, Reuters, Bloomberg News, and The New York Times blog. The work is also on the Web site of Health Affairs, a leading journal of health policy research.

Study Raises Questions About Cost Savings From Preventive Care
By Lori Montgomery
Washington Post Staff Writer
Tuesday, September 1, 2009
Preventive services for the chronically ill may reduce health-care costs, but they are unlikely to generate the kind of fantastic savings that President Obama and other Democrats have said could help pay for an overhaul of the nation's health system, according to a study being published Tuesday.
• Study Raises Questions About Cost Savings From Preventive Care
• Health-Care Reform 2009
Using data from long-standing clinical trials, researchers projected the cost of caring for people with Type 2 diabetes as they progress from diagnosis to various complications and death. Enrolling federally-insured patients in a simple but aggressive program to control the disease would cost the government $1,024 per person per year -- money that largely would be recovered after 25 years through lower spending on dialysis, kidney transplants, amputations and other forms of treatment, the study found.

However, except for the youngest diabetics, the additional services would add to overall health spending, not decrease it, the study shows.
"There's no free lunch here. Prevention will not pay for everything. But it's not as expensive as it looks at first blush," said Michael J. O'Grady, a senior fellow at the National Opinion Research Center at the University of Chicago, and one of four authors whose work is being published on the Web site of Health Affairs, a leading journal of health policy research.

The study comes a week before lawmakers are due back in Washington to continue the debate over Obama's signature domestic initiative, a debate that has come to focus heavily on cost. With budget deficits soaring in the wake of a global recession, Republican critics -- and a growing number of moderate Democrats -- say the nation cannot afford a vast expansion of the health-care system unless it includes measures to reduce federal spending on care over the long term.

In response, Obama, House Speaker Nancy Pelosi (D-Calif.) and House Majority Leader Steny H. Hoyer (D-Md.), among others, have promised that health-care reform will save money, in part by increasing the availability of preventive care. In addition, Pelosi and Sen.. Tom Harkin (D-Iowa) have chastised the Congressional Budget Office, the nonpartisan arbiter of the cost of legislation, for failing to include such savings in the estimates of pending reform bills.

The new research offers them added ammunition, arguing that the 10-year horizon typically used by CBO analysts is too brief to capture the savings that eventually result from improved public health. The authors -- who include two University of Chicago medical professors as well as O'Grady and James C. Capretta, who both served for years in various health policy positions in Washington -- suggest that the CBO instead use a 25-year "budget window" to calculate the cost of prevention programs.

"I'm trying to show them that there are other ways to do this, as we face these new challenges from the epidemic of chronic illness," he said. "They're used to thinking like economists. And their friends at Health and Human Services are used to thinking like actuaries. But there's this third way, which is epidemiological, which shows us how a disease progresses over time."

Legislation introduced by House Del. Donna M. Christensen (D-U.S. Virgin Islands) would explicitly permit key lawmakers to ask the CBO to use a longer horizon when estimating the cost of preventive care, a development that concerns some independent budget analysts, who count on the agency for objective analyses. The CBO's official estimates do not take into account savings accrued beyond the 10-year window, in part to prevent lawmakers from counting on savings that may never materialize.

"One of the reasons I worry about rescoring prevention and wellness and pressure on CBO to do it is because [reform advocates] are looking for magic bullets," said Robert Bixby, executive director of the nonprofit Concord Coalition, which urges deficit reduction. "I don't see how they can pay for what they want to do."

But CBO Director Douglas W. Elmendorf said the agency already has the authority to look at costs over a longer term, though not in the context of official estimates. He called the new study, which has been reviewed by CBO staff, "exactly the sort of research that we use in building our cost estimates. And we will consider these findings in future estimates we do in this area."

In its own analysis of preventive care, CBO said earlier this month that the cost of making cancer screening, cholesterol management and other services broadly available is likely to far outweigh any savings ultimately generated. The new study looks at a more narrow population -- people already diagnosed with diabetes -- and projects the cost of providing them with a very specific regimen of frequent checkups and diagnostic tests that has produced predictable results in clinical trials. (Treatment for other forms of disease may vary in their costs.)

For diabetes patients, only about two-thirds of that cost would be recovered in the first decade, when fewer complications materialize, and more than three-quarters would be recovered over 25 years, the study found. Only for the youngest patients, those aged 24 to 30, would spending on preventive care wind up producing a net savings: the study calculates that $21 billion spent on younger patients would cut overall spending on their health care by $6 billion over 25 years.

The study was funded in part by the National Changing Diabetes Program, which is primarily funded by Novo Nordisk, a maker of diabetes medicines.
U.S. health reform estimates need long view: study
Tue Sep 1, 2009 12:36am EDT

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By Susan Heavey
WASHINGTON (Reuters) - The Congressional Budget Office may be missing potential savings from various health reform proposals by not looking at efforts to manage or prevent expensive, chronic conditions such as diabetes and heart disease, researchers said in a study released on Tuesday.
The study, published in the Tuesday edition of the Health Affairs journal, comes as members of the U.S. Congress prepare to return to Washington next week and again take up legislation to revamp the U.S. healthcare system.
President Barack Obama has made the overhaul a top priority this year, but debate has swelled in both parties in part over the CBO's early projections the Democratic plan could cost nearly $1 trillion.
Obama and other Democrats have argued the CBO does not factor in how improvements to care such as primary doctor visits, although costly at first, could improve people's health and lower costs over time.
The nonpartisan CBO, charged by Congress to estimate the cost of various programs, now uses a 10-year forecast that cannot look at the cost of programs aimed at diseases that can last for decades, researchers at the University of Chicago said.
Instead, the CBO should use methods that would weigh savings from earlier treatment and other intervention that could help reduce costly complications from conditions that arise when left untreated or improperly treated, they said.
Lawmakers need cost estimates that look at a period of 25 years for healthcare legislation, they said in their study, which was sponsored by diabetes drug maker Novo Nordisk A/S and looked at a scientific model to help estimate such costs for long-term diseases.
"Although this would not be necessary for the vast majority of cost estimates produced by the CBO, it would improve the information available when Congress considers health legislation with implications for the treatment of a relatively small number of costly chronic illnesses," they wrote.
In the study, researchers at the University of Chicago's National Opinion Research Center said new longer-term estimates would also help legislators and others estimate how having healthier, longer-living patients would affect costs.
In their model, the researchers used the example of diabetes, which affects nearly 8 percent of the U.S. population, or 24 million Americans, and factored in the costs of complications such as blindness, kidney failure and stroke.
They projected the disease would cost $336 billion a year 25 years from now. They then factored in the costs of prevention programs that would include medication and routine testing and how they could save money over time.
While such methods would need to be adjusted as treatments change, it could provide the CBO a starting point to look more long term, they said.
(Reporting by Susan Heavey; Editing by Peter Cooney

Health-Care Overhaul Needs New Savings Gauge, Researchers Say
2009-09-01 14:02:31.133 GMT
By Nicole Gaouette
Sept. 1 (Bloomberg) -- U.S. lawmakers trying to write a health-care overhaul are hampered by congressional rules that allow too little time to count the payoff from managing chronic diseases, researchers at the University of Chicago said. Looking at diabetes, the scientists found that savings from proper treatment multiply from the 10th to 25th year, according to the analysis published today in the journal Health Affairs..
The 10-year period used by the Congressional Budget Office to “score” legislation stresses the upfront costs and picks up too little of the benefit, the researchers said.
Chronic ailments, including diabetes and heart disease, account for 75 percent of U.S. health-care costs, the scientists said. They published the study, which proposes a model for analyzing health policies, as Congress and the Obama administration struggle to keep the price tag for legislation at no more than $1 trillion over 10 years.
“We must have a better way not only of scoring, but of scoring treatment and prevention so we get the best value for our health-care dollar,” said Jim Marks, a physician and senior vice president of the Robert Wood Johnson Foundation Health Group, based in Princeton, New Jersey. The foundation studies ways to improve health and health care in the U.S.
Changing the U.S. health-care system is President Barack Obama’s top domestic priority. He said he wants to make insurance available to 46 million people now lacking coverage and contain the growth in medical expenses. An overhaul measure is stalled in the Senate Finance Committee.
The study was funded by the National Changing Diabetes Program, founded by Danish insulin maker Novo Nordisk A/S.
New Model
Study co-author Michael O’Grady said the new model combines data on health spending with the progress of a disease. O’Grady said the model “allows you to see that if you actually did spend money on intervening, on getting patients better care, you can not only predict what likely will happen to these people but also how to avoid” negative outcomes such as strokes and amputations that some diabetics endure.
“That’s a good clinical outcome, but it’s also a good economic outcome,” O’Grady said in a telephone interview.
O’Grady is a researcher at the National Opinion Research Center, a social science research center affiliated with the University of Chicago with a branch in Bethesda, Maryland. The study measured savings “generated by long-term reductions in the major complications of diabetes, including blindness, kidney failure, lower-extremity amputations, stroke, and coronary heart disease.” By using data on the progression and treatment of the disease, and not just the spending, future costs can be more accurately assessed, O’Grady and his colleagues said.

25-Year Savings
Using the model, the researchers found that a diabetes management and prevention program yielded savings of $6 billion over a 25-year period for those between ages 24 to 30. When measured over a 10-year period, the same program cost $1.2 billion for the same age group. CBO spokeswoman Melissa Merson referred to a blog post by agency director Douglas Elmendorf on the agency’s evaluation of preventive care.
“CBO takes in account any estimated savings to the government that would result from greater use of preventive care as well as the estimated costs of that additional care,” Elmendorf wrote on Aug. 9. “The evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.”
Two House members introduced legislation July 9 that would require the CBO to weigh data from health studies and not just spending when evaluating costs and savings from preventive health measures.
The Preventive Health Savings Act of 2009, co-sponsored by Delegate Donna M. Christensen, a Democrat from the Virgin Islands, and Representative Michael C. Burgess, a Texas Republican, also calls on CBO to take a longer view that the traditional 10-year budget window. Christensen and Burgess are physicians.

SEPTEMBER 3, 2009, 1:56 PM
When Preventive Care Costs More
By Michelle Andrews
Many politicians are betting that pending health care legislation will save taxpayers billions of dollars by increasing support for preventive care and ultimately reducing the need for expensive medical interventions in the years to come. But a new study adds to the evidence that while preventive health care may save lives, it doesn’t necessarily save money.
Michael Conroy/AP Paul Mullen, 66, weighs in during a diabetes prevention program in Indianapolis in June.
The report, published online this week in the journal Health Affairs, projected that people with Type 2 diabetes who participate in a disease management program to prevent serious complications would cost the federal government slightly more money over 25 years than they would have without any intervention. The management program would save money only among the youngest participants in their 20s, the researchers found.
Diabetes is exactly the sort of chronic condition in which experts would expect preventive care to have a positive financial impact. Disease management programs that help patients keep their blood pressure and blood sugar levels in check and encourage them to get regular foot and eye exams can help forestall or even prevent expensive complications, like kidney failure, amputation, blindness and stroke.
But while these programs may be a boon to patients’ health, the study estimated that the cost savings would generally be offset by the cost of the program itself, estimated at $1,024 annually per patient.
Improved health may be reason enough to finance preventive care programs, the authors noted. “Even though you don’t save money, you recoup a lot of your costs and you get good clinical results,” said Michael O’Grady, a senior fellow at the National Opinion Research Center and one of the study authors.
Mr. O’Grady and his colleagues also noted that for chronic diseases like diabetes, it makes more sense to estimate the financial impact of preventive interventions over 25 years rather than the 10-year window that the Congressional Budget Office uses to calculate financial impacts. Looking further into the future, they say, yields a truer sense of the cost-benefits ratio.
Still, even the long view did not show that a prevention program like this saves money. Preventive care may well be like any other kind of medical care — expensive now, and in years to come.
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