Monday, April 14, 2008

Three Markers of Faulty Health Policy

RALEIGH – As political speeches and advertisements ramp up through November 2008, expect to hear and see lots of claims about health care. It promises to be among the top three domestic-policy issues in the political cycle (along with economic concerns and, in some places, immigration).There are three markers for judging the superficiality of a politician’s knowledge of health-care policy. If you spot any one of these markers in a statement or ad, you can consider the politician as only somewhat knowledgeable. If you spot two of these markers, consider the politician not at all knowledgeable.If you spot all three markers, consider the politician average. Here’s the first marker:• “To save money, we need to invest a lot more dollars up front in prevention.”While this notion sounds plausible and is widely believed, it is simply not true. While some forms of preventive care do, indeed, reduce overall health-care costs by heading off diseases or complications, most preventive care doesn’t. Don’t take my word for it. Governing just published an excellent piece on the subject in its April edition. “The growing consensus in the medical research community is that preventive care usually does not save money,” wrote reporter Josh Goodman. As one of his sources succinctly put it: “The problem with preventive care is that everybody gets it. And if everybody gets it, you’re wasting a bunch of money and a bunch of treatment.”If you read just one scholarly article on the subject, I’d recommend an article from the February 14th issue of The New England Journal of Medicine. It’s a literature survey, examining the findings of nearly 600 separate studies. The authors concluded that “the broad generalizations” about preventive care made by presidential candidates and other politicians can be misleading. “Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not,” they wrote.Does all this constitute an argument against getting physicals or other preventive services? Of course not! Prevention may not save money most of the time, but it may well save your life or make you feel better. The point is that most preventive care is really a consumption good, not an investment good. Don’t pretend that it pays for itself over time. Its benefits need to be compared against alternative uses of the dollar, which may also improve one’s quality of life. And it does not constitute a true cost-saving reform in any politician’s health-care plan.Now for the second marker:• “Health care costs are high and rising because of cost-shifting – we all pay more because the uninsured are showing up and getting care at the hospital.”This is, at best, an exaggeration. Uncompensated hospital care – the “charity” care they are obligated to provide and essentially finance through higher prices to other patients – is only a small fraction of health expenditures, typically under 4 percent. Add in other providers, and uncompensated care rises no higher than 7 percent. And some of that is financed by philanthropy or explicit taxes. Cost-shifting is a factor but not a big one.Other versions of the argument are trickier. One is that if the uninsured obtained service at doctor’s offices rather than hospital emergency rooms, the service would cost less. Sure, but uninsured people consume less health care overall than insured people do (as advocates of mandates or single-payer plans frequently remind us). The cost of getting particular services would be lower if insurance networks helped route the previously uninsured away from emergency rooms, but increased access would led to an overall increase in their health-care consumption, too. Also, unfortunately, insured people show up at emergency rooms more than they ought to, so the cost “savings” wouldn’t be nearly as much as suggested.Another version of the argument is that insuring the uninsured would save money because they’d have more access to preventive care. As discussed above, this would be true for some individuals, but wouldn’t be true on balance. Again, this kind of argument doesn’t suggest that covering the uninsured wouldn’t confer health benefits on them. It simply means that covering them won’t save money for everyone else. It will cost us. Government mandates or payment plans are transfer programs. They move income from those who earned it to other groups of beneficiaries.Finally:• “Other developed countries have less-expensive health care systems but at least as much access and quality to medical care.”As I observed in a previous column, there is no free lunch here. Universal coverage, however it is accomplished, would lead to greater consumption and expense in the absence of other governmental policies to restrict access and reduce the incomes of medical providers. In reality, other governments enact just such policies. Now that you have your scorecard for evaluating political statements on health care, mark away.Hood is president of the John Locke Foundation.

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