It just seems intuitive that money spent on preventative health care saves larger expenses down the road, by avoiding more costly future treatments. This narrative has been repeated often by insurance companies, medical professionals, and politicians. The only problem is that evidence suggests that it is not true — at least in the broadest sense.
Studies have challenged the premise of preventative health care and alleged cost-savings since the 1970s. A randomized study by the RAND Corporation designed to answer this very question found that the less expensive it was for people to obtain medical care, the more people used that care, driving costs higher.
A more recent study of Oregon's population of uninsured lower-income consumers reached the same conclusion. In a randomized test, low-income residents who were chosen by lottery to be eligible for the state Medicaid program spent more on healthcare than those who did not receive Medicaid coverage.
How Comprehensive Preventative Care Programs Raise Costs
It stands to reason that costs would increase in the short term with greater use of health care, but why does that not translate into savings down the road? The primary reason is that in a comprehensive preventative care program, to keep one person from developing the disease, it is necessary to treat a lot of people who would not have developed the disease in the first place. For most conditions, the "number needed to treat" is high enough that costs of the preventative program outstrip the cost of the treatments in the absence of the program.
Joshua T. Cohen of Tufts Medical Center uses a simple parable to make the point. We have all heard that an ounce of prevention is worth a pound of cure. This logic fails, according to Chen, because "you have to give a lot of people those ounces of prevention to end up with one person who's going to get that pound of cure." The implication is that even with a greater emphasis on preventative medicine, healthcare costs will continue to rise because of the greater amount of coverage.
The Centers for Medicare and Medicaid Services (CMMS) recently published their annual report on expected healthcare spending over the next ten years. The original estimate on 2014 spending shows a 5.5% increase, the largest increase in five years. While the increase in coverage due to Obamacare cannot be fully blamed for the increase, it logically played a significant role.
We're not saying that preventative care is a bad thing, or that its costs are not worth the benefits. In some specific areas, preventative care may be cost effective — the New York Times suggests that contraception counseling is one of those areas because of the collective costs of an unplanned pregnancy. What we are saying is that as a rule, the premise that preventative care saves money on healthcare costs cannot be justified.
That is a germane point as Obamacare moves toward another full year of coverage statistics and the full picture on spending increases comes into focus. There is still a raging argument in some states to expand Medicaid coverage, and both sides will throw around statistics to try to bolster their argument. Look them over with great skepticism, especially arguments about cost reductions combined with greater insurance coverage. In general, that does not occur.
Granted, Obamacare's increased coverage and preventative nature decrease costs for lower-income individuals and families, while raising them for the wealthy. However, it is highly unlikely to reduce costs overall. The "Affordable" in the Affordable Care Act does not apply in the aggregate.