Measuring the Savings from Preventative Health Care
This month, the House Budget Committee passed a bill that would direct the Congressional Budget Office (CBO) to evaluate the long-term budget impacts of legislative initiatives to invest in health care prevention and wellness.
H.R. 766, the Preventive Health Savings Act, was introduced by Representatives Michael Burgess (R-TX) and Diana DeGette (D-CO) and would increase the timeframe in which CBO is allowed to evaluate budgetary costs (and savings) for health-care-related measures from the standard budget window of ten years to 20 and 30 years.
This bipartisan effort attempts to address a common criticism that CBO estimates of these policies include up-front costs but aren’t of long enough duration to account for potential savings. This has become an issue recently as policymakers evaluate changes to Medicare’s prohibition against paying for weight-loss drugs and the Biden Administration’s proposal to eliminate Hepatitis C.
To be sure, this targeted change makes sense in that more information on costs and savings are helpful for legislators to make better decisions. However, Members should understand that just viewing things through a longer timeline doesn’t mean that prevention and wellness efforts are guaranteed to garner savings. Furthermore, those longer-term impacts should not be used to get around offset requirements for the purpose of PAYGO or other budget rules. Finally, costs to the federal government aren’t the full story for policymakers when making governing choices (although those of us here at the Committee for a Responsible Federal Budget think they are of utmost importance).
For instance, the new class of obesity drugs – which show promise in addressing a range of health care challenges – might be worth spending money on and could provide exceptional value for the United States as a whole if made widely available and covered by government programs like Medicare. However, that just means legislators should digest CBO’s new longer-term estimates, and if CBO says the drugs will ultimately cost more than they save, there are numerous other policy changes that can be used to pay for the investment. (Our Health Savers Initiative has many suggestions.)
In a June 2020 report, CBO explained that it weighs many variables in determining whether a health care intervention will score as a budgetary saver. For example, the cost of screening an entire population for a specific disease could still exceed the benefits of reducing the long-term health care costs of the subset of the population determined to have the disease. CBO also reviewed historical research and found that in about 80 percent of studies, preventative medical services led to higher health care spending.
Additionally, CBO must account for all budgetary costs from a policy, not just those within health care programs. To illustrate, a specific individual might live longer and have lower health care spending due to a health intervention, but the individual’s prolonged longevity also means additional Social Security payments that could exceed the health care savings.
The other variable that is crucial for CBO to model, especially in the case of the new class of obesity drugs, is the cost of the drugs themselves – a variable that will be very sensitive to the actions of future policymakers. CBO has mentioned that the Inflation Reduction Act’s establishment of Medicare price negotiations could potentially reduce the costs of these drugs. However, that depends on how future Administrations utilize their authority, whether the statute holds up against court challenges, and whether Congress passes new legislation that waters down the existing provisions (that a substantial number of Members appear to support) or strengthens them.
It is entirely possible that in a case like Hepatitis C, where pharmaceutical drugs are capable of curing the disease while eliminating the need for high-cost liver transplants, the costs of screening and treating would ultimately save the federal government more than it would cost over the long term. Under this legislation, CBO would have a broader mandate to figure that out and report out to policymakers.
We applaud the Congressional efforts to increase CBO’s ability to provide more information in their estimates. We also know that CBO has been calling for help from outside researchers (here and here) to better understand the complex issues at hand. However, the bottom line is that legislators have numerous options at their disposal to pay for initiatives, and if things are worth doing, they are worth paying for. If unexpected health care savings and deficit reduction accrue down the road, all the better given large projected deficits and an unsustainable fiscal future.
