Barack Obama has insisted that his overhaul of the health-care system will pay for itself and save money, largely through bigger and supposedly more efficient preventive care.  His favorite example for this paradigm is diabetes, a disease that requires a lifetime of maintenance care, usually aggressively approached.  However, the National Diabetes Foundation’s new study on aggressive maintenance shows that, while the approach works well in controlling the disease, it does not save money except for the youngest of patients (emphasis mine):

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.

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.

But the argument wasn’t that adding services wouldn’t hike costs as much as some people imagined.  Obama argued that adding services would cut costs, making his new system less expensive, thanks to the savings of limiting expensive interventions later in life.  That’s simply not true, as even a simple analysis would have showed, because not all diabetics end up on dialysis machines or get amputations.  Diabetes can be managed by most diabetics well enough to avoid the most serious complications, although a small minority of Type 1 diabetics (my wife was among them) have inconsistent reactions to insulin; they’re called “brittle diabetics.”  Even aggressive management won’t hold off those complications.

Aggressive management works well for the patients, but it costs more.  There is no way around that fact.  If you access the medical care system more often, it drives up costs, in both the short- and long-term.

This should come as no surprise to anyone, least of all Congress.  Three weeks ago, the CBO told Congress the exact same thing, based on their own studies — and they had another point to explain as to why real prevention programs will always cost more than they save:

In making its estimates of the budgetary effects of expanded governmental support for preventive care, CBO takes into account any estimated savings that would result from greater use of such care as well as the estimated costs of that additional care. Although different types of preventive care have different effects on spending, the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.

That result may seem counterintuitive. For example, many observers point to cases in which a simple medical test, if given early enough, can reveal a condition that is treatable at a fraction of the cost of treating that same illness after it has progressed. In such cases, an ounce of prevention improves health and reduces spending—for that individual. But when analyzing the effects of preventive care on total spending for health care, it is important to recognize that doctors do not know beforehand which patients are going to develop costly illnesses. To avert one case of acute illness, it is usually necessary to provide preventive care to many patients, most of whom would not have suffered that illness anyway. Even when the unit cost of a particular preventive service is low, costs can accumulate quickly when a large number of patients are treated preventively. Judging the overall effect on medical spending requires analysts to calculate not just the
savings from the relatively few individuals who would avoid more expensive treatment later, but also the costs for the many who would make greater use of preventive care. As a result, preventive care can have the largest benefits relative to costs when it is targeted at people who are most likely to suffer from a particular medical problem; however, such targeting can be difficult because preventive services are generally provided to patients who have the potential to contract a given disease but have not yet shown symptoms of having it.

The Obama argument on cost savings through preventive programs amounts to a shell game, a Ponzi scheme.  Any promised payoffs would come decades later, far too late to dump the system or recover the costs of adopting a national health-care system, while the government spends all of the money up front.  Obama’s conclusions fly in the face of common sense and now two studies showing the opposite conclusion.  The savings are as illusory as the White House’s initial deficit projections and promises of economic boom from their stimulus package.