Spending More Won’t Cut Health Care Costs

Real Clear Markets:

For decades now, would-be health care reformers have claimed that if we just invest more in preventive care we will cut big chunks of spending out of our health system. In the early 1990s, for instance, Medicaid administrators and hospital executives argued that if we built more satellite health clinics in poorer neighborhoods, residents would get check-ups more often and visit hospital emergency rooms, where care is expensive, less frequently. So hospitals built the clinics, often with government grants, and we got more clinics but just as many emergency room visits, and Medicaid costs continued to spiral upwards.

Still, politicians have remained undeterred. In the 2008 presidential election, John Edwards told us that “study after study shows that primary and preventive care greatly reduces future health care costs,” while Barack Obama claimed that “too little is spent on prevention and public health.” Recently, President Obama claimed at a town hall meeting that by adding preventive care to health reform we’ll cut down on costs, including costs for emergency room visits.

But I would be skeptical of any health reform legislation that projects big savings from preventive care or, even worse, requires new government programs to boost preventive care. As a report issued by the Congressional Budget Office last week reminded us, there are no widespread savings to be expected from increased preventive care. In fact, the report concluded, most preventive care actually adds to health care spending. What a shocker to learn that spending more money actually costs more.