Will prevention lower health costs?

extract from

           "The Coming Crisis of Medicare: What the Intergenerational Reports should say, but don’t, about health and ageing".

 

The Commission also considered another argument that health economists and health industry representatives have used to minimise the cost ramifications of ageing, which is that new diagnostic methods, procedures, and medicines will prevent costly episodes of ill health. Because the larger number of elderly will be healthier in the future—assuming that the benefits of new medicine result in a decline in the prevalence of chronic conditions and acute episodes—the argument goes that health costs will not significantly increase, as there will be offsetting expenditure savings across the whole health sector, such as reduced hospital admissions.

There are good reasons to think that the arguments of the self-proclaimed ‘ageing realists’ are overly optimistic. The recent worldwide trend has seen shifts away from medical services to more complex and costly medical goods: more advanced equipment, procedures, and pharmaceutical medicines. In Australia, this trend has contributed to health expenditure growing faster than the rest of the economy over the last decade or so, and has encompassed a doubling in the cost to the Federal government of the PBS, with an important driver of cost growth being new and very expensive so-called ‘blockbuster’ drugs, such as Celebrex for treating arthritis.

The Productivity Commission found that the ‘weight of evidence appears to support the view

that better health among older people is not going to reduce health expenditure’. The evidence indicated that at present demand pressures associated with new technology ‘are acting to slightly increase—or at least maintain—the current age profile of expenditure across different components of health care’. And there are good grounds to believe that ‘the rising share of older people in the future will compound the underlying growth in health expenditure arising from demand and technology’. In a wealthy country, the growing proportion of the population aged over 65 will have rather more political muscle, will expect governments to satisfy their expanding healthcare needs and wants, and will expect the public system to provide them with the health benefits offered by the latest medical technologies, almost as soon as they are available in the private system.

This was the most critical aspect of the Productivity Commission’s report: the idea that ageing will have only a minor impact on rising health expenditure is open to question, it found, because it is more reasonable to expect that ‘in combination with demand and technology, ageing will place significant additional pressure on future health expenditure’. 

 

The Commission reasoned that the demand for healthcare in older age groups could grow into the middle of the century at considerably higher rates than in the past. As the population ages, there will be larger numbers of elderly people who will consume more high-cost healthcare, because they will demand more and more high tech procedures (such as pacemakers, cochlear implants and hip replacements). The rising prevalence of obesity, the resultant increase in the disease burden, and the expected continual decline in health status according to age, will mean that the elderly will demand more and more costly ongoing care and recurring treatment, particularly to manage lifestyle-related chronic conditions. Reduced disability and improved quality and quantity of life for the elderly due to the better healthcare available will therefore not mean lower health costs, but will amplify demand for new, sophisticated, and expensive treatments, and mean that ageing will exacerbate the pressure associated with new technology.