RALEIGH – I’m as fond of proverbs and folk wisdom as the next person. But I don’t think that “an apple a day keeps the doctor way” suffices as an agenda for health care reform, or that “penny wise, pound foolish” is a sufficient guide for managing one’s investment portfolio.
Unfortunately, more than a few politicians and political activists seem to think that the familiar saying “an ounce of prevention is worth a pound of cure” constitutes not just a vague endorsement of prudence but also a statistically valid prediction. Thus they’ve convinced themselves that it would save taxpayers money in the long run for government to spend more money in the short run – be it on crime prevention, early childhood education, or preventive health care.
It all sounds reasonable in theory. In the real world, though, the savings usually don’t materialize. North Carolina’s recent, painful experience with “preventive” home-health services serves as a case in point.
In the N.C. Senate’s new budget plan for the 2010-11 fiscal year, lawmakers are proposing to cut tens of millions of dollars from Medicaid expenditures on in-home “personal care services.” Right now, vendors currently assist some 40,000 Medicaid patients with such daily needs as dressing, eating, or going to the bathroom. If something like the Senate budget becomes law, only about 5,000 North Carolinians will receive this level of in-home care.
Patients are upset. Private vendors are very upset. And the usual apologists for government giveaways are issuing the usual predictions about how taxpayers won’t end up saving money in the long run because the recipients previously receiving in-home services will end up in far-costlier institutions.
Experience and common sense tells us, however, that such cases will be rare. Most of the Medicaid patients who will no longer be eligible for in-home services were never at significant risk of institutionalization in the first place.
The problem stems from two related phenomena. The Prevention Myth is the previously mentioned idea that spending money on the front end always or usually saves much more money on the back end. The Woodwork Effect is the tendency for reforms, whatever their immediate efficiency gains, to make services so much more attractive to potential beneficiaries that increased enrollment and utilization swamp any savings.
In this case, the evidence is convincing that personal-care services have been overutilized. Only a tiny percentage of current recipients are so severely disabled and lacking in family support that they truly can’t function without daily in-home care. It was entirely reasonable for the Perdue administration to tighten eligibility for these services last year, and for the Senate to propose replacing them altogether this year with a more targeted and affordable program.
The issue actually has a pretty long history at the national level. Back in the 1980s, there were several large-scale studies of programs promising to manage the care of Medicaid patients and divert them to lower-cost alternatives. One of the official evaluations summed up the findings pretty well: the typical program “benefited clients and the families and friends who cared for them in several ways” but “contrary to its original intent, [it] increased costs. The costs of the additional case management and community services were not offset by reductions in the cost of nursing home use.”
Since then, there have been other state and local reforms intended to achieve better results. Some have, but the savings remain small. In cash and counseling programs, for example, recipients of long-term care are given more control over the Medicaid dollars allocated to them. A 2003 evaluation of Arkansas’s program found that it did tend to reduce subsequent nursing-home costs, but it also induced more demand for home-health services. There were no net cost savings.
The Prevention Myth and the Woodwork Effect aren’t always present. There are some government interventions – typically low-cost, well-targeted programs – that do indeed pay for themselves in foregone future expenses. But not many.
The program the Senate now wants to end isn’t one of them. Sometimes a budget cut is just a budget cut – a necessary action that saves money, regardless of how loudly the affected parties object.
Hood is president of the John Locke Foundation.