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Bending the Medicare Cost Curve in 12 Months or Less: How Preventative Health Care Can Yield Significant Near-Term Savings for Acute Care in Alberta

26 Pages Posted: 28 Jan 2015  

Daniel Dutton

University of Calgary - The School of Public Policy

J. C. Herbert Emery

University of Calgary - Department of Economics

Thomas Mullie

Independent

Jennifer Zwicker

University of Calgary - The School of Public Policy

Date Written: January 22, 2015

Abstract

Over the course of more than 30 years, a series of Canadian government commissions and health policy researchers have repeatedly identified the importance of “bending the cost curve” to sustain publicly funded health care, and the potential to do so through upstream investment in health promotion and disease prevention. So far, however, the level of public investment in prevention represents only a slight portion of total public health care expenditure, largely consisting of traditional public health initiatives such as vaccinations, disease screening and information campaigns.

This study of the Pure North S’Energy Foundation’s preventative health care program — wherein health care usage by program participants was measured against age- and sex-matched control samples — finds that the sort of preventative health care services offered by Pure North can lead to genuine and significant near-term cost savings for Canada’s single-payer health care system. Participants in the first year of the program required 25 per cent fewer hospital visits and 17 per cent fewer emergency room visits compared to the control group. Among those who persisted in the program for a year or longer, the effects were even more significant: 45 per cent fewer hospital visits in the year after joining, and 28 per cent fewer visits to emergency departments, compared to the control group.

This represents real cost savings for a public health service: From $388 per person who joined the program to $677 per person who persisted beyond the first year. As a proportion of annual health spending for these participants on hospitals, emergency departments and general practitioners, this represents a cost reduction ranging from 22 to 39 per cent. If the Alberta government were able to implement this kind of program province-wide (at an estimated cost of $500 per participant), and were to realize similar results in terms of reduced strain on acute care services, it is possible that the province could free-up the equivalent of 1,632 hospital beds every year. That is roughly the same as building two entirely new hospitals each on the scale of Calgary’s Foothills Medical Centre.

This demonstrates that “bending the cost curve” for public health care spending is not merely something that is realizable in the long term, but rather in the immediate future, as quickly as within a year after this kind of program could be implemented province-wide. And yet, the near-term savings in acute care services represent only the first wave of benefits. The prevalence of chronic diseases and conditions, including diabetes, heart disease, cancer and mental illness, have been rising and are projected to keep doing so over the coming decade. The Pure North program aims to prevent and address these health conditions and chronic diseases through a combination of screening and testing, lifestyle modification, nutrition education, the identification of nutritional deficiencies, and dietary supplements. The long-term benefits of a Pure North-style program implemented province-wide in Alberta are likely to be that much greater as the prevalence of diabetes, heart disease, cancer and mental illness is tempered through the use of widespread preventative care.

Then there are the broader “indirect benefits” of a generally healthier population: higher labour productivity, higher incomes and greater well-being. These returns to the Alberta government, and taxpayer, have the potential to be as large, if not larger, than the direct benefits of significantly reduced acute care costs.

Keywords: AHS, healthcare Alberta, reducing health care costs

Suggested Citation

Dutton, Daniel and Emery, J. C. Herbert and Mullie, Thomas and Zwicker, Jennifer, Bending the Medicare Cost Curve in 12 Months or Less: How Preventative Health Care Can Yield Significant Near-Term Savings for Acute Care in Alberta (January 22, 2015). SPP Research Paper Volume 8, Issue 2, January, 2015. Available at SSRN: https://ssrn.com/abstract=2555801

Daniel Dutton (Contact Author)

University of Calgary - The School of Public Policy ( email )

Calgary, Alberta
Canada

J. C. Emery

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403 2205489 (Phone)
403 2825262 (Fax)

HOME PAGE: http://econ.ucalgary.ca/emery.htm

Thomas Mullie

Independent

No Address Available

Jennifer Zwicker

University of Calgary - The School of Public Policy ( email )

Calgary, Alberta
Canada

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