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Cost-projection techniques may understate impact of chronic disease initiatives

Current methods used to estimate the costs of federal health initiatives may not capture the full impact of steps to prevent and manage chronic disease, according to a study published in Health Affairs.

The study, funded by the National Changing Diabetes Program at Novo Nordisk, Inc., suggests that well-designed prevention and treatment interventions dealing with chronic illness could be more cost-effective than projected in some estimates to date.

The study's authors present a new epidemiologically based model that projects federal costs for type 2 diabetes under different policy options. They argue that this model, and similar models for other chronic diseases such as heart disease, could be used to provide more accurate estimates of the long-term spending associated with diabetes treatment interventions.

The Congressional Budget Office, which estimates or "scores" the costs of federal programs for Congress, and the Office of the Actuary at the Centers for Medicare and Medicaid Services, which projects Medicare costs on behalf of the administration, currently rely heavily on health economic or actuarial models.

Elbert Huang, an assistant professor of medicine at the University of Chicago School of Medicine and the study's lead author, said these models work well for most healthcare policies but can't capture the changes in disease progression found in a chronic disease like diabetes.

"Although both the CBO and the CMS track closely the literature relevant to their projection assumptions, to our knowledge neither agency has yet built a forecasting approach for any chronic condition or disease that uses reliable epidemiological data to project expected health and cost effects from alternative policy scenarios," he said.

Huang and his coauthors argue that the 10-year budget window typically used by Congress may not be long enough to accurately assess the effects of many interventions addressing chronic disease.

"For many chronic illnesses, and in the case of diabetes in particular, complications from the disease may not show up for many years," said co-author Michael O'Grady, a senior fellow at NORC in Bethesda, Md. and principal of O'Grady Health Policy, LLC. "Thus, cost estimates covering only 10 years may capture the up-front costs of prevention and disease management efforts but not the long-term health and economic benefits of avoiding future complications."

As an example, over a 25-year period, a diabetes management and prevention program modeled by Huang, O'Grady and the other co-authors yielded savings for those age 24-30 when they entered the program, but the program resulted in an increase in net costs for this group when measured over only a 10-year period.

The study's authors recommend giving Congressional leaders the authority to request 25-year cost projections from the CBO for legislative provisions aimed at producing long-term health status improvements. They also propose modifying Congressional "paygo" rules that require legislation to be at least deficit-neutral over a 10-year period.

"Several approaches might be considered for doing this, such as using an average cost for 25 years as the yearly costs incorporated into the 'paygo' 10-year test," they wrote. "This alternative budget process should be available only if the Democratic and Republican leaders of the (House and Senate Budget Committees) agree to it."