"Nothing in healthcare saves money. It is not quite true, but it is a good adage to keep in mind."

Health economics has spent four decades asking whether the trillions spent on US healthcare are buying proportionate health. Peter J. Neumann, ScD, Director of the Center for the Evaluation of Value and Risk in Health (CEVR) at Tufts Medical Center and Professor of Medicine at Tufts University School of Medicine, has been one of the people asking that question since the beginning. His answer, refined across more than 350 peer-reviewed papers and three books, is that, despite a good deal of waste and room for improvement, a lot of what healthcare buys may be worth having, though not always for the reasons some clinicians and policymakers may assume.

Neumann's career began in the 1980s in Washington, with economic challenges tied to rising US health spending. Those questions have not gone away. They have only grown bigger.

"Today we spend roughly a trillion dollars just on medications, over five trillion on healthcare overall. There is a lot of evidence that we do not spend it efficiently. But there are all kinds of incentives in the system for people to keep doing what they are doing."

In 2006, he co-founded CEVR at Tufts as what he describes as "a kind of startup," beginning with himself, his collaborator Josh Cohen, along with a research assistant, and a programmer. Twenty years on, CEVR maintains the Cost-Effectiveness Registry, a database of cost-effectiveness analyses used by researchers and policymakers worldwide. Neumann has served as President of ISPOR and co-chaired the Second Panel on Cost-Effectiveness in Health and Medicine.

His collaboration with John H. Stone, MD MPH, Professor of Medicine at Harvard Medical School, and the Edward A. Fox Chair in Medicine at the Massachusetts General Hospital, and Glenn Phillips PhD, Vice President of Health Economics and Outcomes Research at pharmaceutical company Argenx, produced a microsimulation model presented at ISPOR Europe 2025^.[1] The model estimated the lifetime clinical and economic burden of long-term steroid use in autoimmune disease at $24,915 to $41,368 per patient. For Neumann, the steroid question is a case in point of what he has been arguing for forty years.

"Incentives really matter"

Ask Neumann what the field has taught him, and the first answer is the simplest one: incentives shape behavior, often decisively.

"Even when we have good quality evidence, if people have incentives to act in ways inconsistent with that evidence, they might obey that incentive. Hospitals and physicians, are almost always good actors operating in difficult systems. Some procedures and interventions will still be used even if they are ‘low value’."

The implication for steroid-toxicity is direct. Steroids are cheap, accessible, and effective at suppressing the symptoms clinicians need to manage. The financial incentive to step patients through them before reaching for newer agents is structural. Quantifying the downstream cost of that pathway, in QALYs lost and adverse event spending, can help inform decisions and perhaps counteract the incentives.

The myth that prevention always pays for itself

One of Neumann's most repeated points may be counterintuitive for non-economists.

"We may have lots of cost-effective interventions that are very good value for money. But they do not necessarily save money."

People assume better care, better technology, or earlier prevention must reduce total health spending. Often, they do not. What they do, when well chosen, is buy meaningful improvements in health for the price paid. That is the difference between cost-savings and cost-effectiveness.

The microsimulation work captures the distinction. In the myasthenia gravis cohort modeled by Stone, Neumann, and colleagues, a 50% reduction in steroid dose resulted in a gain of 0.56 quality-adjusted life years and $24,915 in avoidable adverse event spending per patient. Eliminating steroid exposure entirely produced a gain of 1.41 QALYs and $41,368 in savings. For drug developers, this is clarifying data. The economic case for steroid-sparing therapeutics rests not only on the treatment of the target disease, but on the patient harm they prevent, measured in QALYs gained and adverse event costs saved.

The woodwork effect

Neumann is candid about why interventions often disappoint financially once they reach scale.

"What happens when you have interventions is that they become widely used and diffuse into populations who may not benefit from them as much as the original analyses suggest. This is what is sometimes called the woodwork effect - people come out of the woodwork."

In contrast, targeted strategies aimed at higher-risk populations almost always deliver better value than broadly deployed ones. For drug developers, this argues for tools that can identify which patients carry the highest cumulative toxicity burden, and which stand to gain most from intervention.

What gets measured

Neumann is realistic about the limits of health economic modeling. The ISPOR paper projects cost savings from steroid dose reduction by inferring harm from population-level adverse event rates. The aggregate harms and potential savings are real, though individual experiences may vary.

Microsimulation makes the population-level argument for steroid-sparing strategies. Clinical outcome assessments such as the Steritas GTI translate that argument to the individual, capturing the actual burden that one patient carries from a specific exposure.

A forty-year view

Neumann frames the work ahead as a three-stage problem: better evidence, better incentives, better payment and delivery systems. The lifetime cost paper advances the first stage. The Steritas GTI and its companion clinical outcome assessments equip drug developers, regulators, and the HEOR community to make the second stage stand up at the individual patient level.

"We have tough choices about where we spend our money. The science keeps improving. You want incentives in place to encourage high-value care, and disincentives against low-value or wasteful care."

For four decades, Neumann's argument has stayed remarkably consistent. The evidence base supporting it continues to grow by the year.

Peter J. Neumann, ScD, is Director of the Center for the Evaluation of Value and Risk in Health (CEVR) at the Institute for Clinical Research and Health Policy Studies at Tufts Medical Center, and Professor of Medicine at Tufts University School of Medicine. He is the founder and director of the Cost-Effectiveness Registry, a comprehensive database of cost-effectiveness analyses in healthcare.

Dr Neumann is the author or co-author of over 350 papers in the medical literature, and three books: Using Cost-Effectiveness Analysis to Improve Health Care (Oxford University Press, 2005); Cost-Effectiveness in Health and Medicine, 2nd Edition (Oxford University Press, 2017); and The Right Price: A Value-Based Prescription for Drug Costs (Oxford University Press, 2021). He served as co-chair of the Second Panel on Cost-Effectiveness in Health and Medicine and as President of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR).

He is a member of the editorial advisory boards of Health Affairs and Health Affairs Scholar and previously served on the Congressional Budget Office's panel of health advisors. He has held several policy positions in Washington, including Special Assistant to the Administrator at the Health Care Financing Administration. He received his doctorate in health policy and management from Harvard University.

Reference

1. Stone, J.H, Neumann, P., Narayanaswami, P., et al. (2025, November 9–12). Microsimulation Model to Estimate the Clinical and Cost Burden of Adverse Events Related to Long-Term Oral Corticosteroid Usage in Autoimmune Diseases in the United States Poster. ISPOR Europe 2025, Glasgow, UK