$750 Billion a Year Wasted?
How Much is $750 Billion a Year?
Ricardo Alonso-Zaldivar writes in Life Health Pro that the Institute of Medicine, an arm of the National Academy of Sciences, which is an independent organization that advises the government, reports that the U.S. health care system squanders $750 billion a year through unneeded care, unnecessary paperwork, fraud and other waste. To put that figure in perspective, it’s equal to:
- 30 cents of every medical dollar.
- More than ten years of Medicare cuts in the Patient Protection and Affordable Care Act.
- More than the Pentagon budget.
- More than enough to care for the uninsured.
The report from an 18-member panel of prominent experts, including doctors, business people, and public officials, finds that deep cuts are possible without rationing, and a leaner system may even produce better quality:
Health care in America presents a fundamental paradox. The past 50 years have seen an explosion in biomedical knowledge, dramatic innovation in therapies and surgical procedures, and management of conditions that previously were fatal …Yet, American health care is falling short on basic dimensions of quality, outcomes, costs and equity.
The report draws these analogies to explain the many inefficiencies of the U.S. healthcare system:
- If banking worked like health care, ATM transactions would take days.
- If home building were like health care, carpenters, electricians and plumbers would work from different blueprints and hardly talk to each other.
- If shopping were like health care, prices would not be posted and could vary widely within the same store, depending on who was paying.
- If airline travel were like health care, individual pilots would be free to design their own preflight safety checks — or not perform one at all.
Where Is It All Going?
The panel identified six major areas of waste, and adjusting for some overlap among the categories, settled on an estimate of $750 billion.:
- Unnecessary services ($210 billion annually);
- Inefficient delivery of care ($130 billion);
- Excess administrative costs ($190 billion);
- Inflated prices ($105 billion);
- Prevention failures ($55 billion), and
- Fraud ($75 billion).
Examples of wasteful care include:
- Most repeat colonoscopies within 10 years of a first such test.
- Early imaging for most back pain.
- Brain scans for patients who fainted but didn’t have seizures.
The Panel’s Recommendations
The report makes ten recommendations, including these top 4:
- Payment reforms to reward quality results instead of reimbursing for each procedure.
- Improving coordination among different kinds of service providers.
- Leveraging technology to reinforce sound clinical decisions.
- Educating patients to become more savvy consumers.
The report’s message for various stakeholders are:
- Government: Accelerate payment reforms, such as the ACA’s Independent Payment Advisory Board.
- Employers: Movebeyond shifting costs to workers to demanding accountability from hospitals and major medical groups.
- Doctors: Getting beyond the bubble of solo practice and collaborate with peers and other clinicians.
The ACA Gets the Ball Rolling
The need for reforms is acknowledged by all political parties in Washington. President Obama’s ACA makes a good start by providing for an Independent Payment Advisory Board to cut Medicare payments to service providers that gradually changes how hospitals and doctors are paid to reward results instead of volume. Republicans dishonestly portrayed this as “death squads” (ie. decisions on individual claims made by bureaucrats) and rationing, both are in fact prohibited. Presidential candidate Mitt Romney actually proposes rationing in the form of limiting the amount of money future retirees can get from the government for medical insurance, and relying on the private market to somehow find an efficient solution on their own. Sardiologist Dr. Rita Redberg, a medical school professor at the University of California, San Francisco, notes that a divisive political environment prevents an honest discussion of an urgent issue:
Rationing to me is when we are denying medical care that is helpful to patients, on the basis of costs. We have a lot of medical care that is not helpful to patients, and some of it is harmful. The problem is when you talk about getting rid of any type of health care, someone yells, ‘Rationing.’ “