Panel of experts says $750 billion is misspent yearly
WASHINGTON – The U.S. health care system squanders $750 billion a year – roughly 30 cents of every medical dollar – through unneeded care, byzantine paperwork, fraud and other waste, the influential Institute of Medicine said Thursday in a report that ties directly into the presidential campaign.
President Barack Obama and Republican Mitt Romney are accusing each other of trying to slash Medicare and put seniors at risk. But the counter-intuitive finding from the report is that deep cuts are possible without rationing, and a leaner system may even produce better quality.
“Health care in America presents a fundamental paradox,” said the report from an 18-member panel of prominent experts, including doctors, business people, and public officials. “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 concluded.
If banking worked like health care, ATM transactions would take days, the report said. 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.
How much is $750 billion? The one-year estimate of health care waste is equal to more than 10 years of Medicare cuts in Obama’s health care law. It’s more than the Pentagon budget. It’s more than enough to care for the uninsured.
Getting health care costs better controlled is one of the keys to reducing the deficit, the biggest domestic challenge facing the next president. The report did not lay out a policy prescription for Medicare and Medicaid but suggested there’s plenty of room for lawmakers to find a path.
Panel members urged a frank discussion with the public about the value Americans are getting for their health care dollars. As a model, they cited “Choosing Wisely,” a campaign launched earlier this year by nine medical societies to challenge the widespread perception that more care is better.
More than 18 months in the making, the report identified six major areas of waste: 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). Adjusting for some overlap among the categories, the panel settled on an estimate of $750 billion.
Examples of wasteful care include most repeat colonoscopies within 10 years of a first such test, early imaging for most back pain, and brain scans for patients who fainted but didn’t have seizures.
The report makes 10 recommendations, including 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, and educating patients to become more savvy consumers.
The report’s main message for government is to accelerate payment reforms, said panel chair Dr. Mark Smith, president of the California HealthCare Foundation, a research group. For employers, it’s to move beyond cost shifts to workers and start demanding accountability from hospitals and major medical groups. For doctors, it means getting beyond the bubble of solo practice and collaborating with peers and other clinicians.
The Institute of Medicine, an arm of the National Academy of Sciences, is an independent organization that advises the government.
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