Editorial: Pervasive waste besets health care, demands fix

“Medicare imperiled.” “Medicaid devours state budgets.” “Workers shouldering more health care costs.”

You’ve seen the headlines. You’ve listened to the solutions, which amount to shifting costs from one ledger to another. That’s what the Affordable Care Act will do. That’s what Republican alternatives would do. That’s what the various plans to reform Medicare and Medicaid will do.

What none of them will do on a scale grand enough is control health care costs. All these solutions fail to address the disjointed, uncoordinated “system” of care that yields a colossal $750 billion in waste annually, according to an eye-popping report from the Institutes of Medicine.

The problem in fixing this mess is that inefficiency pays, so some powerful interests will dig in. Nonetheless, Americans must demand efficiency, or health care spending will be the ruin of budgets everywhere.

The IOM report itemizes the problem, and it reads like a hospital bill from hell: unnecessary services, $210 billion; excessive administrative costs, $190 billion; inefficient delivery of services, $130 billion; excessively high prices, $105 billion; fraud, $75 billion; and missed prevention opportunities, $55 billion. This isn’t just a financial scandal. The report notes that if all states delivered health care as efficiently as the best-performing one, 75,000 deaths might have been averted in 2005.

IOM pulls no punches in critiquing the U.S. health care system, saying it’s like homebuilders working from different blueprints and pilots devising their own preflight checklists – or skipping them altogether.

As a result, U.S. health care costs have grabbed a larger share of the economic pie, from 7.2 percent of the gross domestic product in 1970 to 17.9 percent in 2010, according to the Kaiser Family Foundation. In 2009, per person spending in the U.S. was $7,598, which easily led the world. In second-place Switzerland, it was $5,144. In Canada, it was $4,139. This might be tolerable if health care outcomes were the best, but in many key categories the U.S. lags other nations.

Health care inflation has a Pac-Man effect on government budgets, gobbling money once set aside for education and other items. Just one example of the ripple effect: the rapid rise in college tuitions. So, even the healthiest citizens can’t avoid the scourge of squandered health care dollars.

IOM offers many recommendations. Coordination and cooperation are the keys. The difficulty in pulling that off in the U.S. is that there is no central authority overseeing health care. Some of the best ideas in the Affordable Care Act were reduced to pilot projects after considerable political wrangling. However, if health care consumers educate themselves and demand higher value, the system would have to adjust. To the extent that government can control costs, it should do so by rewarding best practices and penalizing inefficiency. Medicare is the obvious place where this can take place.

Ultimately, some tough choices will have to be made. We can’t have everything but, curbing unnecessary spending, we can get what we need.