U.S. Health Care Waste Larger Than Pentagon Budget

The American Interest ^ | September 7, 2012 | Walter Russell Mead

[2ndDivisionVet]

It’s not exactly earth-shaking news that there’s a lot of waste in the U.S. health care system, but this item we came across still managed to stagger us: A report by the Institute of Medicine estimates that as much as $750 billion is wasted in the U.S. health care system each year. Three quarters of a trillion dollars. Every year. As the Wall Street Journal notes, that’s bigger than the Pentagon budget, amounting to roughly 5 percent of GDP.

The report offers a familiar laundry list of problems. Unnecessary services are the leading driver of waste, but administrative expenses and inefficient care are not far behind. The report has several suggestions:

. . . 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 the panel’s chairman, Dr. Mark Smith, president of the California HealthCare Foundation research group. For employers, it is to move beyond cost shifts to workers and to 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.

Obamacare doesn’t seem to do much to solve any of these problems. Reforms like these would make more sense.

[2ndDivisionVet]

Astounding, isn't it?

[Eric in the Ozarks]

So long as third party payment exists, there will never be “control” on health care costs.

[winner3000]

(Unnecessary services are the leading driver of waste)

Until we have legal reform, those services will continue to be performed.

[bjc]

For years we thankfully had minimal need for doctors and hospitals. Then my wife had two knees replaced and I had a colonoscopy after my brother was diagnosed with colon cancer. This meant that I had to find a new primary care physician and have a full physical for the first time in three years.

WRT my wife’s surgery, the bills were an eye-opener. The difference between the face rate and the rate negotiated by BCBS is astounding to the point of farce. Clearly there is a method in this madness and I would love to read an empirical expose of pricing and billing practices.

As to my own experience, I was struck or rather astonished by the selection of tests and procedures based upon what my insurance would cover. Fortunately we have pretty good insurance though a very large deductible. Defensive medicine may well play a role, but I suspect that the doctors have incentives within their practices to maximize revenues per patient and this likely plays far more of a role in driving health costs.

[Artie]

“educating patients to become more savvy consumers.”

Until all healthcare is paid for “out of pocket” this will never happen.

[bjc]

I think you make a good point. In the case of my wife’s surgery, I have to acknowledge that since I knew that the costs would significantly exceed our $3000 deductible I did not pay particular attention to the hospital bill. We did, however, blow the whistle on the PT who charged for a visit that did not happen.
However I do not think removing third parties is entirely the answer. Pricing of medical services is essentially monopolistic at the point of need for all but discretionary treatments - therefore, I think belonging to a group that negotiates prices ahead of time makes sense. In addition, insurance for major medical expenses also makes sense just as car insurance makes sense.

[manc]

actually does not surprise me as I lived in England and saw how Govt health care wasted a lot of money

[PreciousLiberty]

I remain convinced that insurance as it presently works is a bad thing. People see it as “something for nothing”, and the medical industry sees it as a source of endless money.

If people had to pay their own way, the price of medical care would drop dramatically, probably with little or no loss of quality. That would also give people a lot more incentive to live healthier, fitter lives.

I think avoiding processed food, then eating lots of wild game along with plants you raise yourself is a real plan for a healthier life. You’ll at least get some exercise and fresh air hunting the game and growing the plants. ;-)

[Noob1999]

We don’t need no stinkin’ 2000+ page Obamacare takeover of the medical market to get to our medical savings,
just get us sorry-ass consumers involved so that we can monitor our health costs.

(How about a personal signoff on doctor bills, with someone telling us the meaning of all the codes, and a percentage copay on all these bills, before the doctor can submit the bill to the payer, whether it be the government or an insurance co. —No fixed co-pay, a percentage of the bill!)

On reviewing my insurance statements a few years ago, I found out that my dermatologist, whose assistants hit some spots with liquid nitrogen, was always reimbursed at 100%;
while my cardiologist keeping me alive caring for my A-Fib, would always get reimbursed at 57% of his submitted bill, and couldn’t get any reimbursement for monthly blood test monitoring by his team of nurses.

I said “Doc, you’ve got to get more creative in your billing process, ‘cause you’re getting screwed!” He laughed, and said that he was going to see if he could find a code to provide dermatology services to my heart.

The system is broken, and we don’t need a government takeover, just some simple changes to get our hands around $billions in savings.

[Elendur]

you are correct.
socialized medicine simply doesn’t work.
...
http://www.freerepublic.com/focus/f-bloggers/2928328/posts
$83,046 For A 3 Hour Hospital Visit - Why Are Hospital Bills So Outrageous?
///
i don’t have car insurance, to fill my gas tank,
and buy new tires.
as long as OTHER people subsidize medical care,
this will get worse, until it collapses.

[grumpygresh]

The best fraud and waste detector as well as the best outcome assessment is a healthcare consumer paying for their own healthcare with their own money.

[Mike Darancette]

Muzzle trial lawyers.

[hinckley buzzard]

If people had to pay their own way the cost of medical care would drop dramatically--because the amount of medical care received would drop dramatically. Overall health and lifespan would drop as well, as all the chronic conditions that run up costs would be generally neglected until way too late.

There is a reason why the institution of health insurance corresponds to a large improvement in the nation's health. Ask any physician who actually practices medicine how hard it is now, with insurance, to get patients to comply with diabetes regimens, just for example. Or treatment of high blood pressure.

Then try to imagine how patients will respond to the idea of taking a medication which has no noticeable effect, for a disease they cannot feel, and pay serious money for it.

[heye2monn]

Health care is one of the most heavily regulated industries in the United States.

Health care is one of the most wasteful industries in the United States.

Coincidence?

[PreciousLiberty]

“If people had to pay their own way the cost of medical care would drop dramatically—because the amount of medical care received would drop dramatically. Overall health and lifespan would drop as well, as all the chronic conditions that run up costs would be generally neglected until way too late.

There is a reason why the institution of health insurance corresponds to a large improvement in the nation’s health. Ask any physician who actually practices medicine how hard it is now, with insurance, to get patients to comply with diabetes regimens, just for example. Or treatment of high blood pressure.

Then try to imagine how patients will respond to the idea of taking a medication which has no noticeable effect, for a disease they cannot feel, and pay serious money for it.”

I believe you’re underestimating the intelligence of your fellow man, while also having very little clue about the real costs of healthcare.

At any rate, we’ll see how the current experiment works out, at all of our expense. ;-)

[Eric in the Ozarks]

I agree, a major medical plan is worthwhile. But a relative recently had minor surgery and saw her two day hospital stay come in at $2,500.
It would be tough to negotiate this service since there are far fewer hospitals than car dealers (an example.) Competition is the solution, somehow.