Health care: How the U.S. system is designed to waste your money
Filed under: Technology, Economy, Healthcare
On Monday, Thomson Reuters released "Where Can $700 Billion in Waste Be Cut Annually from the U.S. Healthcare System," a white paper exploring American health-care costs. The report identified six factors -- administrative inefficiency, provider inefficiency, lack of care coordination, unwarranted use, preventable conditions, and fraud -- that cost the U.S. health-care system roughly $700 billion a year.That's a shocking figure, but $700 billion is a conservative estimate. The price of waste may be as much as $850 billion annually, the report concluded, and other studies suggest the figure may be closer to $1.2 trillion. Given that the most expensive health-care proposal on the table in Congress would cost about $1 trillion, it's clear that significant industry reform could fund most of the cost of universal health insurance.
Where do these costs come from? As much as $150 billion can be chalked up to inefficient hospital administration. Our hospitals spend 25 percent of health-care revenues on administration -- twice as much as Canada's. Better scheduling and more attention to avoidable errors could save up to $100 billion per year, Reuters says. "If all hospitals reduced their average cost to the average cost of the most efficient 10 percent of hospitals," the white paper says, "operating expenses would [drop] by $73 million per year."
Another big potential money saver: coordination between caregivers. Duplicated tests and overuse of emergency rooms result in as much as $50 billion of unnecessary expenditures annually. Preventive medicine could save as much as $50 billion.
It would be reassuring to pretend that such waste is accidental, but it seems to be part of a larger business plan. Every time a patient has blood taken, the hospital gets to bill for administering the test, analyzing it, and storing additional materials, and the insurer subsequently often challenges the patient over the necessity of the test. By the time the transaction is complete, a few vials of blood have supported doctors, nurses, lab technicians, billing agents, test manufacturers, insurance adjusters, and other health-care professionals; the question of whether the test was necessary in the first place is moot.
One of the central points of today's battle over health-care reform has been the issue of a public option: a government-administered insurance plan designed to encourage competition in the marketplace. Reform's most extreme opponents criticize the public option as a step in an inexorable death march to Soviet-style communism and conjure Kafkaesque fantasies of "death panels" and rationed care in an apocalyptic prophesy of American health care. Reform's most ardent supporters, on the other hand, view the public option as an all-purpose solution to a system with no checks and balances: a government-administered price-setter that automatically injects price cuts, improves service, and increases efficiency.
But the Reuters white paper suggests that the public option is a red herring. The real heart of the debate, it says, lies in wonkier issues like efficiency and oversight. The system is now designed to maximize profits by minimizing efficiency: The longer a patient languishes in the hospital enduring tests and procedures, the more money goes to hospitals, drug companies and the medical industry. As health-care becomes more complex and expensive, insurers reap the harvest. For the health-care industry, making money is the primary goal. Healing the sick is a mere side effect.
While a public option might encourage industry players to strive for efficiency and lower prices, it doesn't directly confront the central issue of waste; nor do the health care proposals on Capitol Hill. The focus on universal health coverage is overshadowing the issue of health-care waste, inefficiency and fraud. In a recent New York Times op-ed, former Treasury Secretary Paul O'Neill warned, "Any health care reform that does not address the pervasive waste and the associated burden of needless suffering for patients and staff alike will give us little to celebrate."
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Reader Comments (Page 1 of 4)
10-26-2009 @ 6:14PM
W. C. Peterson said...
You've got your numbers wrong. The waste, fraud and inefficiency costs are near a Trillion Dollars PER YEAR. The public option cost estimates are a Trillion Dollars OVER 10 YEARS.
Passing the public option will result in 900 Billion dollars of SAVINGS EVERY YEAR. What are we waiting for? We need to keep the insurnace companies from all that profit. It's time to make them NOT FOR PROFIT.
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10-26-2009 @ 6:53PM
Bill said...
I completely agree. But remember, insurance companies are like banks, i.e. the abuseres are too big to fail and too big to be held accountable or regulate. Make them non-profits? They easiest way to enlist the blind support of the masses is to cry SOCIALISM!
10-26-2009 @ 7:04PM
john said...
You mean the fraud, waste and deficits that Mediscam and Medikoolaid run every year. Both grow more than 3 times faster than the US economies long term growth rate creating huge yearly deficits, decade after decade, meanwhile the number of people paying in declines yearly. The existing healthcare attempt is bankrupt 5 times over and getting worse exponentially. Don't you Obumblecare sheeple think that before we create another multi trillion dollar government boondoggle for everyone under 65, we should first straighten out the failed socialist debacle already in existence? P.S. If you Marxist thieves will quit stealing the money out of my paycheck for all your failed government programs, I will GLADLY opt out of your pathetically bankrupt SSI, Mediscam and Medikoolaid and take care of my own retirement. WAKE UP PPL!!!!!!!!!
10-26-2009 @ 9:21PM
J said...
9,286 Earnarks in the bailout they rushed through behind closed doors thats how they gave Acorn BILLIOn and now they are doing Healthcare LOL.
10-26-2009 @ 10:42PM
Ursula said...
perhaps you shoud learn how to spell properly first...............
10-27-2009 @ 12:09AM
flamingrose40 said...
That has to be the dumbest thing Ive heard yet!! If you list businesses in order of profit rankings.....The insurance industry is actually 30th on the list..so comparatively speaking...they arent making the same profits as other companies you seem to have no problem with the level of profits they make, such as....drumroll...and consider how in bed they are with Obama...this should tick you off....GE and energy have a higher profit level than insurance companies....
10-27-2009 @ 12:10AM
NoKaBosh said...
What makes you think they won't waste even more with Obamacare? They're not doing a thing to cut the waste and fraud from the two gov't plans we already have. Why would they do it for a third program? They have no incentive. As the costs go up they'll just raise taxes til the country goes broke.
10-26-2009 @ 6:30PM
Joey said...
The difference between insurance companies and the government's administration of programs like Medicare is the fact that insurers examine claims in an effort to determine if they are legitimate or fraudulent. The government simply pays everything - the result being an enormous cost to taxpayers in the form of fraud and waste.
While a public option sounds like a great idea, and although almost everyone who has made a claim under an insurance policy knows how frustrating insurers can be, the result will almost certainly be monumental losses due to fraud, waste and just plain negligence. Conservatives can't stand the idea of such a result. Liberals figure it as an unavoidable cost that we'll just have to pay (i.e., that people other than them have to pay.)
Insurance, especially medical insurance, is unlike any other "business" in the country. It deals with our ability to live. It isn't involved in discretionary purchasing matters, like a new car, or a new house, TV set, etc. It deals with our lives and our ability to live our lives free from as much pain and phsyical misery as possible.
Insurance companies are supposed to collect 'premiums' from us and, when we need medical treatment, are supposed to pay our bills. This isn't rocket science and insurance executives should not be earning millions upon millions of dollars for collecting our money and paying it out. They should make a reasonable living, but taking a huge bite out of the money that is intended for our medical treatment is unconscionable.
What we need may not be a public option - unless we really do like fraud and waste. Maye what we do need is a return to non-profit insurance companies that are closely regulated by the government.
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10-27-2009 @ 8:55AM
harry said...
You all obviously do not understand insurance. Insurance covers the cost of the medical procedure. They do not set the price of the procedure. They do set a price that they will pay for various procedures. Don't be fooled by the insurance smoke screen that is being proliferated by congress. The real problem is over use of testing so doctors and hospitals can have ample evidence they did everything possible when frivilous law suits are brought againt them. Ask your doctor how much their malpractice insurance cost.
10-26-2009 @ 6:32PM
dterraman@aol.com said...
....already too much waste and fraud in government health programs...clean that up first...and I`ll think about it....
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10-26-2009 @ 6:45PM
thinkingabovemypaygrade said...
Lots of assumptions in the above article
---Assumption that the report cited is accurate
---Assumption that health care orgs LIVE to suck as much money as possible off each patient
--Assumption of VIRTUOUS and EFFICIENT government administrators
--An overall assumption that ALL capitalists live to prostitute honor for a buck but that ALL gov. employees are "pure of heart"
--to name a few either unproven or---possibly partly wrong assumptions.
I have joked with my parents that they should be glad they are old not and not 20 years from now. Because I have joked gallows humor style --as I wondered "How will the US get rid of all us Excess Baby Boomers?"
In a postmodern world---where only might actually makes right...as in our Duma (I mean our one party Congress) we will sneak care rationing in the back door...!
And some will say "Well we assumed that this or that report was---Accurate...!"
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10-26-2009 @ 6:48PM
Dr. Steven Auerbach said...
The savings will only come if we focus on true "health care" and not "disease care". Prevention is just early detection of disease. This is, of course, good but "health promotion" is even further upstream. This is where we will ultimately provide substantial savings. Less drugs, less surgery. Teach people to Eat Well, Move Well and Think Well. Start in the elementary schools and follow for life.
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10-26-2009 @ 7:52PM
vernon huffer said...
Reform would be a disaster for health insurance executives. They would have to take jobs where they could be productive for instance anything menial. This article says what needs to be said more often. There are dozens of countries that have better health care for less money. Our present system prevents Americans from shoppiing for more efficient and better health care except by offshoring themselves hard to do in an emergency but good for elective proceedures.
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10-26-2009 @ 7:10PM
Carol Lowery said...
The 2 top people are wrong, anything run by the Feds is full of waste, mismanagment and fraud. Take any Fed program and you will find this, Femi, Hud, Welfare, Medicare, Medicaid, Clash for Clunkers, 8,000 tax credit for new buyers, etc etc etc. Any national plan will be just as bad if not worse. If this stupid Democratic Congress passes a public health plan, I will quit paying taxes. My Medicare is a substandard piece of shit health care in comparision to what I had with group health.
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10-26-2009 @ 7:18PM
brucelee said...
Why don't every tax paying American have a medicade or medicare card. After all, it's the IRS that takes your tax dollars and give it to the CIA, FBI and the Senators. They all get medicare and medicade cards.
It's the FCC that creates the media hoaxes for the news media to call the Top Story of today, while they write about you not having health coverage. Right
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10-26-2009 @ 7:30PM
DICK JENSEN said...
WILL SOMEONE TELL ME HOW MUCH THE PROFIT IS THAT THESE INSURANCE COMPANIES ARE MAKING? I KEEP HEARING THE RHETORIC ABOUT INSURANCE COMPANY PROFITS BUT, NO ONE STATES HOW MUCH THEY ARE MAKING. PROFITS THEY ARE INTITLED TO. TO YOU POSTER WHO ARE SAYING THIS, HOW MUCH DO THEY MAKE?
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10-26-2009 @ 9:44PM
Jerry said...
It's been reported that insurance company profits are on average about 2-3%, basically in line with other competitive industries. Of course, that doesn't include the non-profit insurance providers or overlooks the fact that profits for mutual insurance companies go to the policy holders. It further ignores the phenomenon of self-insurance by large employers, who only pay the insurance company for administration.
10-26-2009 @ 7:34PM
Joe said...
I say we start letting these government officials start paying for their own health care and see what kind of a pinch we are really in. 12 years ago my HMO program was $22 bi-weekly for my family. Today that same HMO would cost me $227 bi-weekly. Now I am on a HSA and so far it hasn't bit me to hard. My son has allergies and that's the most of the costs
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10-26-2009 @ 7:39PM
DICK JENSEN said...
JOE, I ASSURE YOU UNDER THE OBAMA PLAN YOUR HEALTHCARE COST WILL BE TRIPLE WHAT YOU ARE PAYING AND YOU WILL NOT GET TO SEE YOUR PRESENT DOCTORS.
10-26-2009 @ 9:30PM
James said...
Dick you are wrong. If this bill passes the cost of Health Care in this country will drop dramtically.
The insurance companies have no compitition and charge the indivual as well as business that have Health Care for their employees as much as they want.
These Health Care insurance companies costs have more than tripled in the last 8 years. They are making obscene profits in the worst recession since the great depression.
10 years ago I was paying $350.00 every two months for my own Health insurance. For the same coverage today the cost is $800.00 a month ! Do the math.