Health-care reform: Tackling the waste in the system

Dec 18, 2009 3:58 PM

The human consequences of our broken health-care system are easy to understand. It is estimated that about 45,000 Americans die each year due to lack of insurance. Almost 50 million Americans don’t have health insurance and are at risk of financial ruin if they get sick or injured. Millions more are at risk because of inadequate health insurance.

But how do you measure the problem of waste in the entire health-care system? Researchers at Thomson Reuters, a private company that collects and analyzes health spending data, just came out with a study that estimates that the United States wastes between $650 and $800 billion dollars every year. That’s about one third of total health care spending.

Here’s where the study says we throw away the most money every year:

Unnecessary care: 40 percent of waste, $250-325 billion. Overuse of antibiotics, diagnostic tests, and generally overaggressive treatment can really add up. So can prescribing brand-name drugs when a generic would work just as good or better.
Fraud: 19 percent, $125-175 billion. Doctors bill for services they don’t provide and take kickbacks for making unnecessary referrals. Insurers misrepresent the cost of services. Drug companies misbrand drugs. And patients abuse the system too.
Red tape and paperwork: 17 percent, $100-150 billion. The fragmentation of the health-care system, the redundant paperwork, and systems for underwriting, administrating claims, and managing networks costs a fortune and makes no one any healthier.
Medical errors: 12 percent, $75-100 billion.
Poor prevention: 6 percent, $25-50 billion. Letting treatable chronic conditions such as diabetes or high blood pressure get out of hand costs more in the end, when they become catastrophes.
Uncoordinated care: 6 percent, $25-50 billion. Poor communication between among doctors, nurses, laboratories, and hospitals can lead to duplication of tests and inappropriate treatments.

The good news is that the health-care reform bills before Congress have programs that go after all of these areas of waste. We discussed some of them earlier today. For more on controlling costs, read Atul Gawande’s fantastic piece in the New Yorker.

—Kevin McCarthy, associate editor

Photo courtesy of AMagill