Consumer Health Nation — 07 September 2012

The debate over the nation’s health care is about to get a little bit louder. According to a new report published by the Institute of Medicine, the U.S. healthcare system wastes $750 billion dollars a year, or roughly 30 cents of every medical dollar.

More than 30 percent of health spending is wasted on unnecessary services, excessive administrative costs, fraud and other problems, according to the report. And that adds to unnecessary suffering. By one estimate, roughly 75,000 deaths might have been avoided in one year alone if the system were more efficient.

Six major areas of waste were identified in the report, titled “Best Care at Lower Cost: The Path to Continuously Learning Health Care in America.”

More than $210 billion annually is lost on unnecessary services and $190 billion on excessive administrative costs.  Inefficient delivery of care costs another $130 billion and inflated prices add another $105 billion to the health care bill. Fraud alone costs another $130 billion.

“The threats to Americans’ health and economic security are clear and compelling, and it’s time to get all hands on deck,” said Mark D. Smith, president and CEO, California HealthCare Foundation. “Our health care system lags in its ability to adapt, affordably meet patients’ needs, and consistently achieve better outcomes.”

Using other business models as an example, the study noted that if banking worked like health care, ATM transactions would take days. And if home building were like health care, carpenters, electricians and plumbers would work from different blueprints, hardly talking to each other.

According to the report, America’s health care system is far too complex and costly, plagued by pervasive inefficiencies, and an inability to manage a rapidly expanding clinical knowledge base.  Without change, it could threaten the nation’s economic stability and global competitiveness.

But the findings of the report and its 18 member panel were not all doom and gloom.  The authors made 10 recommendations to improve a system they say is fixable.

Those recommendations include payment reforms to reward quality 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.

According to Smith, the report’s main message for government is to accelerate payment reforms. For employers, it’s to move beyond cost shifts to workers and start demanding accountability from hospitals and major medical groups.

And for doctors, it means getting beyond the bubble of solo practice and collaborating with peers and other clinicians.

Left unchanged, the study concludes that the nation’s healthcare system will continue to underperform, causing unnecessary harm and strain national, state and family budgets. Actions to reverse the trend will be substantial, sometimes disruptive, and absolutely necessary.

“It’s a huge hill to climb, and we’re not going to get out of this overnight,” said Smith. “The good news is that the very common notion that quality will suffer if less money is spent is simply not true. That should reassure people that the conversation about controlling costs is not necessarily about reducing quality.”

The Institute of Medicine, an arm of the National Academy of Sciences, is an independent organization that advises the government.



About Author

Richard Lenti

Richard Lenti has worked as a news writer for the last 20 years at various television stations in Los Angeles. He is a Golden Mike winner and a graduate of California State University, Fresno. With roots in print journalism, Richard is excited to be “published” once again; having people read his work as opposed to having it read to them. As a freelance writer his work has appeared in the Easy Reader, L.A. Jazz Scene, Irrigation and Green Industry, and the KCAL 9 Online website.

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