The American healthcare system wastes more than $750 billion a year — about 30 cents of every medical dollar — through unneeded care, paperwork, fraud and other waste, according to a new report from the Institute of Medicine.
The influential Institute, an arm of the National Academy of Sciences, is an independent organization that advises the government, and its report was prepared by an 18-member panel including doctors, business people, and public officials.
The report identifies six major areas of waste: unnecessary services ($210 billion a year squandered), excessive administrative costs ($190 billion), inefficient delivery of care ($130 billion), inflated prices ($105 billion), fraud ($75 billion), and prevention failures ($55 billion).
The $750 billion a year wasted is equal to more than 10 years of Medicare cuts called for by Obamacare.
Inefficiencies also cause needless suffering, according to the panel. By one estimate, 75,000 deaths might have been averted in one recent year if every state had delivered care at the quality level of the best performing state.
“American healthcare is falling short on basic dimensions of quality, outcomes, costs and equity,” the report stated.
To illustrate the inefficiency of American healthcare, the report said that if home building were like healthcare, carpenters, electricians and others would work from different blueprints. If shopping were like healthcare, prices would not be posted and could vary widely within the same store, depending on who was paying.
“The threats to Americans’ health and economic security are clear and compelling, and it’s time to get all hands on deck,” said panel chairman Mark D. Smith, president and CEO of the California HealthCare Foundation.
“Our healthcare system lags in its ability to adapt, affordably meet patients’ needs, and consistently achieve better outcomes. But we have the know-how and technology to make substantial improvement on costs and quality.”
Among the suggestions from the panel: Improve coordination among different service providers, reform payments to reward quality instead of reimbursing after each procedure, use technology to reinforce sound clinical decisions, and educate patients to become better consumers.
“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.”
