As the debate about the future of Medicare heats up, the program’s chief actuary estimates that 15 percent to 30 percent of healthcare expenditures are wasteful. Cindy Holtzman, a consumer advocate with Medical Billing Advocates of America, cited several examples, such as a Florida patient who was charged $140 for a single Tylenol. A patient in South Carolina paid $1,000 for a toothbrush. A patient in Georgia who used one bag of IV saline solution was billed for 41 bags for a total of $4,000. In the case of the Georgia patient, insurance paid the entire claim. “Usually any kind of bill under $100,000, they (insurance companies) don’t look at the details. And that’s where something like this can be paid in error,” Holtzman said. After Holtzman investigated, the bill was fixed, and the insurance company was refunded its money.
Medicare spending exceeded $500 billion in 2010. As much as $75 billion to $150 billion could be cut without reducing needed services. A potential cause is that Medicare’s reimbursement procedures do not track the appropriateness of the care provided. Medicare farms out its claims administration to private local contractors based on how quickly and cheaply they process claims. These contractors are not given incentives to audit the taxpayer dollars they spend; even if they wanted to, they would need data that is typically not found on the claim form.
Healthcare spending is wasteful across the board, not just in Medicare. Writing for Politico, Ralph G. Neas, CEO of the National Coalition on Health Care (NCHC), a non-profit, non-partisan organization working to improve America’s healthcare system, says that “Total expenditures on healthcare represented 17 percent of the gross national product in 2010 and are projected to reach 20 percent by the end of this decade. The federal government already spends more for health care than for defense, Social Security or any other single spending category. The nonpartisan Congressional Budget Office has emphatically identified rising health costs as the greatest threat to our fiscal future. It doesn’t have to be this way. Our current system is devastatingly inefficient. The United States spends 141 percent more on healthcare than other economically advanced nations. But our far higher bill is not buying us a healthier population. Roughly 30 percent to 40 percent of medical and hospital costs can be attributed to waste and inefficiency. That means, America is on a path to squander $10 trillion over the next decade. That hemorrhage would leave our economy — and our cities, states, small businesses and middle-class families — on life support. Given our financial condition, preventing this kind of spending and the economic drag it represents should be the kind of urgent national problem that overrides ideological differences and encourages us to find common purpose.”
NEHI, an independent non-profit national network for health innovation, has recommended actions that would reduce wasteful healthcare spending by up to $84 billion. The plan was produced in collaboration with the National Priorities Partnership. One major area for savings is eliminating emergency department overuse. More than half of the 120 million annual ED visits can be avoided, representing a $38 billion opportunity for savings. Medication errors add up to seven million inpatient admission and outpatient visits involving serious but avoidable medication errors, representing a $21 billion opportunity for savings. Unnecessary hospital readmissions is another area where savings can be achieved. Seven million people are readmitted to hospitals within 30 days of discharge annually but 836,000 of these cases could be avoided, representing a $25 billion opportunity.
Another study believes that healthcare spending waste is much more widespread. As much as 50 cents of every dollar spent in healthcare is wasted, according to Pricewaterhouse Cooper’s Research Institute. The organization determined that unnecessary price gouging makes up $1.2 trillion of the $2.2 trillion spent on healthcare nationwide. “Our best estimate is that for the country as a whole, probably half of what we’re spending on healthcare delivery today is technically waste from a patient’s perspective,” said Dr. Brent James, chief quality officer for Intermountain Healthcare in Salt Lake City. “There are better ways of doing it.”
The Institute of Medicine (IOM), a division of the non-partisan National Academy of Sciences, reports that “excess costs” – which translates to waste — in the American healthcare system cost $810 billion every year. Their findings? Overly-high insurance administrative costs absorbed by doctors and hospitals cost $190 billion. Insurance company inefficiencies cost $20 billion. Unnecessary services (brand name drugs instead of generics, repetitive tests and procedures, etc.) cost $210 billion. Too-high prices for doctors and hospitals cost $85 billion. High drug and device prices cost $20 billion. Errors and avoidable complications cost $75 billion. Inefficient delivery of services costs $ 80 billion. Fraud costs $75 billion. Missed disease-prevention opportunities cost $55 billion.