Healthcare System Wasted $750 Billion a Year

A headline from a story on September 6, 2012, in USA Today reports that three years ago the US health care industry wasted 30 cents of every dollar spent on healthcare. The article is based on a release the same day by the Institute of Medicine. The release and the USA Today article reporting on it note that $750 billion in healthcare spending was wasted in 2009.

The Institute of Medicine reports on the magnitude of the problem in their release by stating, “The costs of the system’s current inefficiency underscore the urgent need for a systemwide transformation. The committee calculated that about 30 percent of health spending in 2009 — roughly $750 billion — was wasted on unnecessary services, excessive administrative costs, fraud, and other problems. Moreover, inefficiencies cause needless suffering. By one estimate, roughly 75,000 deaths might have been averted in 2005 if every state had delivered care at the quality level of the best performing state.”

The report further stated, “Health care costs have increased at a greater rate than the economy as a whole for 31 of the past 40 years. Most payment systems emphasize volume over quality and value by reimbursing providers for individual procedures and tests rather than paying a flat rate or reimbursing based on patients’ outcomes.”

Report author Dr. Mark Smith, a former expert adviser to President Clinton’s Task Force on National Health Care Reform and president of the Oakland-based California HealthCare Foundation, commented in the USA Today article, “I was surprised at how much waste there seems to be. We’re spending money in ways that don’t seem to improve people’s health.” Smith continued, “The threats to Americans’ health and economic security are clear and compelling, and it’s time to get all hands on deck. Our health care system lags in its ability to adapt, affordably meet patients’ needs and consistently achieve better outcomes.”

Julielynn Wong, M.D., author of the USA Today article and ABC News Medical Unit, puts the problem in perspective by saying, “The report, released today by the Institute of Medicine, suggested the money squandered on services that failed to improve Americans’ health could have provided health insurance for more than 150 million workers or covered the salaries of all of the nation’s first responders for more than 12 years.”

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