The top causes of U.S. health care waste

Summary:The country's health system wastes $750 billion a year, thirty cents for every American dollar spent on care.

The U.S. Institute of Medicine announced in a report yesterday that the U.S. health system wastes over $750 billion a year, or thirty cents for every American dollar spent on care.

Here's how the 18-member panel broke down the waste, according to Victoria Colliver of SFGate (and yes, these numbers add up to $765 billion, dear close-readers):

  • Unnecessary services: $210 billion
  • Excessive administrative costs: $190 billion
  • Inefficient delivery of care: $130 billion
  • Inflated prices: $105 billion
  • Fraud (from insurance companies, clinicians, and patients): $75 billion
  • Missed prevention opportunities: $55 billion

That primary cost comes from what the group called the "maddening paradox" of U.S. healthcare, where patients are either over-treated or under-treated for their conditions. The authors recommend moving towards a system that rewards doctors for quality not quantity of care, to remove the impetus for prescribing unneccessary and costly tests and treatments. They also advise better implementation of electronic record-keeping.

As you're probably already all-to-aware, the U.S. spends more on health care than other countries while delivering less actual care. Julielynn Wong of ABC News reports:

The U.S. spends more than twice as much per person on health care as all other industrialized countries despite being the only developed country that doesn’t provide basic health insurance for all its citizens, according to Dr. Timothy Johnson, ABC News senior medical contributor and author of “The Truth About Getting Sick in America.” The U.S. also has the lowest life expectancy among the top five spenders on health care.

So what's going on here? Todd Hixon of Forbes has some theories I find viable, these are his explanations for the high cost of U.S. healthcare (summary in my words):

  1. Over-paid doctors, especially specialists
  2. Higher per capita income compared to other countries = more money to spend on health care ("an explanation, but not a good justification")
  3. Over-eager referrals for higher-cost care like scans, specialists, and hospital stays

We're spending enough money on ineffective healthcare that we could easily cover the costs of effective health care for the nation. But doctors in the U.S. have come to expect top-percentile pay, how do we change that? How do we tell wealthy patients they really don't need all those preventative tests? How do we make sure every person has a primary physician to adequately track their health? These are complicated challenges to face, but tackling them could save thousands of American lives annually.

Photo: Tom Hart/Flickr

Graph: Mary Meeker of KPCB

This post was originally published on Smartplanet.com

Topics: Innovation

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Audrey Quinn is a contributing writer.

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