How to stop wasting billions each year

The angst and anger at town hall meetings on health care reform make it painfully obvious that many Americans are digging in their heels over fears that their current coverage could change.
But here’s something that should scare us all: Nearly half the money spent on health care today is wasted. That’s according to data released last week from the accounting firm PricewaterhouseCoopers’ Health Research Institute. The data says that about half of the $2.2 trillion spent on health care each year, or about $1.2 trillion, is running down the drain.
The biggest leaks – according to doctors, nurses, hospital groups and patient advocates – fall in six major areas and account for about $500 billion lost each year. As we look to potential reforms of our health care system, these are the areas that need shoring up.
Too many tests. This includes tests and procedures ordered that are not based on need, but a concern over liability – or increasing a doctor’s pay. The study calls this the biggest waste of health care dollars, accounting for about $210 billion a year. Dr. Arthur Garson, provost of the University of Virginia, told CNN that “any money that is spent on a patient that doesn’t improve the outcome is waste.”
Conservatives suggest capping malpractice judgments as a way to solve the problem. President Barack Obama supports so-called “evidence-based” guidelines to cut back on unnecessary testing. We think a combination is the answer. Doctors, obviously, need to order tests related to symptoms, but they also need protection from huge settlement awards.
Claims processing problems. This accounts for an estimated $210 billion in waste each year because every insurance company has its own forms. Some medical practices estimate they spend 40 percent of their revenue filling out paperwork that could be automated. Many physicians have abandoned true “private practice” in recent years and become hospital employees so they can have the administrative support needed to handle crushing amounts of paperwork.
Routine denial of claims adds to administrative fees, forces doctors to wait longer to get paid and hurts their bottom line.
Medical mistakes. Errors are estimated at costing $17 billion a year in waste, according to the PricewaterhouseCoopers study. This is everything from incorrect dosing of medications to incorrect procedures being performed.
Patient advocate groups urge the use of computer order entry for drugs and electronic health records to ensure correct care. Obama has urged government to take the lead in this area, with the goal of having patient electronic health records by 2014.
Anyone who has been a patient of a medical system that already uses electronic records has to support this measure, provided security controls are in place. The increased speed, accuracy and improved communication among the patient, doctor, specialists and other care providers makes this invaluable.
Using the emergency room for primary care. The report estimates $14 billion is wasted every year with insured and uninsured patients using hospital emergency rooms for primary care needs. Because emergency rooms are required to treat all patients, they pass these costs on to other patients, which increases the cost for everyone.
Many uninsured people wait to seek any treatment until a small problem has grown into a large one. And people with illnesses such as diabetes and high blood pressure, who do not get regular primary care, wind up in emergency rooms with complications that often cost 10 times what a primary care doctor visit would.
And that cost gets spread to everyone.
A fraction of the $787 billion stimulus bill – $1 billion – is allocated for wellness and prevention spending, including $650 million for programs to combat obesity and diabetes and $300 million for immunizations. The amount seems a drop in the bucket, but anything that can be done to keep people healthier and out of the emergency room will help reduce medical costs for all of us.
Return trips to the hospital. PricewaterhouseCoopers estimates the cost of preventable hospital readmissions at $25 billion a year. Who is most often affected? Elderly patients who are discharged prematurely because insurance won’t continue to pay for their stay, bed availability or plain old ageism. And if patients go home and don’t follow care instructions, complications can arise that land them back in the hospital.
A key reform plan worth support is for Medicare to penalize hospitals that readmit patients within 30 days of discharge. This tells hospitals to get the care right the first time and withholds payment for a secondary admission.
Hospital infections. PricewaterhouseCoopers estimates that about $3 billion is wasted every year as a result of infections acquired during hospital stays.
Richard Clarke, CEO of Healthcare Financial Management Association, told CNN that hospitals are much better at managing this problem than in the past. Still, regular hand washing and alcohol-based hand sanitizers can improve the problem.
And nearly equal to the $500 billion in waste we’ve explained today are the costs associated with risky behaviors. PricewaterhouseCoopers’ report includes up to $493 billion in waste related to smoking, obesity and alcohol abuse – or nearly a half-trillion dollars worth of unnecessary costs related to correctable behaviors and treatable addiction. We’ll weigh in on that later this week.
As the debate over health care reform rages – at town hall meetings, on the Internet, maybe even around your dinner table – consider the gushing leaks in our current system and how much the system could be improved for everyone if this waste was reduced or eliminated.