Elimination of $850 Billion in Health Care Waste Could Pay for Reforms

Throughout the summer and autumn months of 2009, as the health care reform debate rages on from the halls of Congress to the homes of many Americans, a key point in the discussions has been the level of waste in the current system that makes it so expensive. The Obama administration has touted reforms as a way of fixing the problems that cause waste, and the subsequent money saved could help pay for said reforms. Now there are facts that back up those statements, coming from an independent study released on Monday, October 26, which verifies that the current result of waste in the U.S. health care system costs the country between $505 billion and $850 billion.

The report was compiled by Thomson Reuters, an international news source that provides information and support tools in numerous areas of expertise, including health care and science. The company, created in 1941 on the basis of integrity, independence, and freedom from bias, took statistics from the health care industry and found that the billions of dollars are being wasted each year due to a combination of factors that consist of fraud, medical mistakes, unnecessary care, preventable conditions, and an antiquated system that causes inefficiencies.

Vice president of healthcare analytics at Thomson Reuters, Robert Kelley, noted in a statement: “The bad news is that an estimated $700 billion is wasted annually. That’s one-third of the nation’s healthcare bill. The good news is that by attacking waste we can reduce healthcare costs without adversely affecting the quality of care or access to care.”

As reported, some of the most startling findings consisted of actual mishandling of care with either too much of it provided or not enough to prevent certain conditions. Forty percent of the waste found, approximately $250 billion to $325 billion, came in the form of “unwarranted treatment,” such as unnecessary tests run to protect doctors and facilities from possible malpractice or prescriptions for antibiotics without a full diagnosis of the problem. Another 6 percent of waste ($25 billion to $50 billion), on the other hand, was attributed to a lack of care that leads to duplicate tests and erroneous treatments. And yet another 6 percent was found to be spent on hospitalizations for conditions that get out of hand due to insufficient care prior to reaching a dire state that requires immediate care.

Errors by healthcare providers were found to cost between $75 billion and $100 billion, and fraud, such as erroneous Medicare claims and payments awarded for referrals done for the sake of the kickbacks alone, contributed to another $75 billion to $100 billion in wasteful spending.

And finally, the health care system that still relies too heavily on paperwork instead of employing technological advances to streamline the processes adds another $100 to $150 billion to the annual wasteful spending totals. The report cites “redundant paperwork” in the category of administrative inefficiencies that leads to 17 percent of the unnecessary spending. As stated in the Thomson Reuters report, “The average U.S. hospital spends one-quarter of its budget on billing and administration, nearly twice the average in Canada.”

This new information leads directly back to the current health care debate as it stands on the floor of the U.S. House and Senate. If the new reforms can incorporate changes that eliminate some of the wasteful spending and integrate the improvements into a system that can then pay for itself, the health care discussion takes on a new plausibility, not to mention new hope for a better system in the years ahead.