Deconstructing Health Care “Waste” Numbers
We found out recently that the government perpetrated myth that the health insurance industry were a bunch of “robber barons” was a load. So how about this point that it likes to push about “waste” in our health care system?
Well Reuters obligingly publishes an article today entitled, “Healthcare system wastes up to $800 billion a year.”
The estimate is actually 505 to 800 billion but why not go with the higher number when your “perspective” is to support government reform. Anyway:
The U.S. healthcare system is just as wasteful as President Barack Obama says it is, and proposed reforms could be paid for by fixing some of the most obvious inefficiencies, preventing mistakes and fighting fraud, according to a Thomson Reuters report released on Monday.
The U.S. healthcare system wastes between $505 billion and $850 billion every year, the report from Robert Kelley, vice president of healthcare analytics at Thomson Reuters, found.
“America’s healthcare system is indeed hemorrhaging billions of dollars, and the opportunities to slow the fiscal bleeding are substantial,” the report reads.
“The bad news is that an estimated $700 billion is wasted annually. That’s one-third of the nation’s healthcare bill,” Kelley said in a statement.
So now we have 3 numbers to go with telling anyone with an ounce of sense that they’re really not sure how much waste there is. But for the sake of argument, let’s stick with the 800 billion. Obviously they intend too because this is the sop they’re going to throw out there and claim it will “pay” for their “reform”.
The list is rather interesting. For instance:
* Fraud makes up 22 percent of healthcare waste, or up to $200 billion a year in fraudulent Medicare claims, kickbacks for referrals for unnecessary services and other scams.
200 billion or 25% (not 22%) of the waste comes from the portion of the medical system the government already runs. The same system which now saddles us with 52 trillion dollars worth unfunded future obligations. To this point, the government has demonstrated absolutely no ability to curb such fraud or waste. In fact, it has never shown any interest or desire in tackling the problem. Why should we believe they’re serious about it now?
* Unnecessary care such as the overuse of antibiotics and lab tests to protect against malpractice exposure makes up 37 percent of healthcare waste or $200 to $300 billion a year.
37.5% of additional “waste” comes from doctors protecting themselves from malpractice law suits. Yet there is nothing addressing tort reform in these bills. How, then, does what the administration and Congress are offering address this problem? It doesn’t. It would be a fairly easy fix – but they’re ignoring it. It’s called special interest politics.
That means, to this point, 500 billion of the 800 billion dollars in “waste” are either unaddressed (tort reform) or have never been successfully addressed (Medicare).
* Administrative inefficiency and redundant paperwork account for 18 percent of healthcare waste.
Ever talk to a doctor about the administrative hoops one has to go through to get Medicare to pay for service. Certainly private insurance can be a hassle as well, but there are few if any doctors who won’t treat patients with private insurance while there are a whole host (and growing) who won’t treat Medicare patients. Or said more succinctly – it’s mostly a government paperwork problem.
* Preventable conditions such as uncontrolled diabetes cost $30 billion to $50 billion a year.
And that may or may not be helped by more preventive medicine – there are very mixed reviews on how cost effective it really is. However, even if it did a 100% better job than is now being done (which is extremely unlikely), a) it won’t cost less and b) it still remains up to those needing such treatment to seek it out. Regardless, at most it is 6% of this 800 billion in “waste”.
In summary, the government is responsible for 25 – 40% (add in about 15% of that admin number). Malpractice avoidance – something they could fix or at least lower with tort reform – accounts for 37.5% of the total. Preventable conditions may or may not constitute the final 6% described here. That leaves 14% or in undocumented waste, probably broken down in numerous smaller categories that are going unaddressed.
What this all means is government could clean up its own mess and cut waste to 600 billion, pass tort reform and cut it to 300 billion, make Medicare easier for doctors to administer and cut it to about 150 billion.
Instead we’re stuck with an attempt at a complete overhaul with the government trying to sell us on the idea that the problem is with the private sector and giving government more power over health care is the cure.
The cognitive dissonance is so loud you have to wear earplugs.