The U.S. health care system squanders $750 billion a year — roughly 30 cents of every medical dollar — through unneeded care, byzantine paperwork, fraud and other waste, the influential Institute of Medicine said Thursday in a report that ties directly into the presidential campaign.
President Barack Obama and Republican Mitt Romney are accusing each other of trying to slash Medicare and put seniors at risk. But the counter-intuitive finding from the report is that deep cuts are possible without rationing, and a leaner system may even produce better quality.
“The past 50 years have seen an explosion in biomedical knowledge, dramatic innovation in therapies and surgical procedures, and management of conditions that previously were fatal,” said the report from an 18-member panel of prominent experts, including doctors, business people, and public officials. “Yet, American health care is falling short on basic dimensions of quality, outcomes, costs and equity.”
The report identifies six major areas of waste: unnecessary services ($210 billion annually); inefficient delivery of care ($130 billion); excess administrative costs ($190 billion); inflated prices ($105 billion); prevention failures ($55 billion), and fraud ($75 billion). Adjusting for some overlap among the categories, the panel settled on an estimate of $750 billion.
Examples of wasteful care include most repeat colonoscopies within 10 years of a first such test, early imaging for most back pain, and brain scans for patients who fainted but didn’t have seizures.
The report makes 10 recommendations, including payment reforms to reward quality results instead of reimbursing for each procedure, improving coordination among different kinds of providers, leveraging technology to reinforce sound clinical decisions and educating patients to become more savvy consumers.
The report’s main message for government is to accelerate payment reforms, said panel chair Dr. Mark Smith, president of the California Health-Care Foundation, a research group. For employers, it’s to move beyond cost shifts to workers and start demanding accountability from hospitals and major medical groups. For doctors, it means getting beyond the bubble of solo practice and collaborating with peers and other clinicians.
A past president of the New Mexico Medical Society and current delegate to the American Medical Society, Jerry D. McLaughlin II, M.D., of Hobbs, agreed with many of the report’s major findings.
“We as physicians have long argued that a substantial part of our health care costs ... come from redundant and burdensome unnecessary paperwork,” he said. The legal environment also “leads to the practice of defensive medicine, which is the ordering of redundant unnecessary tests and hospital admissions simply as a defense against being sued,” said McLaughlin.
“Spending less and improving the quality of care are possible, as is decreasing the number of uninsured, if physicians and our patients are empowered with appropriate information, decreases in paperwork requirements and limits on frivolous litigation,” McLaughlin said.
The issue of systemic waste is about the profound differences between efficient and inefficient markets, Presbyterian Healthcare Services president and CEO James Hinton told the Journal.
“Interestingly New Mexico is one of the most efficient markets in the country (Dartmouth Atlas study) yet borders one of the most inefficient in West Texas,” he said. The current financial incentive of fee for services system “has tended to underweight preventive and primary care services and over-weighted specialty care, diagnostics and procedures,” Hinton said. “Therefore the system over-consumes in some areas and under-consumes in others. This creates waste and inefficiency. “We are clearly on the front end of a long process to help hospitals and doctors adjust to new payments and lower aggregate costs,” he said.
Lovelace Health System president and CEO Ron Stern said the challenge is to “provide the highest quality care at the most affordable price.” The Lovelace Health Plan’s use of a network of providers, for example, drop the costs of care employers can then pass on to their employees, he said. Lovelace has reduced hospital readmissions, particularly for elderly patients, with doctor patient communications and sending nurse practitioners and pharmacy services to patients’ homes, he said. “We are working as an integrated health care system, between the doctors, the health plan and the hospital, to find ways to improve quality,” he said.