Waste not, want not

The October 7, 2019, New York Times headlined “The Huge Waste in the U.S. Health System,” referencing a study published in JAMA, the Journal of the American Medical Association. The article went on to say that the estimated waste is at least $760 billion per year. “That’s comparable to government spending on Medicare and exceeds national military spending, as well as total primary and secondary education spending.” None of this should have come as a surprise to readers of my book Prescription for Bankruptcy, nor was it really “news.” Back in 2012, both another paper in JAMA and a report from the National Research Council estimated waste in the system at 30-35% of total spending.

Why is waste so prevalent? There are many sources. The biggest one, and the one that should most concern patients, is “low value care:” care that offers little or no benefit or even harm but which costs patients and their insurers money. This ranges from antibiotics for viral illness that will not improve the infection but may cause side-effects to back surgery for non-specific low back pain that may leave patients worse.

Using branded medicine when generics are available is obvious waste. There is enormous waste in testing and medical services. Not only are U.S. prices for most services dramatically higher than those in other countries, but prices for the same service vary widely within the U.S. If the same imaging study can cost $1200 in one location and $4000 in another in the same geographic area, is not the $2800 pure waste?

Studies at major medical centers have shown that a very large percentage of the tests ordered are clearly unnecessary: tests repeated for no reason or tests done so soon after another that they are unlikely to be different. A study of eye surgery showed that huge volumes of medications were discarded because they came in amounts much greater than normally used. Surgical “kits” used by different surgeons for the same operation can vary 4-fold in cost with no obvious difference in performance. Patients having cataract surgery are routinely required to have “pre-op clearance” with a physical exam and ECG even though the national organization of ophthalmologists has said this is not needed.

Tests that were not needed in the first place often show some minor abnormality, which leads to a “cascade” of further tests and rarely benefit the patient subjected to this testing.

Probably the largest source of waste is the huge administrative overhead embedded in the U.S. healthcare system. Fully 25% of “healthcare” spending goes to the direct cost of private health insurers and to the cost to physicians and hospitals of billing and meeting various “mandates” that the insurers place on them. An argument for a single payer system is that it could cut payments to physicians by 10% and at the same time cut their costs by at least that amount by reducing the administrative burden, leaving them financially whole.

With a system that is so expensive, why has there not been some movement to cut waste? A large factor is the lack of interest by those who would have to move the needle. Why should a hospital cut the cost of their surgical kits when they can simply pass the cost on to the insurers?

Another, and perhaps the major factor, is that one person’s wasteful spending is another person’s income. Only under huge pressure from the public and the government are we going to see change. I am not holding my breath.

Prescription for Bankruptcy. Buy the book on Amazon