In U.S. health care, experts assail $1 trillion-plus in waste, fraud and abuse

cashrain-300x225Politicians almost by reflex decry the skyrocketing cost of U.S. health care by blaming much of it on waste, fraud, abuse. They, alas, really may be on to something, newly published research shows.

Health care experts, including a medical leader of health insurer Humana, “combed through 54 studies and reports published since 2012 that estimated the waste or savings from changes in practice and policy,” leading them to some jaw-dropping calculations about how well spent is the $3.5 trillion or so that Americans drop on health care, the New York Times reported.

Answer: Really badly. The researchers, in their published work, estimated that 20%-25% of American health care spending is wasteful. That turns into giant sums, fast, as the newspaper reported, including:

  • $760 billion per year in total waste, as much as the government spends on Medicare and a sum higher than national military spending, as well as total primary and secondary education spending
  • $266 billion a year for administrative costs, the largest source of waste identified by the researchers. It includes “time and resources devoted to billing and reporting to insurers and public programs.”
  • $231 billion to $241 billion per year wasted due to medical service and product prices “higher than what would be expected in more competitive health care markets or if we imposed price controls common in many other countries.” Big Pharma’s nosebleed high brand prices get blasted here, though the study does not explicitly raise consolidated hospital markets as fueling higher prices, too.
  • $205 billion in total wasted each year on inefficient, low-value, and uncoordinated care. This area of excess may be unsurprising, the newspaper noted, with more than half of medical treatments lacking solid evidence of effectiveness. Its toll includes expenses for hospital-acquired infections; use of high-cost services when lower-cost ones would suffice; low rates of preventive care; avoidable complications and avoidable hospital admissions and readmissions; and services that provide little to no benefit. These problems not only waste money but also can be damage patients’ health, cause them unwarranted anxiety and stress and lower their satisfaction and trust in the system.

The researchers also took a novel approach with this waste, fraud, and abuse work, proposing possible remedies for problems they uncovered. These may require Herculean efforts to put in place, making them, perhaps, too broad, theoretical, or idealistic.

But the proposals attack administrative waste, for example, by advocating for a single-payer system. Republican opponents long have lambasted this option, assailing what it calls government or socialized medicine. Democrats have edged toward it, notably through the various presidential candidates propounding systems they call “Medicare for all.”

The expert advocacy for the advantages of single payer comes in an editorial accompanying the research, published in the medical journal JAMA. As the New York Times reported its crux and quoted its author, Don Berwick, a physician and senior fellow at the Institute for Healthcare Improvement:

“Moving to a single-payer system … would largely eliminate the vast administrative complexity required by attending to the payment and reporting requirements of various private payers and public programs. But doing so would run up against powerful stakeholders whose incomes derive from the status quo. ‘What stands in the way of reducing waste — especially administrative waste and out-of-control prices — is much more a lack of political will than a lack of ideas about how to do it.’”

The researchers and editorialists argue for taking several and different approaches to reining in the soaring costs of prescription medications and medical treatments, especially at hospitals. Although profiteering in both areas can be both noxious and harmful, policy makers might well take care with their cost control proposals in these areas to ensure they don’t stifle innovation or degrade quality and safety, the experts said.

They found encouragement in current efforts to curb low-value, uncoordinated, and inefficient care. These include efforts to shift payments away from the current per-procedure system and toward approaches that emphasize bundling (one sum paid to, say, a hospital, then divided among various providers like surgeons, anesthesiologists, and labs) and value, including successful outcomes and lower readmissions.

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent medical care. This has become an ordeal due to the ever-increasing cost, complexity, and uncertainty of medical treatments and prescription medications. Too many meds turn out to be dangerous drugs, and every medical encounter is fraught with the possibility of damaging and even lethal medical error.

Patients, meantime, may appreciate the importance of studies on waste in the health system — if, besides providing egregious participants a poke in the nose — the research results in concrete improvements in care, combined with significant reductions in outrageous costs and bills. Such benefits, albeit not involving hundreds of billions of dollars, may result from excellent journalism, instead.

The independent, nonpartisan Kaiser Health News Service, for example, deserves patient praise for dogging the University of Virginia Health System about its draconian debt collection system. Officials have backtracked on dunning thousands of patients, including the system own low-paid employees, and they’re figuring how better to provide the financial aid and service that should be a hallmark of state-supported outfit.

Which also has led KHN to dig into the somewhat arcane topic of hospitals’ tax exemptions, particularly how they escape hefty payments to support governments in exchange for providing “community benefits,” notably low-cost and charity care. Hospitals that have gotten called out by news organizations for their aggressive debt collections may be skating into shaky legal grounds, KHN reported. That’s because they’re chasing some of their poorest patients for debts, while telling the tax man that they should get deductions because they’re purportedly helping those very same individuals with free or discounted care. It might be time for the Internal Revenue Service to see why hospital debt collections seem so foul and odious, not just because medical debt is a scandal in the health system but also because of the zeal with which some institutions seek to recover it.

And, by the way, if patients want to run down and deal with excessive costs in health care, they might well look in the mirror because they may be a cause for it. A steady and significant part of the economic recovery, and the continued and generally good financial state that the nation and so many areas enjoy now, rests in the spike in health care spending and the jobs that have been created as a result.

Alas, that hiring hasn’t focused solely on direct care, but rather in adding to the armies of bureaucrats and paper-pushing folks handling mountains of bills, records, and other administrative matters. Too many hospitals, especially, have grown not only top-heavy with profit-obsessed suits but also with badly paid lower-level staff. That so many health care workers scrape to get by while Big Pharma and big hospitals get richer by the blink says that taxpayers and lawmakers need to act. The national fixation about health insurance has been important. But we have much work to do throughout the health care system to rid it of waste, fraud, and abuse — especially of patients and the most poorly paid people who may be giving them key help.

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