Health Care's Heap of Waste
WASHINGTON -- How much waste is there in America's health care system? Try $765 billion. That's the estimate from the Institute of Medicine, covering everything from unneeded tests to excessive administrative costs. The estimate is for 2009, when health spending totaled $2.5 trillion. "Waste" was 31 percent, or almost one dollar in three.
Even if waste is only half this, there's ample room to cut costs without weakening quality of care. By all logic, we should be debating how to achieve these savings, because runaway health spending is the crux of our budget impasse. From 1980 to 2011, health care went from 11 percent to 27 percent of federal spending -- and it's headed higher.
Naturally, we aren't having this debate.
The campaign's discussion of health care is purely political. Democrats say Republican proposals to turn Medicare -- federal insurance for the elderly -- into a voucher program would "end Medicare as we know it." Well, that's true; it's also true that Medicare "as we know it" is busting the budget. Vouchers might control costs. For their part, Republicans denounce the Affordable Care Act (Obamacare) without fully explaining why their alternative is better.
The stakes transcend Medicare and Medicaid (federal-state insurance for the poor), because the federal government is the largest purchaser of health services. Its policies shape, for better or worse, the rest of the system. If Medicare promotes
lower-cost, higher-quality care, everyone would benefit. Hospitals and doctors would transfer improvements to other patients.
Workers would also gain, because high insurance premiums squeeze take-home pay. Just recently, we learned that annual premiums for employer-sponsored family coverage increased 4 percent in 2012 to $15,745, according to the Kaiser Family Foundation and the Health Research & Educational Trust. Although the increase was relatively small, it still exceeded wage gains (1.7 percent) and inflation (2.3 percent). Since 2002, gaps are greater; insurance premiums rose 97 percent, roughly triple wages (33 percent) and inflation (28 percent).
The "waste" estimate from the Institute of Medicine (IOM) -- an arm of the National Academy of Sciences -- came in a report ("Best Care at Lower Cost") that broke down the $765 billion figure as follows:
-- Unneeded services (tests, procedures): $210 billion.