by Daisy Luther, The Organic Prepper:
The Affordable Care Act continues to be anything but affordable.
In fact, the healthcare system in the US is in terrible financial shape.
A new study has revealed that waste and needless spending in America’s healthcare system could amount to almost $1 trillion each year. This exceeds the total US military expenditures in 2019 – the world’s largest defense budget – and as much as all of Medicare and Medicaid combined.
This news should not shock anyone.
If you are one of the hundreds of thousands of Americans who are in serious debt due to medical expenses, you are likely not surprised by the new study’s findings. As we recently reported, 66.5 percent of all bankruptcies in the US are tied to medical issues, either because of high costs for care or time out of work. An estimated 530,000 families turn to bankruptcy each year because of medical issues and bills.
Published earlier this month in the Journal of the American Medical Association (JAMA), the study found that roughly 20 percent to 25 percent of American health care spending is wasteful.
The cumulative waste in US healthcare ranged from $760 billion to $935 annually – or 25 percent of what Americans spend each year on health services. And we spend a lot – approximately 18 percent of the gross domestic product (GDP) or more than $10,000 per individual a year on average.
The US healthcare system is bleeding billions of dollars.
For the study, researchers reviewed data from January 2012 to May 2019, with a focus on the 6 waste domains previously identified by the Institute of Medicine and Berwick and Hackbarth.
Computations yielded the following estimated ranges of total annual cost of waste for each domain:
- failure of care delivery: $102.4 billion to $165.7 billion
- failure of care coordination: $27.2 billion to $78.2 billion
- overtreatment or low-value care: $75.7 billion to $101.2 billion
- pricing failure: $230.7 billion to $240.5 billion
- fraud and abuse: $58.5 billion to $83.9 billion
- administrative complexity: $265.6 billion
There have been significant efforts over the years to reduce this waste. Current efforts save $191 billion to $282 billion annually, reducing the net effect of waste to perhaps $478 billion to $744 billion, lead author William H. Shrank, MD, MSHS, told Medscape Medical News.
The study breaks down where those savings occurred:
The estimated annual savings from measures to eliminate waste were as follows: failure of care delivery, $44.4 billion to $93.3 billion; failure of care coordination, $29.6 billion to $38.2 billion; overtreatment or low-value care, $12.8 billion to $28.6 billion; pricing failure, $81.4 billion to $91.2 billion; and fraud and abuse, $22.8 billion to $30.8 billion. (source)
Administrative issues are the largest source of waste.
Administrative complexity, which includes time and resources spent on billing and reporting to insurers and public programs, is the largest source of waste. It is concerning that despite the astronomical costs associated with this domain, the authors found no studies that evaluate approaches to reducing it.
The reason for this may be related to the “complex interplay within these estimates of waste and savings with efforts to combat it,” as Medscape Medical News explains:
Insurers count on prior authorization, for example, to try to rein in overtreatment and what they call low-value care, such as use of expensive drugs when there are cheaper equivalent treatments. Yet prior authorization also contributes to what the authors term “administrative complexity,” the biggest category of wasteful spending identified in their paper, according to Shrank.
“The providers’ administrative complexity represents the payers’ effort to reduce waste,” he told Medscape Medical News. “It’s a perfect example of where the incentives are perfectly misaligned and it creates administrative complexity that just sucks value out of the system.” (source)
Dr. Donald Berwick, CEO of the Institute for Healthcare Improvement, told CBS News that “There are so many different payers, kinds of coding, billing products, recordkeeping requirements, that when you get a system that complicated it adds tasks and paperwork.”
Indeed, a 2016 study funded by the American Medical Association found that doctors spent almost twice as much time on administrative work (49% of their time) as they did seeing patients (27%). Physicians also took another one to two hours of clerical work home with them each night.
The existing fee-for-service payment system, under which each provider bills for the services they deliver, is another major source of complexity and waste.
“Right now you’re billed for the hospital room, by the ambulance company, by every doctor, rehab facility — everyone is keeping their own records and doing their own billing and dividing it up into tiny pieces, which makes it hard for the patient and hard for the caregivers,” Berwick said. “It has long since outlasted its usefulness.” (source)
The government has a history of making healthcare unaffordable.
Asking the government to repair our broken healthcare system is like asking a fox to guard the henhouse.