The Wasteful Cost of Care

The Wasteful Cost of Care

U.S. spending on healthcare has been growing at unsustainable rates. There isn’t a single country in the world that beats us in terms of the cost of care, even though many countries beat us in quality (by lots of different criteria, so it is hard to dispute it). Just look at the slide below… we stand out. The slide does show that our growth rate of spending has leveled off, but absolute spending remains too high. Since this is an election year, we are hearing all about how presidential candidates are going to control this beast that is healthcare spending. The media has lapped up one statistic: $1 trillion. This is the annual waste in spending that must be removed, about 25% of total spend. I love how these statistics come so neatly packaged like that. Yet, the Department of Defense’s budget for the war in Iraq over 8 years was about $750 billion, so we are talking about a lot of money.

Statistics aside, healthcare in the U.S. is too expensive and we need to reduce waste. Period. But what is waste? Waste is spending that can be eliminated without reducing quality or harming / putting-at-risk the consumers. Categorization varies, of course, from 3 to 8 elements, depending on the author, but my favorite one is defined by 6 categories:

  1. Failures of care delivery
  2. Failures of care coordination
  3. Overtreatment
  4. Administrative complexity
  5. Pricing failures
  6. Fraud & Abuse

Since this is a favorite topic of mine, and no one has requested any specific topic yet, I will spend the next 2-3 bits examining these sources of waste and how to address them. If you think that this problem isn’t real, it’s time to wake up.