WSJ Health Blog : Report: U.S. Wastes More Than Half of Health Spending

Health Blog : Report: U.S. Wastes More Than Half of Health Spending
Health care isn’t exactly known for its efficiency, but a new analysis from PricewaterhouseCoopers puts the value of the waste sloshing around in the system at a whopping $1.2 trillion a year.

That’s right. Trillion–with a T. The findings of the firm’s Health Research Institute suggest that up to that much “wasteful spending” could be going on, more than half the $2.2 trillion spent on health care in this country.

PwC arrived at that estimate by pulling together a lot of previous research and performing its own analysis. Still, the particulars are a bit vague, with some large ranges.

A lot of the waste is attributed to some favorite bugaboos of efficiency advocates, including ineffective use of information technology ($81-$88 billion), claims processing, ($21-$210 billion) and defensive medicine ($210 billion). Medical errors cost $17 billion and badly-managed diabetes is tied to $22 billion.

Frankly, I’m surprised the ‘defensive medicine’ slice isn’t higher. Read their blog entry for the rest of the story.

From my worm’s eye view of the health system there’s absolutely no reason for me, as an individual physician, to try to decrease healthcare spending. Oh, I’ll make it a point to prescribe generics whenever possible, I’ll gently try to talk people out of xrays they don’t need but want, but that’s about it. There are very powerful forces aligned to prevent anyone or anything from denying even the most futile or insane healthcare spending.

The Ottawa Ankle Rules are but one example. Every ED sees patients with ankle sprains, and some need xrays (but up to 35% don’t, at least in Canada). When I was with the USMC, where I could tell patients ‘no, you don’t need an xray, you have a sprain’ I taught and applied the Ottawa Ankle Rules, and was reasonably proud I wasn’t sending a constant stream of sprained ankles to the xray department for normal xrays to be taken. I mentioned this effort to one of the ED physicians at the base Naval Hospital once, and his response surprised me: “Please don’t do that. When they are off duty they come down here to get an xray of their ankle”. So, applied science and physical exam, with an explanation (I had a lot of time per patient then, and very little equipment) didn’t do it, they went around the system to get an xray. Whay? Because they wanted an xray. There’s an addiction to tests and tech in US medicine (on both sides of the equations, I’ll grant), and it’s not healthy for the patients or the pocketbook.

Nobody I know in the US even tries to apply the Ottawa Ankle Rules in civilian hospitals. Refuse to do an unindicated test? Are you bananas? The patient will insist on “Talking to your boss”, will call the patient advocates’ office, etc, and the incentives are very clear: just order the test, no matter the lack of utility.

Fortuantely organized medicine has stopped sending the message that physicians need to be the gatekeepers of healthcare spending, since there is no backup for those doctors and decisions that would do just that: deny useless tests and futile care. Ask the HMO’s how their rationing care to try to prevent escalations in cost (and save money on their healthcare on the cheap model) went over with the public, the same public that was supposedly aware that for a lower cost they were going to have to have less control over the “I want it all, now” healthcare that’s the norm in this country.

The current system is a prescription for indulgence and waste on a colossal scale. The only way to reign in the explosion of spending in this country is rationing of some sort: Free markets will ration based on ability to pay; single payor will ration based on refusal to pay and a blizzard of paperwork for everything. There is no free lunch, and we’re spending money we don’t have on tests and treatments we don’t need.

We have met the enemy, and he is us*.

Update: About the PWC report; I’ve read it, and am underwhelmed. Here’s the methodology (page 3 of the report):

About the research
As part of its preparation for the 180º Health Forum, PricewaterhouseCoopers’
Health Research Institute (HRI) interviewed more than 20 health industry and
government executives who will be participating in the forum sessions. The
forum is dedicated to change in healthcare. Reviewing the waste in health
spending was viewed as an appropriate starting place for discussing how to
restructure incentives, investments and priorities. In addition to interviews,
HRI reviewed more than 35 studies about waste and inefficiency in healthcare
and commissioned a survey of 1,000 U.S. consumers to get their views on
what constitutes waste and inefficiency in the system.

So, it’s a series of opinions with very nice graphs. As documentation of conventional wisdom it’s first rate; as a scientific critique, less so.


Comments

  1. TheNewGuy says:

    Excellent point on the Ottawa ankle rules.

    They’re taught in Academia… and almost never used in the private sector.

  2. We get surgeons back from the US after their training in Canada and they all face a culture shock with respect to defensive practice. When they first arrive and their first complication occurs panic sets in only to realize that patients tend to accept it as their own. I’m much more likely to hear “….I’ve got the worst luck; I always get the complications…” rather than “…what did you do wrong…” Up here lawyers are not allowed to accept contingency fees (may have changed recently – not sure) which makes it tougher to launch lawsuites. People also understand there’s limited resources. It’s a lot easier to have an open and frank discussion about a “likely” diagnosis without worrying about how it might be interpreted in court. Beside the PWC report doesn’t sound like good research.
    http://www.waittimes.blogspot.com

  3. Whenever you want to incite the masses, bring together large numbers, whether it’s dollars, numbers of lives, tons of something or other. What is less important is how you accumulate those large numbers, which typically start out on a small scale with variably rough estimates, then simply apply some multiplication factor — no one expects you to count billions of anything.

    So you take a small error, then multiply it by millions or a billion and you end up with quite substantial errors.

    Conversely, if you want to calm the masses go the other direction — take some massive amount of wasted energy, money, lives, and divide by as large a number as you can get away with. So the cost of some massive project of dubious value comes down to cents per taxpayer.

  4. FWIW, I use the Ottawa Ankle Rules. If they meet criteria, I tell them there’s a 99.9% chance that nothing’s broken. Some say great, others say “but I want an xray” so I shrug and order one. I probably save 10-20 ankle xrays a year, which I then cash in for unnecessary pediatric head ct’s. :)

  5. TheNewGuy says:

    FWIW, I use the Ottawa Ankle Rules. If they meet criteria, I tell them there’s a 99.9% chance that nothing’s broken. Some say great, others say “but I want an xray” so I shrug and order one. I probably save 10-20 ankle xrays a year, which I then cash in for unnecessary pediatric head ct’s. :)

    I like the way you think… it’s like carbon credits.

  6. In my ER, any trauma or injury to a distal extremity with reasonably severe pain and/or swelling/deformity etc means that I can order an XR in triage. Ottawa ankle whats?

    I order these XRs on patients who most likely just have a sprain, but I wonder if me just getting all those XRs in triage saves money overall because the patient is only in the department for a very short time (whether the ankle is broken or not) once they actually get a room.

  7. In response to Ian Furst:
    There seems to be a disproportionate power given to medicine in the US. We can not fix everything. People die. They die of accidents, heart disease, lung disease, renal disease, infectious disease, cancer…..the list goes on and on. Living is a dying process. There are very unfortunate bad outcomes– unanticipated bad outcomes — but it does not always mean that there was malpractice; however, in our society, people are quick to call the lawyer. An unanticipated bad outcome may be a lottery ticket.

    Apparently, there is going to be an attempt to overturn the malpractice caps in Texas (http://www.chron.com/disp/story.mpl/metropolitan/5569349.html). If you read the comments under that article, lawyers are refusing to take cases in Texas because the lawyer’s cut won’t be big enough….And the number of lawsuits isn’t driven by lawyers? Hmmmm. Sigh. The games continue.

  8. I had no idea the Ottawa rules weren’t used in the US!

  9. We are “tech junkies” when it comes to health care in this country. Everybody wants the latest, newest and most expensive tests when it’s for them. Doctors are afraid not to order the tests knowing it’s not the x-ray, ct, mri, pet scan, etc. you take that gets you sued… it’s the one you don’t. It’s not just the doctors, apparently nurses now order the x-rays. I wonder if at least on paper the attending physician has to buff the charts for reimbursement purposes by signing it off? Further, most of the economic hospital policy decisions are made by the bean counting squads upstairs. No wonder half of the cost of health care is waste. Problem is… who can do anything about it at this point without tearing the “machine” apart and rebuilding it? Painful as it sounds, that’s probably going to be the ultimate and only real resolution.

  10. Man, this is wacko – we waste that much $$.

  11. A great follow up to this is this weeks JAMA commentary – “Gizmo Idolatry”.

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  4. [...] to go to the ED in almost every case. He also made a couple of insightful comments about how the US wastes more than half of the money it spends on health care: “There’s an addiction to tests and tech in US medicine” and “‘I want it [...]