Health care: $1.2 trillion down the drain

[Heracles 417]

The biggest problem and difference in health care costs between countries is highlighted in red. Unfortunately while the dems are on the right page on health care reform, they refuse to accept that litigation is a huge huge cost to health care. Actually litigation in general is a huge cost for Americans and has reduced the quality of living for all, for the gain of the very few, but that is a totally different debate.

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Health care's big money wasters

More than $1.2 trillion spent on health care each year is a waste of money. Members of the medical community identify the leading causes.

By Parija B. Kavilanz, CNNMoney.com senior writer

Last Updated: August 10, 2009: 8:41 AM ET

NEW YORK (CNNMoney.com) -- Down the drain: $1.2 trillion.

That's half of the $2.2 trillion the United States spends on health care each year, according to the most recent data from accounting firm PricewaterhouseCoopers' Health Research Institute. The report identified 16 different areas in which health care dollars are squandered.

What counts as waste? As policymakers continue to debate the extent and timing of health care reform, CNNMoney.com spoke with doctors, nurses, hospital groups and patient advocacy groups to find out.

Too many tests

Doctors ordering tests or procedures not based on need but concern over liability or increasing their income is the biggest waste of health care dollars, costing the system at least $210 billion a year, according to the report. The problem is called "defensive medicine."

"Sometimes the motivation is to avoid malpractice suits, or to make more money because they are compensated more for doing more," said Dr. Arthur Garson, provost of the University of Virginia and former dean of its medical school. "Many are also convinced that doing more tests is the right thing to do."

"But any money that is spent on a patient that doesn't improve the outcome is a waste," said Garson.

Some conservatives have suggested that capping malpractice awards would help solve the problem.

President Obama doesn't agree; instead, his reform proposal encourages doctors to practice "evidence-based" guidelines as a way to scale back on unnecessary tests.

Those annoying claim forms

Inefficient claims processing is the second-biggest area of wasteful expenditure, costing as much as $210 billion annually, the PricewaterhouseCoopers report said.

"We spend a lot of time and money trying to get paid by insurers," said Dr. Terry McGenney, a Kansas City, Mo.-based family physician.

"Every insurance company has its own forms," McGenney said. "Some practices spend 40% of their revenue filling out paperwork that has nothing to do with patient care. So much of this could be automated."

Dr. Jason Dees, a family doctor in a private practice based in New Albany, Miss., said his office often resubmits claims that have been "magically denied."

"That adds to our administrative fees, extends the payment cycle and hurts our cash flow," he said.

Dees also spends a lot of time getting "pre-certification" from insurers to approve higher-priced procedures such as MRIs. "We're already operating on paper-thin margins and this takes times away from our patients," he said.

Susan Pisano, spokeswoman for America's Health Insurance Plans, said "hundreds of billions" of dollars can be saved by standardizing procedures and using technology -- something the White House has mentioned as a key to health care reform.

"For that to happen, we need the technology," she said. "Doctors and hospitals must adopt the technology, and we have to develop rules for exchanging of information between doctors, hospitals and health plans."

Pisano said the industry is launching a pilot program later this year that will allow physicians to communicate with all health plans using a standardized process.

Using the ER as a clinic

More insured and uninsured consumers are getting their primary care in emergency rooms, wasting $14 billion every year in health care spending.

"This is an inappropriate use of the ER," said Dee Swanson, president of the American Academy of Nurse Practitioners. "You don't go to the ER for strep throat."

Since emergency rooms are legally obligated to treat all patients, Swanson said providers ultimately find ways to pass on the cost for treating the uninsured to other patients, such as to those who pay out-of-pocket for their medical care.

Dees also took issue with consumers who don't get primary care for their diabetes or blood pressure on a timely basis, hence finding themselves in the ER.

"Going to the doctor for strep throat would cost $65-$70. In the ER, it's $600 to $800," he said.

The $787 billion stimulus bill signed passed by President Obama earlier this year includes allocates $1 billion for a wellness and prevention fund, including $300 million for immunizations and $650 million for prevention programs to combat the rapid growth in chronic diseases such as obesity and diabetes.

Medical "Oops"

Medical errors are costing the industry $17 billion a year in wasted expenses, something that makes patient advocacy groups irate.

"Do we have a good health IT system in place to prevent this?" asked Kim Bailey, senior health policy analyst with consumer advocacy group Families USA.

Bailey suggested that processes such as computerized order entry for drugs and use of electronic health records (EHR) could help ensure that patients get the correct dosage of medications in hospitals.

The stimulus bill calls for the government to take a leading role in developing standards by 2010 to facilitate the adoption of health information exchanges across the system, including patient electronic health records by 2014.

Obama has repeatedly said that the use of technology in the health sector will help boost savings, enhance the coordination of care and reduce medical errors and unnecessary procedures.

Going back to the hospital

Bailey suggested that processes such as computerized order entry for drugs and use of electronic health records (EHR) could help ensure that patients get the correct dosage of medications in hospitals. Discharging patients too soon is a "huge waste of money," said Swanson.

"This happens a lot with elderly patients who are discharged prematurely because of insurance, bed unavailability or ageism," she said.

Many times, patients also don't follow instructions for care after discharge. "So complications arise and they are readmitted in a week," Swanson said.

PricewaterhouseCoopers estimates the cost of preventable hospital readmissions at $25 billion annually.

Among the reform plans, one proposal being considered is for Medicare to potentially penalize hospitals who readmit patients within 30 days of discharge.

You forgot to wash your hands!

Those ubiquitous dispensers of hand sanitizer are in hospitals for a reason: PricewaterhouseCoopers estimates that about $3 billion is wasted every year as a result of infections acquired during hospital stays.

"The general belief is that hospitals are getting much better in managing this than they have in the past," said Richard Clarke, CEO of Healthcare Financial Management Association, whose members include hospitals and managed care organizations.

Something as simple as hand-washing often can reduce the problem.

"Sometimes doctors are the most difficult people to convince to do this," said Clarke. "The challenge here is that patients sometimes come in with infections which then spread in the hospital."

The stimulus bill signed by Obama earlier this year includes $50 million for reducing health care-associated infections. To top of page

First Published: August 10, 2009: 4:01 AM ET

Edited August 10, 2009 by haza

[Trumplestiltskin 5,791]

How do you tell though if a test is "unnecessary"?

[Heracles 417]

How do you tell though if a test is "unnecessary"?

A doctor should be able to make the choice. After all they are the professional. We are able to get a second opinion to verify any decision.

Unfortunately in the United State we have a situation were doctors are forced to make unnecessary decisions / tests in order to ensure they are not sued. Under the English law of tort, which Aus follows too, you cannot simply sue a doctor for malpractice if the malpractice was not intentional. Hence the lower costs.

The US spends more on unnecessary testing to prevent litigation than Australian spends on NHS per annum.

Edited August 10, 2009 by haza

[Trumplestiltskin 5,791]

How do you tell though if a test is "unnecessary"?

A doctor should be able to make the choice. After all they are the professional. We are able to get a second opinion to verify any decision.

Unfortunately in the United State we have a situation were doctors are forced to make unnecessary decisions / tests in order to ensure they are not sued. Under the English law of tort, which Aus follows too, you cannot simply sue a doctor for malpractice if the malpractice was not intentional. Hence the lower costs.

The US spends more on unnecessary testing to prevent litigation than Australian spends on NHS per annum.

But again - I'm not sure how someone can actually *know* this without the benefit of the patient's medical history. How can anyone possibly make a remote diagnosis saying that such and such test was not only unnecessary but was done because the Dr didn't want to get sued or make extra $$$?

When I had a lymphoma biopsy a few years ago - I was reading a forum about the disease and there were a lot of posters talking about how difficult it was to get an accurate diagnosis (and some people had been for several biopsies before being diagnosed - by which time their cancer was at stage 3 or 4). One of the biggest issues appeared to be that the insurance company would often recommend a different (cheaper) test than the Dr - single slice scan of the removed tissue rather than the more accurate (multiple slice). There were whole sections (not unlike the visa sections of this forum) advising people what to do - not least writing letters (from themselves and their doctor) to the insurance company recommending the multi-slice test along with referenced literature about the diagnostic benefits.

As to malpractice - I'd bet that most malpractice isn't "intentional", you can't *intend* incompetence

Lawsuits are an inevitable part of the health system we have - when drugs and treatments are marketed directly to the public via glossy advertisements it encourages people to self-medicate. The relationship between the public and the healthcare system creates a spurious illusion of choice and that patients have the power to choose their treatments, when in reality they don't. In this country if a person develops a chronic condition they can quite conceivably get bankrupted and lose everything. I'm not surprised that there are so many lawsuits - its a natural extension of the attitude that created this screwed up system to begin with.

[Niels Bohr 72]

Getting a second opinion is just as expensive. Defeats the purpose.

[Trumplestiltskin 5,791]

Getting a second opinion is just as expensive. Defeats the purpose.

Possibly, but that's also an inevitable part of the system we have.

At least on my insurance website - if I'm looking for a specialist there are "quality" rankings based on testimonial reviews from past patients.

[Heracles 417]

You need to consider the lawsuits in itself.

Under English law, most lawsuits here would be thrown out if filed there. They certainly do not accept many multimillion dollar payouts, if any. That is how you keep a system afloat. You have to cap all costs. Dems like Obama refuse to cap or protect against frivolous lawsuits as it chips away at the infamous American lawyer's revenue. Obama might be a nice guy but he is just doing what everyone else does here, protect their own.

I'll put it another way. As you pointed out, in various countries, like Australia, you cannot just visit the doctor and self-prescribe because you saw it on TV. Doctors are also protected against malpractice lawsuits, in many cases with a cap on litigation payouts. How has that worked out for them? Has it lead to an increase in failures to find a disease or people people dying earlier? Australians have one of the longest life spans in the world.

Edited August 10, 2009 by haza

[Trumplestiltskin 5,791]

Well what sort of "frivolous" lawsuits are we talking about here?

I'm not even convinced that this is a real issue anyway. At least whenever I've had a procedure here - you can't get into an OR without first signing a legal disclaimer that you understand the risks posed by the operation and that certain, clearly defined complications might result.

[Mr. Big Dog 10,747]

How do you tell though if a test is "unnecessary"?

A doctor should be able to make the choice. After all they are the professional. We are able to get a second opinion to verify any decision.

Unfortunately in the United State we have a situation were doctors are forced to make unnecessary decisions / tests in order to ensure they are not sued. Under the English law of tort, which Aus follows too, you cannot simply sue a doctor for malpractice if the malpractice was not intentional. Hence the lower costs.

The US spends more on unnecessary testing to prevent litigation than Australian spends on NHS per annum.

Fear of malpractice suits may cause some unnecessary procedures but I think that the fee-for-service compensation scheme is the main culprit on that end. The more is done, the more doc earns. Alter that and most of the "wasteful" procedures will disappear. If they don't, tackle tort reform.