Waste in Healthcare

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medical_billing_advocate-95The waste seen in the U.S. healthcare industry cannot be reduced to simply one problem. It is, instead, a wide range of issues which indicate that the healthcare system’s health is in need of as much of a checkup and overhaul as any health-related issue it hopes to address. What exactly are the problems with the current system, and why are sick people paying the price for this system’s overall failure?

The list of problems is rather easy to identify and as per 2012 estimates concerning wasted expenditures, these were identified as excess administrative costs ($190 billion), inefficient delivery of care ($130 billion), unnecessary services ($210 billion annually), inflated prices ($105 billion), fraud ($75 billion), and prevention failures ($55 billion), for a total adjusted price of $750 billion after adjusting for overlapping categories.

How is it possible to waste so much money in one year? While listing a problem can give us a hint at the general idea, it is necessary to truly understand how the system is failing before consumers can demand the changes necessary to end this tremendous waste.


Inefficient Care

In 2010, Americans spent $2.6 trillion in healthcare costs, or $8,233 per person, which is more than any other country in the world.

Compared to comparable countries, the U.S. has fewer doctors and fewer insured individuals per capita. Inefficiencies within the system itself are as much to blame as any other identifiable factor.


Lack of Standardization

Other countries in these studies have the tendency to mass insure their citizens for all services covered. This allows the country’s government to have control over the overall cost of services, procedures, and care and keeps the cost lower overall. In the U.S., these services are split up into essential and elective care and use for-profit insurance companies. This allows the companies to set the prices they see fit for any services rendered and seriously inflates the cost.

The very way that the U.S. health system is set up inflates the cost of services and includes a separate healthcare system for military personnel, veterans, seniors, end-stage renal failure, federal government employees, and Native Americans.

In addition to the confusion in government insurance, you can add the hundreds of private health insurance companies used by individual citizens. Instead of creating competitive pricing as is seen in other areas of business with a large market, this somehow has created a system of gouging for profit at the cost of health. Most companies will match or charge more for a service or procedure if they see their competitors are charging more instead of dropping their price to increase their customer base.


Inflated Costs

Higher volume sales means that insurance companies are able to have more impact on the costs of pharmaceutical prescriptions and equipment. As consumers, we understand that if you buy food in bulk or at a warehouse store that it costs less because you are buying large quantities. The same theory should apply to the bulk purchase of prescription medications, surgical, and hospital equipment.

medical_billing_advocate-119Due to the system’s inflexibility in enforcing price regulation, the prices are instead increased to ridiculous levels which are often 10 times more than the exact same product in another country. For example, a CT scan in Canada is 5 times cheaper than in the U.S. A routine doctor’s visit is 3 times cheaper. Prescriptions in the UK and Germany are 10 times cheaper.

Are they using different CT scans? No. Is the doctor doing anything differently in an office visit? No. Are the prescriptions substandard and not as effective in the UK? No. These are identical services and items as other countries with vastly different costs in the U.S. and no justification for the price differences.

The outlandish costs of simple items can be absolutely ridiculous. Scissors are a great example. While it is understandable that surgical scissors would be more expensive than a pair of high quality household scissors, can we really say that a pair of scissors is worth $9000? Are they made of gold?

The use of a ventilator during a hospital visit can be charged at over $2000. While these pieces of equipment do come with some significant price tags, it is doubtful that a patient using one for 4 hours during surgery has used an equivalent of $2000 of its lifetime cost and life expectancy.

Think you are having a heart attack, go to the emergency room and have several hundred dollars in testing done to determine you have heartburn? Apparently the Maalox used in the hospital, although the ingredients list is identical, costs almost $12 per teaspoon. It doesn’t cost that for an entire bottle in the store.


Delivery of Care

Delivery of care is equally inefficient. Patients are often sent to specialists, for procedures, receive duplicate testing and office visits, and get no more answers than anyone in another country. While specialization is necessary, a patient shouldn’t have to be sent to an endocrinologist just because they have diabetes, for example. Diabetes is just as easily treated by a general physician, and more cost effective, unless there are extenuating circumstances.

The endocrinologist then suggests a course of treatment and tells the patient to see their family physician to keep them in the loop. In the end, the patient is bounced around the system, often receiving duplicate testing procedures, and multiple unwarranted office visits just to end up with treatment other countries would have served by a general family practitioner. Does the patient only receiving this treatment from a general practitioner suffer negative health consequences just because the person writing the script isn’t a specialist? Should a patient not respond to standard treatment, of course, a specialist is warranted. But why are we sending people to specialists from the onset?


Administrative Costs

Administrative costs in the United States were an estimated $156 billion in 2007, with projections to reach $315 billion by 2018. Lack of uniform oversight, standardization, redundancy issues, and lack of transparency in payment rules is costing billions in waste, an estimated 1/3 of all spending.

Insurance companies complicate their processes and create delays to justify costs accordingly. Inflate the number of hours required to do a job and you can charge for more hours. Shuffle paper back and forth a dozen times to pay a simple visit invoice with a more streamlined set of procedures and the price drops. The calculation of these estimated expenditures can be foggy at best due to lack of standardization, so exact figures are often difficult to nail down.


Preventative Medicine

Current systems focus on treating the sick and most money is allocated as such. While treating ill people is extremely important, it is important to prevent them from becoming sick to begin with. Prevention failures in the U.S. contribute not only to increased health spending, but to poor health in the population.

Obesity, heart disease, high blood pressure, diabetes, and many other now-common diseases are often highly preventable through patient education and focus on preventative medicine. The goal should not be to treat the sick; it should be to prevent them from becoming sick to start with. Could the money then be spent on prevention and then lower the burden on medical staff and patients’ pockets?



Hospital, doctor, and physician errors also figure into this amount. Many patients are forced to return to the hospital or extend hospital stays due to procedural issues and complexities which end up with the patient suffering from something which could have been otherwise prevented. This also increases healthcare premiums through lawsuits and further inflates the costs of medical procedures, equipment and patient charges.



Due to the high volume of transactions which are in various stages of processing at any given time, the system is left open to fraudulent claims by insurance companies of approximately $272 billion across the entire health system. Claims submitted for visits which didn’t happen or extra costs for services not received on visits that did occur account for this figure.

medical_billing_advocate-116The task forces who consistently search out these fraudulent claims, track them down, and attempt to recover the costs also add to the money wasted on fraud. This fraud is not limited to insurance companies alone, as doctors, other healthcare providers, and pharmaceutical distributors have been caught doing plenty of the same things.

While efforts are constantly being made to eliminate this aspect of the issue, with the current system in place, this proves rather difficult. Fraudulent operations which are closed down in one state are quickly reopened in others using slight variations on the original scam.

While the information above only touches on a few of the areas in which the system is both the victim and the cause of waste, it is by no means exhaustive and can’t begin to paint a full picture of the problem. They do, however, show us the very obvious ways in which consumers are overpaying for services that are almost equivalent to healthcare services rendered in other countries for lower costs.

While the U.S. may come out ahead in terms of wait times, heart procedures, and cancer treatments, for example, are they really ahead? Should there be a wait time for a procedure that might not even by medically necessary? Should patients be suffering from preventable illnesses such as high blood pressure and cardiovascular disease which are preventable through patient education and associated preventative spending?

While, as individuals, it may seem impossible to have any effect on this huge issue, there are many ways in which we, the consumers, can protect not only our health, but our finances. As individuals, we can also hold insurance companies and political figures accountable for their portion of the blame, when warranted.

Being aware of the system waste and how it affects us in comparison to other countries is the key to making a change for ourselves. Use services which have ethical business practices and use your power of choice effectively when selecting one. Consult interest groups or other resources with concerns over things such as whether a charge to your insurance is accurate and justified. Beware and be aware.









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