US Health Care System Wastes $750 Billion Annually: Report

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Roughly 30 percent ($750 billion) of all medical spending in the U.S is wasted on unnecessary treatments, poor administration, fraud and other forms of pervasive inefficiencies each year, claimed a report by the Institute of Medicine (IOM) on Thursday, with nearly 75,000 deaths in 2005 believed could have been averted if every state had delivered care at the quality level of the best performing state.

The report’s panel, made up of 18 prominent doctors, businesspeople and public officials, wrote that America’s health care system was now facing a “fundamental paradox” as it was “falling short on basic dimensions of quality, outcome, costs and equity,” despite “an explosion in biomedical knowledge, dramatic innovation in therapies and surgical procedures, and management of conditions that previously were fatal,” over the past 50 years.

The report added that “America's health care system has become too complex and costly to continue business as usual,” with “inefficiencies, an overwhelming amount of data, and other economic and quality barriers” hindering progress to improving health.

"The threats to Americans' health and economic security are clear and compelling, and it's time to get all hands on deck," said committee chairman Mark D. Smith, president and CEO of California HealthCare Foundation in Oakland, in a press release

"Our health care system lags in its ability to adapt, affordably meet patients' needs, and consistently achieve better outcomes.  But we have the know-how and technology to make substantial improvement on costs and quality.  Our report offers the vision and road map to create a learning health care system that will provide higher quality and greater value."

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According to the Associated Press, the report identified six major areas of waste: unnecessary services ($210 billion annually); inefficient delivery of care ($130 billion); excess administrative costs ($190 billion); inflated prices ($105 billion); prevention failures ($55 billion), and fraud ($75 billion). By adjusting for some overlap among the categories, the panel then settled on an estimated annual cost of $750 billion.

Accordingly, the committee, who are part of an independent organisation that advises the government, makes ten recommendations to solve inefficiencies in medical care.

These include: payment reforms to reward quality results instead of reimbursing for each procedure, improving coordination among different kinds of service providers, leveraging technology to reinforce sound clinical decisions and educating patients to become more savvy consumers.

Smith told AP that their main message to the government was to accelerate payment reforms so that employers can move beyond cost shifts to workers and start demanding accountability from hospitals and major medical groups, while doctor can go beyond the bubble of solo practice and collaborate with peers and other clinicians.

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The report did not lay out a policy prescription for Medicare and Medicaid but said that there was plenty of room for lawmakers to find a path, while they urged the government to launch a frank discussion with the public about the value Americans are getting for their health care dollars.

"It's a huge hill to climb, and we're not going to get out of this overnight," said Smith to AP. "The good news is that the very common notion that quality will suffer if less money is spent is simply not true. That should reassure people that the conversation about controlling costs is not necessarily about reducing quality."

Check Out The Infographic Below On What’s Possible For The U.S. Health Care System (Created By The IOM):