The American Interest
Analysis by Walter Russell Mead & Staff
U.S. Health Care Waste Larger Than Pentagon Budget

It’s not exactly earth-shaking news that there’s a lot of waste in the U.S. health care system, but this item we came across still managed to stagger us: A report by the Institute of Medicine estimates that as much as $750 billion is wasted in the U.S. health care system each year. Three quarters of a trillion dollars. Every year. As the Wall Street Journal notes, that’s bigger than the Pentagon budget, amounting to roughly 5 percent of GDP.

The report offers a familiar laundry list of problems. Unnecessary services are the leading driver of waste, but administrative expenses and inefficient care are not far behind. The report has several suggestions:

. . . 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.

The report’s main message for government is to accelerate payment reforms, said the panel’s chairman, Dr. Mark Smith, president of the California HealthCare Foundation research group. For employers, it is to move beyond cost shifts to workers and to start demanding accountability from hospitals and major medical groups. For doctors, it means getting beyond the bubble of solo practice and collaborating with peers and other clinicians.

Obamacare doesn’t seem to do much to solve any of these problems. Reforms like these would make more sense.

Published on September 7, 2012 5:00 pm