The remarkable amount of money we waste on medical care
Bottom Line: I have no doubt that you’d rather have an extra $2,700 in your pocket with no strings attached annually. In fact, I’m certain you’d love to have an extra $10,736 annually for your family of four. Where are those numbers coming from? The amount of money we’re wasting on healthcare annually.
A new study from JAMA demonstrated a quarter of all money spent on healthcare is wasted. That’s huge with $3.5 trillion, or more than $10,700 per person, being spent annually on healthcare in the US. Eliminating all waste isn’t realistic but eliminating most of it should be a goal. The result is that the average person is paying $2,684 in medical waste annually. Because most Americans have employer sponsored healthcare plans, subsided insurance coverage, Medicare or Medicaid the full effect of the near $11,000 cost of our healthcare, or $2,700 in waste is masked. That doesn’t mean we aren’t paying for it. If your healthcare is employer sponsored that money is part of your total compensation. If it’s though subsidies, Medicare or Medicaid – it's through higher taxes collected.
In JAMA’s study, they identified these culprits for the waste we’re paying for:
- Failure of care delivery
- Failure of care coordination
- Over treatment or low-value care
- Pricing failure
- Fraud and abuse
- Administrative complexity
Clearly, there’s a lot that needs to be addressed. President Trump, in his recent executive order, acknowledged this as he tasked Health and Human Services with new guidelines to cut red tape and create greater efficiencies within Medicare. Doing so also minimizes opportunities for fraud. It’s a starting point but this appears to be a systemic issue within the medical establishment. Much of this isn’t within our control directly but some of it is. Asking questions about whether procedures are needed can make a difference. Asking what the costs of tests and procedures will be in advance can help. On the medical establishment’s end, use of current software/technology is desperately needed.
If we become better, more informed stewards of our own healthcare, the federal government reforms the egregious regulatory environment and health systems modernize we can meaningfully move the needle.