Study finds that half of health care dollars are wasted

About 50 percent of health care spending is eaten up by waste, excessive prices and fraud, according to a report set for release today by Boston University researchers. Major sources of unnecessary spending include administrative costs and profit in the insurance industry, high prices of prescription drugs and health services and, to a smaller extent, theft and fraud, according to the study.

U.S. health spending is projected to reach $1.9 trillion in 2005. "If half of health care spending is wasted now, that's $950 billion this year. If we could save even a third of waste, we'd save over $300 billion this year," said Alan Sager, co-director of the health reform program at Boston University's School of Public Health and co-author of the report. The report, which uses data collected by other researchers and from the government, warns that the nation's fast-growing health care tab is consuming an ever-greater share of the America's overall economic resources. Health care will consume 15.5 percent of the U.S. economy this year, up from 13.2 percent in 2002, the study notes.

Sager and co-author Deborah Socolar arrived at their 50 percent waste estimate by culling published material such as comparisons of U.S. medical costs with those of other countries and estimates of administrative expenses in the U.S. health care system. Sager argued that waste needs to be curbed and doctors need to make more careful decisions to control runaway spending. "We know there is enough money to take care of everyone, but not if we keep practicing blank-check mentality and using cost controls that have failed for decades," he said. The report's criticisms of administrative expenses are based on a study last year by Harvard Medical School that determined that bureaucratic inefficiency on the part of insurance companies, doctors, hospitals, nursing homes and other institutions cost the country $399.4 billion in 2003.

A spokeswoman for the trade group that represents health insurers described administrative cost estimates for the industry as "very vague and generally exaggerated." Susan Pisano of the America's Health Insurance Plans said it's difficult to calculate administrative costs because much of that spending benefits consumers by providing better quality care and finding ways to save money.

The report placed much of the responsibility for reform on doctors because it contends that decisions made by physicians determine about 87 percent of personal health spending. "We certainly make decisions about what care or what treatment the patient needs ... but (we) don't control the prices charged by the pharmaceutical companies or the hospitals," said Dr. Michael Sexton, a Marin County physician and president-elect of the California Medical Association. Sexton said doctors in general try to make the best and most efficient decisions on behalf of their patients. "Some of the solutions are going to require us as a nation to invest in technology that will help us learn what is the best care for the least cost," he said.....

U.S. health spending per person in 2002 was 2.1 times the average in Canada, France, Germany, Italy, Japan and the United Kingdom. Source: "Health Costs Absorb One-Quarter of Economic Growth, 200-2005," Boston University.

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation.

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