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U.S. health care system wastes $750 billion in one year alone Posted: September 11th, 2012

By Barbara Marquand

The U.S. health care system can no longer afford to conduct business as usual, according to a new report from the Institute of Medicine.

In 2009 alone, the system wasted $750 billion -- 30 percent of health care costs that year -- on unnecessary services, excessive administrative costs, fraud and other problems, according to the report.

Besides wasting money, the system's inefficiency costs lives. According to one estimate, roughly 75,000 deaths might have been averted in 2005 if every state had delivered care at the quality level of the best performing state, the report said.

"The threats to Americans' health and economic security are clear and compelling, and it's time to get all hands on deck," Mark D. Smith, president and CEO of the California HealthCare Foundation, said in a press statement. "Our health care system lags in its ability to adapt, affordably meet patients' needs and consistently achieve better outcomes."

If banking were like health care, the report said, automatic teller machine transactions would take days instead of seconds because of unavailable or misplaced records. If home building were like health care, carpenters, plumbers and electricians would work from different blueprints.

The report's critique and recommendations have implications for health insurance companies, hospitals, medical schools, doctors, government programs and patients.

Why health care is in trouble

The report identified two reasons for the system's failure -- complexity and costs. Because of the way health care providers are trained, paid and updated with new information, the system can't keep up with the deluge of new biomedical and clinical knowledge. Meanwhile, growing costs of care are unsustainable. Health care costs have grown faster than the economy as a whole for 31 of the past 40 years, the report said.

But Smith, who chaired the committee that wrote the report, said the United States has the knowledge and technology to improve the health care system. The report calls for a "continuously learning health care system" that improves by getting the word out quickly about new research and discoveries made in caring for patients. Among the report's recommendations:

  • Use new technology to capture and share data faster. Doctors and patients often lack information they need to make decisions, and it can take years for medical breakthroughs to gain widespread adoption.
  • Get patients and their families more involved in their care.
  • Create better teamwork in health care organizations.
  • Change how health care providers are paid. Today's payment systems emphasize volume over quality, the report said. New systems should reward health care providers for providing high-quality and efficent care.

The report was sponsored by the Blue Shield of California Foundation, Charina Endowment Fund and Robert Wood Johnson Foundation. The institute of Medicine was established in 1970 under the National Academy of Sciences Charter.