US healthcare spending reached $3.65 trillion in 2018, representing $11,212 per person. As a percentage of GDP, the US spends about twice as much (on average) on healthcare than what other developed countries spend. US healthcare is so expensive because our healthcare system is plagued by waste and fraud. For instance, at least 20% of US healthcare spending is unnecessary due to:
Overuse of Medications (e.g., antibiotics)
Overuse of Screening Tests (e.g., colonoscopies)
Overuse of Diagnostic Tests (e.g., endoscopies)
Overuse of Therapeutic Procedures (e.g., cardiovascular, knee replacements)
Overuse of Aggressive Care for Dying Patients
Failures of Care Coordination
Administrative Complexity
Fee-for-Service Incentives
Defensive Medicine
Overuse of Specialists (insufficient gatekeeping)
Underuse of Primary Care Nurse Practitioners
Plus an estimated 10% of Medicare/Medicaid is lost to fraud, a much higher rate than what’s found with private insurers. Why so much fraud? Partly because the Medicare billing system is easy to game (see, for instance, “upcoding” and “inflated risk scores”) and partly because Medicare doesn’t require preauthorization as a condition of payment for medical services and items. As one doctor put it:
“Without a doubt, there is much more fraud committed in Medicare/Medicaid than in private insurance plans. Medicare requires no preauthorization. A doctor, hospital, home care or medical supply company sends a bill electronically and a government check comes through the mail.”
It all adds up.
Per a bunch of previous posts, I identified several reforms that could cut US healthcare spending by almost a trillion dollars a year. Suggestions included:
Stay with a multi-payer system, but with strict cost controls, like Japan and Germany.
Develop fee schedules for diagnostic procedures, treatment, and medical equipment, set by federal or regional governments, like Japan and Canada. Public and private payers would use the same fees schedule, streamlining the medical billing process (i.e., reducing administrative complexity)
Increase Medicare/Medicaid fraud prevention, detection, and prosecution.
Greatly expand the number of nurse practitioners as independent primary care providers and gatekeepers to specialists, as is already happening in several European countries.
Institute a no-fault medical malpractice system, like the one in Denmark.
Develop federal guidelines for medical testing and treatment, much like the NICE system in Britain, which would reduce defensive medicine as well as malpractice claims. As in Britain, medical providers would still be allowed to depart from guidance per their independent judgment of what’s best for the patient.
Think about it: around 10% of non-elderly Americans are uninsured. That’s almost 28 million people. But US healthcare costs could be 25% lower if the above reforms were implemented. Then the US would have a healthcare system where everyone is covered and everyone’s paying less.
Links and References:
National Health Expenditure Projections 2017-2026 - CMS
Berwick DM, Hackbarth AD. Eliminating waste in US health care. JAMA. 2012; 307 (14):1513–1516. DOI: 10.1001/jama.2012.362
Brownlee, S., Chalkidou, K., Doust, J., Elshaug, A. G., Glasziou, P., Heath, I., Nagpal, S., Saini, V., Srivastava, D., Chalmers, K., … Korenstein, D. (2017). Evidence for overuse of medical services around the world. Lancet (London, England), 390(10090), 156-168. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5708862/