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How Much Health-Care Spending Is Wasted? Lots.

Author: Peter R. Orszag
September 12, 2012


Last week, two important reports underscored the potential for improving the value of health care in the U.S.

The first of these, "Best Care at Lower Cost: The Path to Continuously Learning Health Care in America," issued by the Institute of Medicine, highlights two crucial facts. The first is that the health system provides a great volume of care that doesn't help patients. The authors write "there is evidence that a substantial proportion of health care expenditures is wasted, leading to little improvement in health or in the quality of care. Estimates vary on waste and excess health care costs, but they are large" -- possibly amounting to more than $750 billion in a single year.

As the report notes, that is enough to pay the full salaries of all the nation's firefighters, police officers, and emergency medical technicians for more than a decade.

Second, medicine is becoming so complex that it is virtually impossible for an individual doctor to keep pace -- especially without help from computers, the institute says. Consider that the number of medical journal articles has risen to more than 750,000 a year, from 200,000 in 1970. "Diagnostic and treatment options are expanding and changing at an accelerating rate, placing new stresses on clinicians and patients, as well as potentially impacting the effectiveness and efficiency of care delivery," the report concludes.

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