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Did You Hear That Wasting Money In Healthcare Was Good For the Economy?

Stanley Feld M.D.,FACP,MACE

On August 22, the NY Times had an article called “Health Care the Engine that Drives the Economy.” I believe the experts The Times chose to quote were not serious, uninformed or quoted out of context.

“The United States already spends nearly 16 percent of its gross domestic product on health care, and it is almost impossible to know where all that money goes.”

“By 2030, predicts Robert W. Fogel, a Nobel laureate at the University of Chicago Graduate School of Business, about 25 percent of the G.D.P. will be spent on health care, making it “the driving force in the economy,” just as railroads drove the economy at the start of the 20th century”.

But Dr. Fogel says he is not alarmed.” Americans can afford it, he says, because the nation is so rich.”

Most of us are aware that corporations spend 16-18% of their gross revenue on healthcare. General Motors spends $1.500 per automobile built on healthcare premiums. Thirty percent (30%) of the premium is spent for administrative costs at the insurance company. Medicare stated that its overhead is only 3%. However, Medicare outsources all the administration duties to an insurance carrier. Therefore it should have little administrative overhead.

Administrative costs could be greatly reduced by effective use of information technology. Claims adjudicated at point of service should be as simple as it is during commercial transactions. If one ever experienced the inefficiency in adjudicating a hospital bill one could appreciate the administrative waste. The savings to the system would be approximately $40 billion per year. Electronic Medical Records documenting care as well as medical and financial outcomes would save the healthcare system another $40 billion dollars per year.

If we added successful Chronic Disease management systems into our healthcare system, we could save another $60 billion per year simply decreasing the complications of Diabetes Mellitus by 50% and save $10 billion decreasing the complications of Osteoporosis

Instituting proven techniques, adjudication of claims, communication and documentation using EMRs could result in a total savings of $150 billion. Instituting these techniques would eliminate waste and inefficiencies in the system. It could reduce the cost of care and make insurance more affordable to corporations and individuals.

The big question is,” Who should benefit from this savings?” The answer should be: patients and society. A portion of this savings should be used to reduce the cost of care. A portion of the savings should be used as incentive to stimulate adoption of the new systems so the new systems are successful. We could also figure out how to make insurance available at an affordable price to the 47.6 million uninsured people with a portion of the savings.

However, I bet the facilitator stakeholders are lining up to grab the extra money generated by the elimination of the inefficiencies.

Waste is not good for any economy. The waste in the healthcare system should not be the engine driving the economy. Adding value and better medical care should be the engine for a healthier America.

  • Nari Kannan

    Thinking wasting money is good for the economy suffers from the same problems that Communism had in practice! In a global economy, every piece of work needs to be done in the most efficient and effective way that someone else is dcapable of doing. Otherwise sooner or later it will catch up! There is no better example of this than how Toyota and Honda are taking Global and US market share away from American Car Makers for the past four decades. All by doing things in the most efficient and effective way possible, lowering costs and at the same time increasing quality and productivity. The irony and the sad thing is that they listened and adapted the teachings of American Quality Gurus like Feigenbaum, Deming and Juran. These gurus were ignored here in the U.S!
    It is a shame that all these ideas to reducing costs are not being adopted!
    I am guessing nothing except a total breakdown will shake American Healthcare from complacency!
    Dear Nari
    Great comment. I hope more citizens are getting as upset as you are.
    The only way things are going to change is if the public is outraged and presents an option. I hope to present that option

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