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Economics In The U.S. Healthcare System

3156 words - 13 pages

Economic in the U.S. healthcare system:
The $765 billion price tag on wasteful spending

Our country aims at continuing to increase the quality of patient care but medical services
are being overused at an alarming rate causing great concern. The health spending of this country’s gross domestic product or GDP is 17.6% which is more than any other country (Feldstein).
A report from CMS in 2010 states that the total health spending in the U.S. was roughly $2.6 trillion which is twice as much per capita of the average for any other nation yet delivers a lesser amount of care. These figures translate to $8,402 per person. (CMS) The Centers for Medicare and Medicaid Services predicts ...view middle of the document...

As demonstrated in the exhibit below these areas include:
1. Unnecessary services (27.5% or $210 billion)
2. Excess administrative costs (24.8% or $190 billion)
3. Inefficient delivery of care (17% or $130 billion)
4. Inflated prices (13.7% or $105 billion)
5. Prevention failures (7.2% or $55 billion)
6. Fraud (9.8% or $75 billion).

Table 2. Breakdown of six major areas of waste in healthcare
Source: Institute of Medicine (IOM)

To put these figures into perspective, the six major areas of medical waste in healthcare totaling $765 billion equal eight times as much spent on what the Pentagon spent for every year that it conducted operations in Iraq (Fung).
This paper will focus on the top three areas identified in Table 2 which are:
1) Unnecessary services (tests and overtreatment); 2) Excess administrative costs, and 3) Inefficient delivery of care.


In her book “Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer”, Shannon Brownlee states that one of the reasons that doctors and hospitals have so many unnecessary services is because they lack the required evidence necessary to treat the patient in an effective manner and which tests or drugs will work best. Physicians have a desire to help

even if they don’t know what they’re prescribing will work for the patient. I had the opportunity to hear a lecture by Ms. Brownlee and she reported that $210 billion is overspent in our
healthcare system. She mentioned that a third of CT scans ordered are not needed and 2/3 of PCI’s or angiograms are not necessary. She emphasized that doctors want to help and people want to live at any cost but the communication between them needs to improve in order to avoid unnecessary testing and overtreatment. One of the reasons why there are unnecessary tests is because of patient’s demand as they think that more treatment is better but may not understand all their options. As a result, doctors order more tests because this makes the patient feel that they care more for them.
In a survey from Consumer Reports, doctors say that patients desire to feel that they are being cared for so they may request that their doctor order a test that may be unnecessary or duplicative and many of them are willing to fulfill their request. The survey said that about 2/3 of the doctors have agreed to at least one of these patient requests and more than a 1/3 state that their patients ask for tests that are unnecessary. This is consistent with a report from the Congressional Office Budget that states that up to 30% of healthcare in the U.S. is unnecessary. A study conducted in 2011 revealed that when the cost of the top twelve most overused tests, primarily x-ray and imaging tests, were combined it equaled approximately $6.8 billion. (Consumer Reports) The Journal of the American Medical Association released a study...

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