How can the nation slow down the high rate of growth in health-care spending? Why does the United States spend twice as much on health care as European countries and Americans are no healthier? The federal Institute of Medicine, which devotes a great deal of attention to such questions, has estimated that roughly 30 percent of the $2.5 trillion in health spending in 2009, about $765 billion, was excess cost — expenditures that do not buy better health.
A sizable chunk of the excess cost, an estimated $210 billion, stems from unnecessary services (such as overuse of expensive procedures, frequent tests and treatments that offer marginal, if any, improvements in health). Inefficiencies in service delivery account for another $130 billion. Inflated pricing contributes $105 billion; and missed opportunities to prevent more serious illness add $55 billion to health-care costs.
The institute reckons excess administrative costs amount to $190 billion, with $75 billion more attributed to fraud. Obviously, restraining growth in health spending requires simultaneous action on multiple fronts. None will be more important than eliminating perverse incentives to provide treatment in excess of what a patient needs.
To that end, a pressing challenge involves offering patients (who often are in no position to assess the benefit of a prescribed treatment) clear guidance and criteria to help determine when their care is appropriate or not. They promise to be healthier and safer for being informed.