IOM reports 30 percent of health care spend is wasted: Commentary from GoHealth

The Institute of Medicine’s new consensus report, Best Care at Lower Cost: The Path to Continuously Learning Health Care in America identifies three “imperatives for change “the rising complexity of modern health care, unsustainable cost increases, and outcomes below the system’s potential.”

In this interview, Michael Mahoney of shares his thoughts about the report.

1.       What are the main points of the report?

The main points of the study point out that the current health care system is inefficient, lacks transparency and communication, wasteful and not completely safe or consumer-friendly. It pits the health care system against other industries showing how far behind it truly is. Most importantly, it highlights the fact that we have a responsibility to address and solve the main problems with the health care system. If we start now, we can continually improve our highly complex and complicated health system.


2.       Who requested the report and why?

The Institute of Medicine (IOM) created the Committee on the Learning Health Care System in America due to the demand to improve upon the existing health care system. The IOM has focused on exploring the current system and has provided recommendations to improve the system, and, to regularly learn from the mistakes and improvements in the health care sector.


3.        Is it really true that 30% of health care spending is wasted?

Overall, it depends on what a medical professional considers as waste. Some may believe certain therapies, tests or examinations may be wasteful while other medical professionals will disagree.


Whether thirty percent is completely accurate or not, we know that there’s a significant amount of opportunity to make the system more efficient and reduce waste. For example, the report brings to light the fact that better communication and transparency between health care professionals can reduce redundant tests. That’s a huge opportunity to reduce wasted spending.

4.       How does the 30% break down?

A portion of the 30 percent is coming from expenses from medical care that, in hind-sight, could have been avoided — things like unnecessary testing and treatments and the cost of any harm that resulted from them. Other types of costs, that can be more proactively avoided, are more administrative in nature and protection against fraud. An estimated $65 billion a year is lost to Medicare and Medicaid fraud, alone.

5. What can be done to reduce the waste and how feasible is it?

Steps have already been taken to lower the amount of money being “misused” for administrative costs. Health care reform enacted a Medical Loss Ratio (MLR) that requires health insurance companies to pay between 80 to 85 percent of premiums on actual medical care. Is it feasible to cut down on health care waste? Absolutely. Are doctors going to stop ordering tests and treatments that could potentially save lives? Probably not.

At GoHealth, we always encourage individuals to be smart health care consumers. Until more individuals start demanding improvements across the board in health care, the changes may be slow.

6.       What impact do you think the report will have?

The fact that you are writing a story about this topic is proof that the report has already made an impact. Hopefully, the conversation will continue and some concrete strategies will be developed to cut medical waste further.

September 6, 2012

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