Cutting health care waste could build stronger nation

A new study says $750 billion is squandered and could be redirected to improve the economy.

By Bruce Kennedy Nov 7, 2012 10:45AM

The contentious issue of health care will not go away after the presidential election, specially when it comes to its burden as part of the nation's monstrous debt load.  

In 2010, health care costs made up about $2.6 trillion, or nearly 18%, of the US gross domestic product. Health care spending is expected to account for almost one-fifth of the GDP by 2021.

The Institute of Medicine says $750 billion of those costs do nothing to improve heath care and are instead lost to fraud, inflated prices, unnecessary services or unneeded administrative costs.


But a new study, published by the American Journal of Preventive Medicine, has some suggestions on how to better spend that money -- in ways that could provide financial windfalls for both businesses and U.S. households while helping to reduce the federal deficit.


In their study, researchers from the University of California Los Angeles and the L.A. County Department of Health propose targeting 55% of the planned savings, or more than $410 billion annually, for use by the private sector or companies and individuals to do with as they please. An additional 27%, or $202 billion, could be used toward deficit reduction, and 14% ($104 billion) could go toward investments in infrastructure and human capital.


"It could transform America with little to no reduction in the quality of, or access to, health care actually provided," says professor Frederick Zimmerman, the chair of the Department of Health Policy and Management at UCLA's Fielding School of Public Health and one of the study's authors.


"For example, the Head Start program could be doubled in size, universal preschool could be provided, average class size could be reduced from 22-25 to 13-17 students. And trained nurses could conduct regular home visits for high-risk pregnancies."


The study's authors warn this is no pie-in-the-sky exercise. Any successful plans for paring those excessive and wasteful heath care expenditures will require a disciplined approach, working across a variety of groups and breaking down organizational self-interest and resistance in a coordinated and clear-minded manner.

However, Zimmerman notes that reducing excesses would provide "a monumental opportunity to reallocate those resources to strengthen our international competitiveness, enhance our well-being and build a healthier nation."


"The U.S. has become irrationally attached to its inefficient health care system," the report concludes. "Recognizing the opportunity costs of this attachment is the first step in repairing the system."