Eliminating Waste Does Not Mean Rationing

AP's Ricardo Alonso-Zaldivar recently wrote an article everyone should read about waste in the U.S. health care system, amounting to an estimated $750 billion a year. It's based on a report by the Institute of Medicine, which is part of the National Academy of Sciences.

The whole thing is quotable, but here are the parts I couldn't help marking while reading the story:

If banking worked like health care, ATM transactions would take days, the report said. If home building were like health care, carpenters, electricians and plumbers would work from different blueprints and hardly talk to each other. If shopping were like health care, prices would not be posted and could vary widely within the same store, depending on who was paying.

If airline travel were like health care, individual pilots would be free to design their own preflight safety checks -- or not perform one at all...

How much is $750 billion? The one-year estimate of health care waste is equal to more than 10 years of Medicare cuts in Obama's health care law. It's more than the Pentagon budget. It's more than enough to care for the uninsured. 

And this:

...panel members [who wrote the report] urged a frank discussion with the public about the value that Americans are getting for their health care dollars. As a model, they cited "Choosing Wisely," a campaign launched earlier this year by nine medical societies to challenge the widespread perception that more care is better.

"Rationing to me is when we are denying medical care that is helpful to patients on the basis of costs," said Dr. Rita Redberg, a cardiologist and medical school professor at the University of California, San Francisco. "We have a lot of medical care that is not helpful to patients, and some of it is harmful. The problem is when you talk about getting rid of any type of health care, someone yells, 'Rationing.' "

More than 18 months in the making, the report identified six major areas of waste: unnecessary services ($210 billion annually), inefficient delivery of care ($130 billion), excess administrative costs ($190 billion), inflated prices ($105 billion), prevention failures ($55 billion) and fraud ($75 billion). Adjusting for some overlap among the categories, the panel settled on an estimate of $750 billion. 

Trying to get rid of all the waste will have untintended consequences, of course -- more paperwork for doctors and hospitals, in particular. My sister, Daughter Number Two, is a hospital administrator who understands more about how all of this works than anyone I know. (I often wish she could testify in front of Congress or get the ear of the president.)

One thing she told me was that her nonprofit hospital recently was informed they have to give back Medicare payments if the patient could have been treated in an out-patient clinic, rather than the emergency room, going back several years.

I suppose this would be classified as "inefficient delivery of care," but it doesn't make sense to me to make it retroactive. If the government wants to change the rules on what should be an ER visit and what should be a clinic visit, that's fine, but to take back money that was paid for services rendered in good faith seems unfair.

Even so, I hope the IoM's report has an impact.