Massive waste forces higher premium rates

The Institute of Medicine has just issued a new report on the level of waste in the health care industry. We pause for a moment to draw breath. The latest figure for waste in 2011 was $750 billion. No matter how you cut it, this is a quite amazing number. When looking at the size of the health care service, it's reasonable to think our doctors might make a few misjudgments and order one or two unnecessary tests, or overorder devices. But wasting this amount of money. To give you an idea of the scale, the budget to run the Department of Defense in 2010 was $663 billion. So our doctors managed to waste more money than we spend on defending the country. Let's slightly change the comparison. Both directly and through insurance plans, we paid $8,000 a head for our medical care in 2011. That's more than double the average spent in the other developed countries and all the indicators show they get a better service.

In 2010, the Institute of Medicine reports doctors spent $210 billion on unnecessary tests. Although some doctors attempt to justify the barrage of tests as defensive medicine, i.e. out of fear they may be sued unless they can show they took even unreasonable care when diagnosing the patient, it's actually dishonest. Exactly the same thing is happening in the manipulation of the codes to give the appearance of propriety when billing for higher amounts. In the same way we go through our credit card statements to ensure there are no unexpected debits, we should be going through all our medical bills to make sure we are not being asked to pay for services not delivered.

We should accept our health care service is broken and look to the health insurance industry to step into the breach and protect policyholders from having to pay unreasonably high bills. One of the justifications for higher health insurance rates is the additional administrative work insurers have to do on our behalf. Well protecting our interests should be their number 1 priority.