Wednesday, September 12, 2012

Government Caused or Mandated Waste is in the Trillions of Dollars Each Year... The Health Care Example

Ever wonder how much money we could save if government stopped doing the wrong things and started encouraging the right set of behaviors? I have.

Let's begin with the not so obvious. The waste caused by government isn't always the result of  money spent by government. Government often makes it easy for its "beneficiaries" of a non-market oriented kind to be wasteful. Third party payers and our heavily subsidized public schools and universities, student loans, Social Security and our overall U.S. medical care system, for examples.

In other words, it's not just the money directly spent by government that's wasted. It's also that money which government causes or permits others to spend in its capacity as a third party payer or sponsor and which wouldn't be spent but for government policies and mandates. Simply stated, the lack of competition creates the conditions for lots of waste.

Thus, in addition to the pieces mentioned above, it's also the waste on postal operations, Solyndra type investments, subsidies, protective tariffs and countless other cronyism type expenditires such as ethanol, solar power, wind power, electric cars and such.

And finally, it's also the waste represented by the investments prohibited by government such as drilling for oil and gas, along with building the pipelines to transport it. My educated guess is that we could wipe out the more than trillion dollars in annual fiscal deficits just by our government knows best officials starting to act as true public servants serving the public interest.

Now that's a happy thought, isn't it? A government working for us instead of a paternalistic group of government knows best elitists working hard to "save" us from ourselves.

So here's the bottom line an all this. The government officials who believe, as almost all of them do, even though they won't say it publicly, that they are better stewards of our MOM than we are are just plain nuts. Now let's focus on a newly released study about health care waste and how to curb it.

Report Cites $750 Billion in Annual Health-Care Waste says the following about the enormous potential for health care savings if we began doing old things in new ways. Thinking of things in the MOM manner, in other words:

"WASHINGTON—The U.S. health-care system squanders $750 billion a year through unneeded care, byzantine paperwork, fraud and other waste, the influential Institute of Medicine said .... 

President Barack Obama and Republican Mitt Romney are accusing each other of trying to slash Medicare and put seniors at risk, but the report's finding is that deep cuts are possible without rationing and a leaner system may produce better quality.

"Health care in America presents a fundamental paradox," said the report from an 18-member panel of prominent doctors, businesspeople and public officials. "The past 50 years have seen an explosion in biomedical knowledge, dramatic innovation in therapies and surgical procedures, and management of conditions that previously were fatal.

"Yet, American health care is falling short on basic dimensions of quality, outcomes, costs and equity," the report concluded.

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 wouldn't be posted and could vary widely within the same store, depending on who was paying.

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

Messrs. Obama and Romney agree there has to be a limit to Medicare spending, but they differ on how to get that done. Mr. Obama would rely on a powerful board to cut payments to service providers while gradually changing how hospitals and doctors are paid to reward results instead of volume. Mr. Romney would limit the amount of money future retirees can get from the government for medical insurance, relying on the private market to find an efficient solution. Each accuses of the other of jeopardizing the well-being of seniors.

But panel members urged a frank discussion with the public about the value 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 cardiologist Dr. Rita Redberg, a 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.

Examples of wasteful care include most repeat colonoscopies within 10 years of a first such test, early imaging for most back pain and brain scans for patients who fainted but didn't have seizures.

The report makes ten recommendations, including payment reforms to reward quality results instead of reimbursing for each procedure, improving coordination among different kinds of service providers, leveraging technology to reinforce sound clinical decisions and educating patients to become more savvy consumers. . . .

"It's a huge hill to climb, and we're not going to get out of this overnight," said Dr. Smith. "The good news is that the very common notion that quality will suffer if less money is spent is simply not true.""

Summing Up 

A simple and powerful fact of life is that doing things better costs less than doing those same things poorly. And if we are doing the wrong thing, we're likely to be doing it poorly. 

Keeping MOM out of the medical care decision making process is the wrong thing to be doing. And according to the new study, we're doing a poor job in controlling health care costs as a result of keeping MOM type thinking and behavior on the sidelines.

Specifically, government tends to waste lots of money on health care expenses due to the "third party payer" and fee for services rendered health care system in place. The heavily controlled government system of third party payers is filled with waste.

{NOTE: It's the same with public schools, nursing homes, Social Security, Solyndra, postal operations and countless other OPM big spenders. Thus, until we get MOM in the game and put the OPMers on the bench, this enormous waste and resultant poor quality will continue uninterrupted.}

Simply put, recognizing waste and taking the necessary common sense based steps to eliminate it are different things. But at least they're being acknowledged more frequently these days, and that's a good thing.

Thanks. Bob.

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