The US Healthcare System Is Hemorrhaging: It is Bleeding Close to $1 TRILLION a Year

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The Affordable Care Act continues to be anything but affordable.

In fact, the healthcare system in the US is in terrible financial shape.

A new study has revealed that waste and needless spending in America’s healthcare system could amount to almost $1 trillion each year. This exceeds the total US military expenditures in 2019 – the world’s largest defense budget – and as much as all of Medicare and Medicaid combined.

This news should not shock anyone.

If you are one of the hundreds of thousands of Americans who are in serious debt due to medical expenses, you are likely not surprised by the new study’s findings. As we recently reported, 66.5 percent of all bankruptcies in the US are tied to medical issues, either because of high costs for care or time out of work. An estimated 530,000 families turn to bankruptcy each year because of medical issues and bills.

Published earlier this month in the Journal of the American Medical Association (JAMA), the study found that roughly 20 percent to 25 percent of American health care spending is wasteful.

The cumulative waste in US healthcare ranged from $760 billion to $935 annually – or 25 percent of what Americans spend each year on health services. And we spend a lot – approximately 18 percent of the gross domestic product (GDP) or more than $10,000 per individual a year on average.

The US healthcare system is bleeding billions of dollars.

For the study, researchers reviewed data from January 2012 to May 2019, with a focus on the 6 waste domains previously identified by the Institute of Medicine and Berwick and Hackbarth.

Computations yielded the following estimated ranges of total annual cost of waste for each domain:

  • failure of care delivery: $102.4 billion to $165.7 billion
  • failure of care coordination: $27.2 billion to $78.2 billion
  • overtreatment or low-value care: $75.7 billion to $101.2 billion
  • pricing failure: $230.7 billion to $240.5 billion
  • fraud and abuse: $58.5 billion to $83.9 billion
  • administrative complexity: $265.6 billion

There have been significant efforts over the years to reduce this waste. Current efforts save $191 billion to $282 billion annually, reducing the net effect of waste to perhaps $478 billion to $744 billion, lead author William H. Shrank, MD, MSHS, told Medscape Medical News.

The study breaks down where those savings occurred:

The estimated annual savings from measures to eliminate waste were as follows: failure of care delivery, $44.4 billion to $93.3 billion; failure of care coordination, $29.6 billion to $38.2 billion; overtreatment or low-value care, $12.8 billion to $28.6 billion; pricing failure, $81.4 billion to $91.2 billion; and fraud and abuse, $22.8 billion to $30.8 billion. (source)

Administrative issues are the largest source of waste.

Administrative complexity, which includes time and resources spent on billing and reporting to insurers and public programs, is the largest source of waste. It is concerning that despite the astronomical costs associated with this domain, the authors found no studies that evaluate approaches to reducing it.

The reason for this may be related to the “complex interplay within these estimates of waste and savings with efforts to combat it,” as Medscape Medical News explains:

Insurers count on prior authorization, for example, to try to rein in overtreatment and what they call low-value care, such as use of expensive drugs when there are cheaper equivalent treatments. Yet prior authorization also contributes to what the authors term “administrative complexity,” the biggest category of wasteful spending identified in their paper, according to Shrank.

“The providers’ administrative complexity represents the payers’ effort to reduce waste,” he told Medscape Medical News. “It’s a perfect example of where the incentives are perfectly misaligned and it creates administrative complexity that just sucks value out of the system.” (source)

Dr. Donald Berwick, CEO of the Institute for Healthcare Improvement, told CBS News that “There are so many different payers, kinds of coding, billing products, recordkeeping requirements, that when you get a system that complicated it adds tasks and paperwork.”

Indeed, a 2016 study funded by the American Medical Association found that doctors spent almost twice as much time on administrative work (49% of their time) as they did seeing patients (27%). Physicians also took another one to two hours of clerical work home with them each night.

The existing fee-for-service payment system, under which each provider bills for the services they deliver, is another major source of complexity and waste.

“Right now you’re billed for the hospital room, by the ambulance company, by every doctor, rehab facility — everyone is keeping their own records and doing their own billing and dividing it up into tiny pieces, which makes it hard for the patient and hard for the caregivers,” Berwick said. “It has long since outlasted its usefulness.” (source)

The government has a history of making healthcare unaffordable.

Asking the government to repair our broken healthcare system is like asking a fox to guard the henhouse.

Government involvement in healthcare is a major reason it is so expensive. The details are complex and beyond the scope of this piece, but if you would like to learn more about the role government plays in rising healthcare costs, I recommend the following in-depth articles:

How Government Regulations Made Healthcare So Expensive

What Student Loans and Health Care Have in Common

The Real Cost of Medicare for All is in Lives, Not Dollars

This Obamacare Program Was Meant to Save Money, Instead it Killed Thousands

100 Years of Government’s “Managed” Health Care

After reviewing the history of the healthcare system in the US and how the government damaged it beyond repair, it appears there is only one viable solution: removing government from the equation completely. A truly free market system in which healthcare providers and patients make decisions without interference from middlemen (the government and insurance companies) would likely bring costs down to a reasonable level for most Americans.

There are already medical practices like this across the country. They are usually referred to as “concierge care” or “direct primary care (DPC)” practices. Generally speaking, these business models are membership-based, meaning that patients pay an annual or monthly membership fee in exchange for services. A unique feature of these practices is that the patient and doctor get to spend more time together. Some medical practitioners who offer concierge or DPC services take insurance, some do not. Both business models can allow physicians and patients more freedom because approval from a third party (insurance company) is not required for services and treatment.

Many direct primary care practices offer fees on a sliding scale and some offer special rates for low-income families. Others provide charity care.

In Why I Chose Concierge Medicine, Dr. Simon Murray writes that he believes the concierge business model “will save primary care and will ultimately reduce the cost of healthcare in the United States because doctors with more time will refer less, prescribe, test less, and keep people out of the hospital more.”

Another possible solution to our healthcare crisis comes from a surprising source.

Imagine being able to go to one place to get the following healthcare services:

  • Primary care
  • Dental
  • Counseling
  • Labs & x-rays
  • Health screening
  • Optometry
  • Hearing
  • Fitness & nutrition
  • Health insurance education & enrollment

Now, imagine those services were offered at prices ranging from $20 to $40 for office visits and annual exams, $10 to $20 for lab tests, $45 for counseling, $25 for dental exams (including x-rays), $25 for teeth cleanings, and $45 for a vision exam.

While this sounds too good to be true, those are the services and prices offered at a new Walmart Health center in Dallas, Georgia. The huge center (10,000 square feet) opened last month and is currently the only one of its kind. It appears to be a pilot program of sorts, perhaps (hopefully) with the goal of providing affordable basic healthcare to Americans.

Here’s a bit more information from Walmart’s press release:

The Walmart Health center will offer low, transparent pricing for key health services to provide great care at a great value, regardless of insurance coverage. Customers will be notified on the estimated cost of their visit when they book their appointment.

The Walmart Health center will be operated by qualified medical professionals, including physicians, nurse practitioners, dentists, behavioral health providers, and optometrists. Walmart Care Hosts and Community Health Workers onsite will help customers navigate their visit, understand resources and be a familiar presence for regular visits.

Working in partnership with wellness organizations, the Health center will offer specialized community health resources, online education and in-center workshops to educate the community about preventive health and wellness. (source)

Walmart offers Care Clinics in 19 stores, but those facilities are much smaller (1,500 square feet) and are more limited in service.

Love or hate Walmart, the company is finding ways to provide services many people desperately need at prices that are far more affordable than standard options. As Eric Boehm put it in Walmart’s Entry Into Health Care Could Be Hugely Disruptive in All the Best Ways,

A single Walmart health clinic on the outskirts of Atlanta isn’t going to fix any of the big problems with the American health care system. But you’d be foolish to think that the people running one of the world’s most efficient and successful companies aren’t going to come up with better solutions than the men and women trying to get elected. (source)

CVS and Walgreens are also offering outpatient healthcare services through various models and things appear to be going well for both companies so far.

The best way to avoid medical debt is by taking care of yourself.

Accidents are often not preventable, and neither are some health conditions.

But many of the health issues that lead to massive medical debt are preventable, including obesity, Type 2 diabetes, and heart disease.

A 2014 study published in The Lancet revealed that

…chronic diseases are the main causes of poor health, disability, and death, and account for most of health-care expenditures. The chronic disease burden in the USA largely results from a short list of risk factors—including tobacco use, poor diet and physical inactivity (both strongly associated with obesity), excessive alcohol consumption, uncontrolled high blood pressure, and hyperlipidaemia—that can be effectively addressed for individuals and populations. (source)

If you’d like to improve your health (and hopefully reduce your risk of accruing medical debt), here are some resources that may help.

45 Ways To Add More Physical Activity to Your Day

Quit Smoking program

Bug Out Boot Camp

99 Healthy No-Cook Meals and Snacks

Health Care vs. Death Care: 20 Ways to Stay Well (for Less Money than Obamacare)

What do you think?

Do you think the US healthcare system is eventually going to collapse? Do you think companies like Walmart, CVS, and Walgreens will adequately fill healthcare needs? Or do you think the government is capable of saving the system? Please share your thoughts in the comments.

About the Author

Dagny Taggart is the pseudonym of an experienced journalist who needs to maintain anonymity to keep her job in the public eye. Dagny is non-partisan and aims to expose the half-truths, misrepresentations, and blatant lies of the MSM.

Dagny Taggart

Dagny Taggart

Dagny Taggart is the pseudonym of an experienced journalist who needs to maintain anonymity to keep her job in the public eye. Dagny is non-partisan and aims to expose the half-truths, misrepresentations, and blatant lies of the MSM.

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  • generally, things done half-way don’t work out very well. we sorta have private care and we sorta have universal gov’t sponsored care. it’s not working, tho it could.
    i don’t see how people with pre-existing conditions can get affordable care with current insurance systems without either the gov’t handling it, or if they have an employer big enough to command modest rates for all their employees.
    as a registered nurse, i have seen what happens when people don’t get the care they need. and yes, some illnesses and condition are sometimes due to bad choices people have made. but many are not: think car accidents, falls, cancer, multiple sclerosis, autism, parkinson’s.
    if you have medical where you are with an employer, and your spouse gets a great job in another state, will you have to be separated so you can keep your medical? that is happening right now in my family. it will happen much more if we can’t figure out a fair and right-priced way to care for our population. as long as profits drive our system we will have big problems.
    i think health care is as much a requirement for decent living as food, basic education, meaningful work, etc.
    perhaps we need a whole lot of different ideas to be tired out, including the new walmart center, maybe school based medical care, maybe trialing out the best of the european models.

  • Thanks for the article, plan to reread it along with the links.

    Some simple minded rambling comments.

    It could be said, roughy eighty per-cent of medical costs comes from twenty per-cent of medical procedures. And then the cost is spread to the general populace along with other’s default payments and ‘free’ subsidized medical care.
    (Sorta like everything you buy at Wal-Mart has a seven per-cent markup due to spillage, shop lifting, or how busfares includes those areas that wouldn’t be able to afford lines to their neighblorhoods.)
    Last century Oregon State tried to reduce medical costs by questioning whelter some procedures weren’t cost effective. But that got into a ethical grey area of ‘end-of-life’ hospital stays and how long is it feasible to prolong a patient expectancy when it can drain their families’ life savings. Good that Hospice Care came along.

    Some procedures that a medical doctor performs could be done at a fraction of the cost a RN can do for the same task. Again this is all rough estimates, a nurse can insert a catheter for a cost of sixty dollars while if a doctor does the same procedure it could be billed around five to ten times that amount.

    Doctors along with nurses do get ” burned-out” from the paperwork, long hours and quota of seeing so many patients an hour. Not all medical personnel are equally skilled so it’s up to you to ask the right questions when being examined or you’re get silence if the doctor has time to look away from typing into a computer. You could be a talking St. Bernard for all they may know.

    Assembly line surgery is a money maker in hospitals. Remember the Homopathic/Alternative treatment movement a while back? There’s a balance somewhere.
    Doctors are not trained as pharmacists so cross interaction of prescribed drugs is a problem.

    Plastics. Petroleum based plastics are common in medical supplies. If it’s labeled a kit the price starts at three hundred dollars and up. Not knocking plastics but look at the code inside the triangular symbol on the bottom of the cup liners.

    Medical terminology can be a tower of babel as there are more specialists and less general practitioners. Each hospital has it’s own vernacular vocabulary. A nurse recently from another hospital could refer to the outside diameter of a catheter as the inside diameter or not not know what a gauge size is to begin with. Really. They’re all “Red Robins” as far as they know. Great if you’re on the receiving end. Used to be doctors could talk shop around the hallway water fountain and compare notes but with Administrative politics and mal-practice law suites it’s a team approach with less responsibilty and CYA e-mails that makes Insurance companies a necessary evil. In the 1950’s when insurance were gaining traction in businesses there was a parellel rise in law suites.

    Note, the good ol’ days weren’t that great.

    Beaucracy is self perpetuating and embedded.

    Final rant.
    It’s still an Excel software world with rows and columns. Patient information is spread throughout multiple tables amongst various servers which probably doesn’t make it any easlier for coding or billing workers. (On a sidenote there is a certified test for Hackers which may be useful for getting all a patient’s records together.)

    Hopefully the Wal-Mart approach of having many of the specialists under one roof will be workable.
    (The Object-Orientated approach to programming with all the patient’s information together combined with a flexible heterarchical treatment of what is needed using the best of the old and new is perhaps needed nowadays.)

    Sidenote, when computers came along people thought things would be more streamlined but realized if you weren’t organized to begin with you were still disorganized but on a grander scale.
    Or how when we inherited Vietnam from the French and imitated what they did but on a much greater scale.

    • A bump in the road is the amount of experienced and skilled personnel in various fields retiring after thirty, fourty or so years in their profession. After the jockeying of groups who may be interested in the financial side rather than the competency requirements of the job, and the dust settles we’ll have a better view of what is out there.

      Meanwhile go over to BCE’s recent article on OP, regarding the 23rd edition of a 1868 Nautical Medical Guide. It is well worth your time.

      (Consider what it was to be kidnapped for forced labor on a ship centuries ago exporting diseases throughtout the world. “Lindybeige” has an enteraining narrative on his blog regarding “The White Headhunter”. British storytelling at it’s best.)

  • As a retired RN, there was nothing in this article that surprised me.
    I spent most of my time in the Emergency Room, some time in ICU. My takeaways on the high cost of healthcare:
    ER Docs have to practice what we call ‘CYA medicine’. They often have to order more expensive tests than necessary, because of the litigous society we live in. I woud imagine the same to be true for all doctors. I recently had my gallbladder out; Ultrasound was ‘inconclusive’ but rather than do a CT scan, they sent me to MRI. Was that really necessary? (If I’d been in a better frame of mind, I would have argued)
    I know there are issues with missed and misdiagnosis, but I honestly think if there were caps in place for medical malpractice, that would make a difference. Do you have any idea what doctors pay for malpractice insurance?
    Second is Big Pharma being allowed to advertise, so that eveyone thinks they need the ‘latest greatest’ medication, even if they dont really have a condition.
    That ties in with people ‘demanding’ they get tests/treatments that aren’t potentially necessary to their condition. Dr. Google (and an ‘entitlement’ mentality) make people ‘think’ they need more testing than may be necessary.
    There are problems on all sides of the equation. But getting gooberment involved is not the answer (look at the VA system).

  • I am really intrigued by this development with Wal-Mart. While the idea of concierge care is intriguing, right now it’s very expensive, like joining a country club. i remember my grandmother explaining how health care worked before insurance companies and government involvement — the rich lived and the poor died. Doctors and hospitals did not lower their prices, as “free market” advocates so fondly imagine would happen. They charged exactly as much as they pleased, and made as much profit as they pleased, because a sick, injured or dying person has no bargaining power. They provided care to those who could afford their prices and denied care to those who couldn’t. I wanted to repeat my grandmother’s story for all the conservatives out there who assume that “the free market economy” would cause health care costs to plummet if there were no government involvement or insurance companies.

  • I’m having nightmare flashbacks to my sojourn in Catholic schools with Sister Mary Social Justice lecturing us for hours and hours (that woman just couldn’t shut up…ever!) about how “_________________ is a right!” Yeah, sure, whatever. When things become “rights” (meaning entitlements), everybody, somebody, anybody and nobody pays.

    Between the Fed decimation of the dollar’s value, the government’s raging case of criminal spending and appropriation of private property and individual rights for 50 or so years, no wonder everyone is broke. Healthcare? Are you kidding? People want taxpayers to pay their VET BILLS now because not to do so is species bigotry.

  • You Americans are incorrigible fools, you complain loudly about socialised healthcare systems around the world, which work brilliantly, and here you are, complaining about your laissez-faire free market health care system that bleeds money…no pun intended.

    • Yeah. Who are you trying to fool? Socialized health care is SO brilliant that Canadians come to the US in droves for treatment every year because they can’t get an appointment. People in England are laying on gurneys in the corridors of hospitals and drinking water from flower vases. That’s just brilliant!

      If you like your system you can keep it…komrade.

      • Actually – I have to step in here and defend the Canadian healthcare program. It’s excellent. We never, EVER had to wait an extraordinary amount of time for anything and we lived in multiple cities in Ontario. It’s harder to get a specialist appointment in the US than in Canada BY FAR. And when I compare the care we got in Canada vs. the US? My 100% honest answer is that I was happier with the care in Canada. I didn’t feel like a commodity there.

        When my daughter got an unusual fracture in her arm, it occurred on a Friday. She had an appointment with a pediatric orthopedist at the children’s hospital in Ottawa on the following Monday. The only times I saw people I knew going to the US for care was when it was an experimental treatment that was not approved in Canada. Obviously I don’t know every person in Canada but my experiences and those of my friends and family were all positive.

        Don’t believe Big Pharma and Big Medicine’s propaganda.

  • Look around people are to fat ,If you take care of yourself you can avoid problems .Sugar and carbohydrates are killing you .

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