Is the Health Insurance Industry as Wasteful as Obama Says It Is?

One of the controversial topics that spawned proposals for health care reform is the issue of how wasteful the U.S. health care system is. According to a report made by Thomson Reuters, a U.S. based-information company, an amount between $505 and $850 billion is wasted in the current system annually. This is part of the reason for 'Obamacare,' a nicknamed penned for President Barack Obama’s plan to save money on healthcare.

Wasteful Practices in Health Insurance

Some of the practices identified in the report that lead to unnecessary spending include the use a paper system that discourages the sharing of medical records. As a result, tests are duplicated because providers do not have access to relevant treatment histories. This accounts for 6% of the annual overspending.

Fraud is another problem for many health insurance companies; fraud accounts for 22% of waste, which translates to $200 billion of claims each year go to scurrilous claims, kickbacks for unnecessary services, and other scams. One of the highest identified sources of healthcare waste, up to 37%, goes to unnecessary care such as prescription of antibiotics and lab tests to protect against malpractice suits.

Effects of Wasteful Health Care Spending

Wasteful practices in the insurance industry lead to high costs, as well as difficulty in accessing quality care. In the 2003 issue of the New England Journal of Medicine, it was indicated that doctors from America spend nearly eight hours a week on paperwork, which is higher compared to other countries such as Canada.

As a whole, wasteful practices can explain why the American population spends more per capita on health care but has higher occurrences of diabetes, obesity, and other diseases compared to other developed countries. As a result, various groups have pushed for a reform of the healthcare system.

Source

Reuters