Waste in Health Care System Demands Reform
$935 billion is a huge amount of money. Taking it in perspective, it is much more than the United States spends every year on the military. It is about as much as the entire federal government spent in Ronald Reagan’s fifth year in office, 1985.
Yet, according to a recent study by William Shrank, Teresa Rogstad and Natasha Parekh, that’s the upper end of the range of waste estimated in the American health care system.
This figure includes $266 billion in excessive administrative costs, $240 billion in inflated pricing, $166 billion in failure of care delivery, and $84 billion in outright fraud and abuse.
Simply eliminating that massive amount of waste would enable us to provide all 330 million Americans with a $3,000 per year ( $250 per month ) basic catastrophic health insurance policy to cover them in the event of a life- threatening medical occurrence, such as a heart attack, cancer, or accident which requires hospitalization.
Americans today spend more ($4 trillion per year or $12,000 per person ) on health care to get less than almost any place in the world. We have fewer doctors per capita than comparable countries. We no longer enjoy the highest life expectancy rates and we are shamed by the low infant mortality rates abroad.
A large part of the waste in the “Health Care Swamp” can be attributed to our health insurance companies and our hospitals.
The average surgeon earns $306,000 a year. The average general practitioner about $185,000. Do you know what the CEO of CVS (which owns Aetna) made in 2019? More than $36 million. Cigna’s David Cordani pulled in $19.3 million while Molina’s Joseph Zubretsky scooped up $18 million in total compensation. Humana’s Bruce Broussard raked in $16.7 million and Anthem’s Gail Boudreaux $15.5 million.
Now, when you’re on the operating table or in the ER waiting for treatment, who will be showing up to care for you, the CEO of Anthem, Aetna, or Cigna? Not likely. It will be your surgeon or doctor, whose compensation pales beside the likes of the health insurance barons. Talk about misplaced priorities and misallocation of resources.
And, remember that the giant health insurers are protected against competition by the federal government which grants them an exemption from the antitrust laws. Members of Congress are rewarded handsomely for this exemption when it comes time to collect campaign checks from the insurers at election time.
The hospitals are another big part of the waste problem. According to a 2019 analysis of the 82 largest “non-profit” hospitals in America reported in Forbes, 13 of these hospitals paid their top earner between $5 million and $21.6 million. And 61 paid their top executive between $1 million and $5 million. Only 8 paid their top executive less than $1 million annually. Collectively, almost $300 million in cash compensation was collected by the top paid executive at each of these 82 hospitals. Consider some specific examples: Banner Health of Phoenix paid out $34 million to just two executives. The CEO at Houston’s Memorial Hermann made $18.6 million. Ascension Health in St. Louis paid its chief executive $13.6 million and almost $60 million over four years. These salaries, bonuses, and stock options are being paid out while millions of working Americans are buried in huge medical debts and physicians are struggling to pay six-figure medical school debts.
And, it doesn’t stop there. Some hospitals are marking-up bills by as much as 1,000 percent. A recent report in Health Affairs indicated many hospitals are charging out-of-network and uninsured patients, as well as auto and workers’ compensation insurers, more than ten times what Medicare charges. Why is a CT scan in the United States five times more expensive than in Canada? Is the CT scan in the U.S. of much better quality? Of course not. Why is a teaspoon of Maalox in the hospital $12? That’s more than the entire bottle costs at Walgreen’s! How about $9,000 for a pair of surgical scissors? Where are they operating, at Trump Tower?
Monopolies lead to high prices and poor-quality goods. That’s basic economics and explains why socialism has never worked (state monopoly). Why then do we tolerate monopolies in health care that lead to a trillion dollars of waste, fraud and inefficiency? The health insurance companies are shielded from competition by the politicians in Washington who endorse the back of their campaign contribution checks. Hospitals are increasingly merging with others into bigger and bigger behemoths, stifling competition and hiking prices. Big Pharma stuffs the pockets of our Congress members and senators so there is no price competition from importing prescriptions from abroad.
Just like in our educational monopoly where the money is scooped up by overpaid administrators and bureaucrats — not teachers — our health care system operates in the same way. The money isn’t going to the physicians and surgeons, it’s going to the health insurance company and hospital CEOs and their byzantine bureaucracies of paper-shufflers and billing battalions.
Isn’t it time for drastic reform now? It’s time for “Health Care by the People, for the People” based on the direct primary care model. It’s time that health care worked for the rest of us.
About Dr. James Veltmeyer
Dr. James Veltmeyer is a prominent La Jolla physician and author of “Physician on a Mission: Dr. Veltmeyer’s RX to Save America.” He was voted “Top Doctor” in San Diego County in 2012, 2014, 2016, 2017, and 2019. Dr. Veltmeyer can be reached at [email protected] and by visiting his website at drveltmeyer.com.
