UCLA Health: Redirect Wasted Healthcare Dollars to Transform America

The national Institute of Medicine estimates that $750 billion is lost each year to wasteful or excessive healthcare spending. This sum includes excess administrative costs, inflated prices, unnecessary services and fraud - dollars that add no value to health and well-being. If those wasteful costs could be corralled without sacrificing healthcare quality, how might that money be better spent?

Frederick J. Zimmerman, PhD, chair of the Department of Health Policy and Management at the UCLA Jonathan and Karin Fielding School of Public Health, and colleagues have some suggestions.

"If cut from current healthcare expenditures, these funds could provide businesses and households with a huge windfall, with enough money left over to fund deficit reduction on the order of the most ambitious plans in Washington," Dr. Zimmerman says. "The money could also cover needed investments in transportation infrastructure, early childhood education, human-capital programs, rural development, job-retraining programs and much more. And it could transform America with little-to-no reduction in the quality of, or access to, healthcare actually provided."

The conclusions of Dr. Zimmerman and his colleagues were published in the American Journal of Preventive Medicine.

In the study, the research group presented one scenario of how that money could be used. More than $410 billion per year - or 55 percent of the savings - could be returned to the private sector for individuals and companies to use as they please. Another $202 billion (27 percent) could go toward deficit reduction, yielding a greater reduction than the congressional "super committee" sought and failed to achieve. An additional $104 billion (14 percent) could support additional investments in human capital and physical infrastructure.

Two percent of the savings ($18 billion) could promote urban and rural quality of life by improving the built environment surrounding schools, expanding and modernizing public libraries, improving wastewater treatment and providing rural development grants to every small town in the nation. Job-training opportunities would be affordable for nearly 50,000 unemployed persons. And under the research group's scenario, the remaining 2 percent of the savings would be devoted to fully funding an extensive wish-list of transportation projects to alleviate road congestion and promote mass-transit alternatives.

Freeing up this money would not be easy. These excess expenditures are spread across many groups, and the financial beneficiaries are coordinated, clear-minded and powerful, says Jonathan Fielding, MD, professor of health policy and management and director of the Los Angeles County Department of Public Health. Overcoming resistance will require a concerted collective action on the part of many economic sectors, governmental agencies and other organizations that are not used to seeing themselves as sharing interests.

But whatever one's values and preferences, Dr. Zimmerman says, "eliminating excess medical-care costs provides a monumental opportunity to reallocate those resources to strengthen our international competitive-ness, enhance our well-being and build a healthier nation."

"A Health Dividend for America: The Opportunity Cost of Excess Medical Expenditures," American Journal of Preventive Medicine, December 2012

 

illustration by Mark Summers
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