Rita Numerof, PhD
President and Founder, Numerof & Associates

Part of our national debate on healthcare reform is whether or not we can afford it. In fact, it is possible to ensure coverage for all without increasing cost, without increasing taxes, without creating increased debt and without introducing yet another government solution. With the proper incentives, we can easily find $500 billion annually that we’re unnecessarily spending. For starters:

1. The AHRQ has determined that medication errors across hospitals represent $28 billion of annual unnecessary cost. (In a recent AHA News article, one hospital was praised for reducing medication errors from 20% to 8%, ignoring the larger question of how an 8% error rate was acceptable!)
2. A project to reduce length-of-stay (LOS) at one hospital conservatively estimated an annual cost of $75 million for unnecessary LOS. Considering there are over 5700 hospitals in the U.S., better care coordination and corresponding reduction in LOS can easily produce $380 billion in annual savings.
3. Leading hospital executives estimate 30-40% of the care they are providing is clinically unnecessary. Considering over $650 billion of care is annually provided by hospitals, eliminating 15% of that care (vs. 30-40%) represents an annual savings of $100 billion.

The U.S. already spends more money on healthcare than other developed countries on a per capita basis, so spending even more on top of that defies basic logic! The problem isn’t that we’re not spending enough, it’s that we’re not spending it appropriately. As we’ve illustrated, there is at least $500 billion per year that can be redeployed. And this is before we deal with the abuse and fraud in the system.

Additional Comments:

• The distinction is not being made clear between saying that Americans have no health care vs. saying they have no health insurance. The need for insurance is obvious. It protects us from catastrophic financial hits. Health insurance has become different from other types of insurance. This is what we need to reform. We are using health insurance to pay for almost all expenses, not just the catastrophic expenses.
• Unfortunately, insurance is one of the most complex and costly ways to pay for something. If we use health insurance like every other type of insurance, we can eliminate enormous cost that has resulted from our perverted use of insurance.
• In the process of creating the real change we all desire from healthcare reform, we need to be really clear about what we’re changing and why … and what the impacts are likely to be, both intended and unintended. Successful reform will require a planned and coordinated creation of a fundamentally new business model for healthcare … that aligns the financing mechanisms of the industry with the goals of prevention, improved quality, and reduced costs. There is an important role for government in this new business model creation, but it isn’t legislating the new model. We need to change legislation to enable more healthcare insurance competition.
• We need to make certain that consumers are at the center of our new business model. They need to have real economic and clinical value and meaningful outcome information in order to make good cost/benefit choices. And they shouldn’t have to be dependent on their employers for insurance if we eliminate barriers in healthcare insurance and create a truly competitive market space.