Medicare ‘cut’ nothing compared to waste

Have you heard the one about how President Barack Obama tried to "cut" Medicare by $716 billion over 10 years?

The money helped fund the Patient Protection and Affordable Care Act, which Republicans derisively call ObamaCare. And those same Republicans are extremely upset at the "cut" to Medicare, which as everyone knows they love and want to "save." You know, as a voucher program.

In reality, the $716 billion did not cut care for Medicare patients - not a single Band-Aid, aspirin or IV tube was lost. Instead, the "cut" was reducing payments to health-care providers, insurance companies and other administrative costs.

And as it turns out, the president could have gone further. A lot further.

The Institute of Medicine, part of the National Academy of Sciences, released a report recently that found the amount of money wasted in the American health care system reached $750 billion - in a single year!

According to the report, in 2009, $210 billion was wasted in providing unnecessary services, $130 billion in "inefficiently delivered services," $190 billion in "excess administrative costs," $105 billion in charging prices that are too high, $55 billion because of missed prevention and $75 billion in fraud on the part of insurance companies, doctors and patients.

President Obama's health care law cut $716 billion over 10 years; the Institute of Medicine found $75 billion in a single year. If that amount of waste happens every year, we could save $750 billion by eliminating fraud alone.

"Health care costs have increased at a greater rate than the economy as a whole for 31 of the past 40 years, and now constitute 18 percent of the nation's gross domestic product," the report says. "The growth in health-care costs has contributed to stagnation in real income for American families. ... These high costs have strained family budgets and put health insurance coverage out of reach for many, contributing to the 50 million Americans without coverage."

(That number will be falling soon, as the Affordable Care Act takes effect.)

"In addition to unsustainable cost growth, there is evidence that a substantial proportion of health care expenditures is wasted, leading to little improvement in health or the quality of care," the report says.

That's one of the reasons Obama used savings in the Medicare program to pay for the priorities in his plan. And while the Institutes of Medicine did acknowledge that there may be some overlap in those categories, the numbers "suggest the significant scale of waste in the system."

How much? Enough to cover the 2009 Defense Department budget with change left over. Enough to pay for all the roads, railroads, telecommunications, drinking water and other infrastructure we bought in 2004 with change left over. Enough to pay the salaries for all the cops, firefighters and EMTs in the nation for more than a decade.

And it's enough to buy everybody in the workforce in 2009 a good health insurance policy.

The report covers a lot more than waste: it urges the creation of a "learning" health care system where we harness technology (including computerized medical records) to study, analyze and learn from how we provide care. It calls for everybody in the system - doctors, nurses, insurance companies, and patients - to work together to reform the system to reward good outcomes at the lowest possible cost. The recommendations are well worth following, even with the implementation of the president's health care reform.

But that $716 billion over 10 years, now working to provide health care rather than going to waste? Turns out it's chump change compared to what we could save.

Steve Sebelius is a Review-Journal political columnist and author of the blog slashpolitics.com. Follow him on twitter (@stevesebelius) or reach him at (702) 387-5276 or ssebelius@reviewjournal.com.