Health care wastes up to $850 billion a year

The U.S. health care system is just as wasteful as President Barack Obama says it is, and proposed reforms could be paid for by fixing some of the most obvious inefficiencies, preventing mistakes and fighting fraud, according to a Thomson Reuters report released on Monday.

The U.S. health care system wastes between $505 billion and $850 billion every year, the report from Robert Kelley, vice president of health care analytics at Thomson Reuters, found.

One example — a paper-based system that discourages sharing of medical records accounts for 6 percent of annual overspending.

Some other findings in the report from Thomson Reuters, the parent company of Reuters:

• Unnecessary care such as the overuse of antibiotics and lab tests to protect against malpractice exposure makes up 37 percent of health care waste or $200 to $300 billion a year.
• Fraud makes up 22 percent of health care waste, or up to $200 billion a year in fraudulent Medicare claims, kickbacks for referrals for unnecessary services and other scams.
• Administrative inefficiency and redundant paperwork account for 18 percent of health care waste.
• Medical mistakes account for $50 billion to $100 billion in unnecessary spending each year, or 11 percent of the total.
• Preventable conditions such as uncontrolled diabetes cost $30 billion to $50 billion a year.

"The average U.S. hospital spends one-quarter of its budget on billing and administration, nearly twice the average in Canada," reads the report, citing dozens of other research papers.

"American physicians spend nearly eight hours per week on paperwork and employ 1.66 clerical workers per doctor, far more than in Canada," it says, quoting a 2003 New England Journal of Medicine paper by Harvard University researcher Dr. Steffie Woolhandler.