Healthcare Reform: How much healthcare is wasteful?

Weighing hospital bills
America has the most expensive healthcare in the world. More money is spend on healthcare here than in any other country.

But, how much of our healthcare is wasteful or of unproven value? Before you read more, jot down your estimate!

One reason for our expensive healthcare is the piece-rate system of payment for healthcare providers. Doctors are paid for the services they render, not for the results they achieve. Experts assembled at University of Michigan’s Ford School of Public Policy agreed that this system has to change.

Don’t get me wrong. I believe that most healthcare providers care deeply about the health and well-being of their patients. But they face a set of incentives that economists love to call “perverse.” They also face patients who insist on expensive diagnosis, and a system of litigation ready to pounce on them.

The result can be money wasted on expensive diagnostics or treatments with unknown or unproven value.

Whole-body CT scans are a good example. CT scans are very helpful for specific uses, but whole-body scans for healthy individuals are expensive and their value is unproven. The U.S. Food and Drug Administration says there are “no data” that whole-body CT scanning or screening is effective at detecting any particular disease early enough for healthy individuals. (Skeptical? Here’s the page at the FDA web site summarizing the FDA’s conclusion.)


Immunizations are at the other end of the cost-benefit spectrum—highly effective yet inexpensive.

So, how much healthcare is waste or care without value?

One panelist estimated that 30% to 50% of the money spent on healthcare falls in this category.

If the upper estimate is correct, it means that healthcare should be 1/3 of our economy, not 1/6.

What do you think? Do agree with these estimates?

Have you had an expensive diagnosis of unproven value?

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