The current economic problems facing the United States are a major concern. Most Americans are aware that a significant part of the problem is wasteful or excessive spending. A new study by UCLA researchers has found that a whopping $750 billion is lost each year to wasteful or excessive healthcare spending alone. The findings were published online on October 26 in the American Journal of Preventive Medicine; they will appear in the December print edition.
In their report, Frederick J. Zimmerman, professor and chair of the department of health policy and Management at the UCLA Fielding School of Public Health, and colleagues not only describe the significant waste but also note how that $750 billion could benefit Americans. “If cut from current health care 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,” noted Dr. Zimmerman. He added, “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.”
Dr. Zimmerman admitted that different observers would likely have different priorities regarding the alternative uses toward which the wasted expenditures could be directed; however, he noted that all would agree that the alternatives proposed in this study have inherent social value. “When the fastest-growing part of the economy is also the least efficient, the economy as a whole loses its ability over time to support our current living standards,” noted Jonathan Fielding, a UCLA professor of health policy and management and director of the Los Angeles County Department of Public Health, who is a co-author of the study. He added, “The US has become irrationally attached to its inefficient health care system. Recognizing the opportunity costs of this attachment is the first step in repairing the system.”
The researchers presented one scenario of how that money could be used:
- More than $410 billion per year (55% of the savings) could be returned to the private sector for individuals and companies to use as they please.
- Another $202 billion (27%) could go toward deficit reduction, yielding a greater reduction than the congressional “super committee” sought and failed to achieve.
- An additional $104 billion (14%) could support additional investments in human capital and physical infrastructure. Dr. Zimmerman provided an example. He noted, “The Head Start program could be doubled in size, universal preschool could be provided, average class size could be reduced from 22–25 to 13–17 students. And trained nurses could conduct regular home visits for high-risk pregnancies.”
- A small percentage of the savings (2% or $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.
- 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.
Dr. Fielding cautioned that freeing up this money would be a daunting task. He explained that these excess expenditures will be difficult to reduce because the costs are spread across many groups, and the financial beneficiaries are coordinated, clear-minded and powerful. He noted that overcoming this resistance will require 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 with the others. He added that regardless of one’s values and preferences, “eliminating excess medical care costs provides a monumental opportunity to reallocate those resources to strengthen our international competitiveness, enhance our well-being and build a healthier nation.”
Dr. Fielding said that the result of redirecting some $750 billion per year could be transformative for Americans, and the potential uses for these funds are panoramic in both scope and possibility. He explained, “This will not be an easy fight, but we believe reconceptualizing our excess health care spending by looking at its opportunity cost to society is an important first step.”
A video of the group’s research is available online at this link.
The complete report is available at this link.