Nearly half of Americans say health care costs are a hardship, according to a December 2014 national poll by the New York Times and CBS News. That’s up 10% from 2013, in large part due to the rising cost of care.
Health care costs are a problem we hear a lot about these days, but it can be useful to review some of the numbers. Without going down the rabbit hole of responsibility, here is a brief overview of US health care spending, waste, and some areas of potential saving.
Spending
According to the Centers for Medicare & Medicaid Services statistics, National Healthcare Expenditure (NHE) is expected to hit $3.207 trillion this year. To put it in perspective, that is about $10,000 for every American or 18% of US GDP. In 1960, NHE was equivalent to just 5% of US GDP.
The problem isn’t just that health care spending has increased so dramatically in the last few decades, it’s that the cost of care has risen disproportionately compared to how much money Americans make. The Institute of Medicine (IOM) of the National Academies says that in the decade before 2009 US health care premiums rose 93% faster than average salaries. If other prices had risen as fast as health care costs since 1945, today a dozen eggs would cost $55.
Waste
Discussing why costs have risen so much would be way beyond the scope of this blog post, but we can identify sources of waste that point us towards potential savings. My favorite explanation of wasteful spending in US health care is an interactive infographic released by IOM in 2011. While the numbers aren’t entirely current (they report NHE for 2009, which was just 2.5 trillion), they break down the problem clearly.
In 2009, one-third of national health care spending was waste, according to IOM. Their report divides this into six categories, the largest being “unnecessary services,” which is closely followed by “excessive administration costs.” They also identify waste in inefficiently delivered services, prices that are too high, fraud, and missed prevention opportunities.
Solutions
It’s easier to identify waste than it is to eliminate it, but addressing specific areas of the industry could reduce costs by $463 billion in the next 10 years. The biggest areas would be streamlining administrative costs and improving hospital efficiency, which could save more than $260 billion (or 8% of 2015 NHE). There are many other areas of saving as well, from decreasing the costs of individual care episodes to preventing avoidable hospital admissions.
The good news is that Mobius Health and others in the mHealth industry are working on many of these potentially cost-saving areas. For example, our Mobius Clinic helps medical practices improve efficiency by streamlining clinical workflow from patient intake to discharge using mobile technology. New innovations like this won’t entirely solve the problem, but they speak directly to the areas in health care delivery with the most waste and the biggest potential for saving.