Institute of Medicine Archives | Heartland Health Research Institute

Potential Health Myth Three: Current Repeal, Replace or Repair Obamacare will Fix Healthcare System

Posted on: 07.18.17 By: David P. Lind

Note: This is the third blog from my ThinkPiece article in the Des Moines Business Record. Here are blogs one and two.

Attacking healthcare’s true cost-drivers – such as unhealthy lifestyles, chronic diseases, misaligned payment incentives to health providers, ineffective and unsafe care, uncoordinated care, and powerful lobbying activities that protect many of these cost-drivers – continue to percolate below the surface and remain mostly hidden from public scrutiny. In some cases, badly-needed policy action is required. One major cost-driver is waste, estimated by the Institute of Medicine to be about 30 percent of health spending on unnecessary services, excessive administrative costs, fraud and many other issues. We are far from resolving these problems.

Employer-sponsored insurance covers about 56 percent of the U.S. population, roughly 147 million people. This number dwarfs the individual markets around the country, with the ACA covering about 20 million Americans. Additionally, employers cover more people than Medicare and Medicaid combined. Because of this, employers have a great deal of power and influence over healthcare reform efforts. For progress to be made, employers will need to coalesce diffused whispers into one loud voice when pushing for similar priorities to control costs and enhance quality. Waiting for the healthcare industry to reform from within will never happen, as it will take purchasers and outside players to disrupt a highly dysfunctional non-system.

The goal of any healthcare reform effort should include the central focus of improving efficiencies over the entire system, not just with insurance markets. To be fair, the ACA does provide experimentation within Medicare to leverage payment incentives to encourage coordinated care, but much more disruption is needed.

The Skinny: Insurance costs are nothing more than a derivative of healthcare costs. Focusing on the symptoms and ignoring the root cause(s) will not reform nearly one-fifth of our economy. Real, meaningful reform begins with establishing broader coalitions to address the key cost-drivers that make healthcare delivery so fragmented and costly. The result of this reform will eventually make insurance options more affordable for all payers.

To read the entire ThinkPiece article from the Des Moines Business Record, you can find it here.

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Time to Move Upstream and ‘Invest’ in our Health

Posted on: 11.21.16 By: David P. Lind

Authors: David P. Lind and Yogesh Shah, MD, MPH

Employer-sponsored health premiums in Iowa have increased 215 percent since 1999. This growth, however, appears tame when compared to health insurance plans sold in the individual market. We’ve grown so accustomed to rising health costs that it has become the ‘new normal’ with no apparent silver bullet in sight to remedy the core problems. Healthcare costs continue to outpace general inflation, typically by two-to-three fold. We live with constant anxiety about paying more for our healthcare – whether through taxes, premiums, deductibles and/or other out-of-pocket expenditures.

With the advent of a new Trump administration geared to repeal many Obamacare components, all sorts of health insurance “solutions” will be debated. Ideas to make coverage more competitive include selling policies across state lines, pushing for health savings accounts, and relying on other tax incentives to perform magic. However well-intentioned, belief that the insurance component will somehow fix our cost problem is wishful thinking.

The major source of this problem is our unhealthy population. “Upstream” environmental factors greatly impact our “downstream” health. for all of us. Upstream factors are many – primarily poor nutrition, inadequate housing and education, and low incomes – all considered to be social determinants of our health.

To meaningfully address healthcare costs in Iowa and nationally, we must be willing to consider new approaches and develop a mindset that transcends party politics. This may sound counterintuitive, but to reign in ever-increasing healthcare costs and enhance better population health, we should explore new solutions ‘upstream’ to invest in our collective health and well-being. This is not about implementing ‘socialized medicine.’ It’s about using our limited resources more wisely on key determinants of overall health that can ultimately improve health and control healthcare costs.

Healthcare Spending

In 2014, we spent 17.5 percent of our economy on healthcare, reaching $3 trillion annually. By comparison, in 1960, we spent only five percent on healthcare. One disturbing estimate by the Institute of Medicine shows about one-third of our healthcare spending – or $1 trillion – is widely considered wasted spending, money that can be better invested elsewhere.

Should healthcare costs dominate such a large segment of our economy? If so, shouldn’t we be healthier than other nations based on what we spend? On a per capita basis, the U.S. performs poorly on many key health indicators. For example, our country has lower birth weight, higher maternal and infant mortality, as well as higher incidents of injuries, obesity, diabetes, heart disease, chronic lung disease, disability rates, mental illness and, surprisingly, shorter life expectancy. In addition, we have more drug-related deaths than other industrialized countries.

With these in mind, one would think that most comparable countries must be outspending the U.S. on healthcare services. The facts are quite the opposite. In 2009, our country spent 16.3 percent of its gross domestic product (GDP) on healthcare, about six percentage points higher than the average 10.3 percent spent by 10 other industrialized countries. Yet, our growing appetite for more healthcare spending results in poorer health outcomes. This is both puzzling and frustrating – for policymakers, taxpayers, employers and their employees.

Social Services (Community Health) Spending

Instead of focusing on how to pay for healthcare – a perpetually-growing segment of our economy – we should re-direct our limited resources to impact basic social determinants of health, such as targeting education, housing, nutrition and poverty. Unlike healthcare, U.S. public spending on social services falls far below other developed nations. In 2009, the U.S. spent 9.1 percent of its GDP for aggregate social services versus the average of 15.8 percent spent by all 10 other wealthy countries.

When combined, U.S. healthcare and social services spending ranks in the middle of the pack of peer countries, with a disproportionately higher amount spent on healthcare than on social services.

The U.S. is the only wealthy country where healthcare spending accounts for a greater share of GDP than social services spending – an “imbalance” our country has embraced. Over decades, we’ve allowed soaring healthcare costs to smother the necessary investments we must make to improve our community health. In other words, our country inefficiently relies on medical care and insurance to address problems that we fail to address upstream, at their source. An insightful reference on this subject comes from a book written by Elizabeth H. Bradley and Lauren A. Taylor – The American Health Care Paradox…Why Spending More is Getting Us Less.

What can we learn from this?

High healthcare spending in the U.S. has far-reaching economic consequences, such as wage stagnation, personal bankruptcy and budget deficits. Extensive evidence suggests that making the right investments in social well-being substantially improves population health outcomes downstream. For example, housing vouchers, home energy assistance and the availability of supermarkets in low-income areas are known to reduce obesity, diabetes and nutritional risk in children. In addition, availability of prenatal and infant nutritional assistance is associated with reduced infant mortality.

Realistically, the American culture has had little appetite for becoming more ‘socialized’ in tackling upstream problems, relying instead on the national ideology that spending more on healthcare will solve our health woes and improve health outcomes. But for meaningful change to occur, balancing healthcare with social determinant strategies must emerge both nationally and locally here in Iowa. The Iowa Healthiest State Initiative, a nonpartisan, nonprofit organization, is just one example of attempting to improve the physical, social and emotional well-being of our Iowa communities. This initiative is a good start, but other bold private and public initiatives need to be undertaken for real positive change to occur in healthcare outcomes.

Investing in our health upstream makes a great deal of sense. Spending for the ‘right’ community measures that impact health will provide better health outcomes for Iowa and our country. Such expenditures will take time to translate into positive health outcomes but we need to start investing now. The result may be cost-shifting from inefficient healthcare spending to re-allocating funds for social determinants that matter most, such as nutrition, adequate housing and education. By doing so, we will make our communities and state both healthier and more productive.

Controlling health costs and improving population health – we cannot have one without the other.

Medical-Error Fatalities in Iowa? Here’s a Calculated Guess – Up to 4,300 Iowans Annually

Posted on: 04.15.15 By: David P. Lind

…Yes, an’ how many deaths will it take until he knows
That too many people have died?
The answer, my friend, is blowin’ in the wind
The answer is blowin’ in the wind.
Bob Dylan, Blowin’ in the Wind

In healthcare, we have oceans of data but only puddles of useful information. The data comes in various forms, typically from healthcare providers who care for us and from the insurance vendors who enroll and cover us. Without question, the data generated within our healthcare system is abundantly voluminous.

During the last year, I have spent time writing and presenting about preventable medical errors. I recently was asked by two individuals (one representing the insurance industry and the other employed within the healthcare provider community) to render a guess about specific medical error data within Iowa borders – relating to the number of patients who were lethally harmed. I assured them that I could not find anything local – only national estimates were available. With this said, national patient safety experts, such as Dr. Ashish K. Jha, Dr. Peter Pronovost, Dr. Don Berwick and Rosemary Gibson, among many others, confirm that patients harmed in our country is nothing short of a national epidemic.

In a strange way, this request was similar to the Wizard of Oz being asked to provide a heart, brain and invoke courage. But in this particular case, I was asked to unearth local data about the medical errors found in Iowa. I suspect not even the Wizard could provide this treasure trove of critical public information!

But, out of curiosity, what IF we backed into these numbers using national estimates? After all, national data on medical errors are estimations that emanate from available (but imperfect) empirical knowledge.

Yes, many types of national and local organizations are working diligently to make our healthcare delivery system safer. But until we have a true measurement on the actual prevalence of medical errors to serve as a starting point on a local and national basis, how can we possibly improve or assume progress is being made? For example, are we measuring ‘process’ rather than ‘outcomes’? Are study methods rigorously evaluating improved care in a transparent way? To legitimately improve quality outcomes, we must measure what matters most, not just what is most convenient. Easier said than done, but many times we confuse activity with progress, which only prolongs egregious results.

From information found in past studies, reports and evidence, we do know that about 25 percent of all patients are harmed in our country by medical mistakes. The Institute For Healthcare Improvement estimated 15 million medical mistakes occur in our hospitals each year. In 1999, the Institute of Medicine (IOM) released ‘To Err is Human,’ suggesting that perhaps as many as 98,000 Americans die in our hospitals each year as a result of preventable medical errors. In 2013, another report was published in the Journal of Patient Safety conveying that up to 440,000 Americans die in our hospitals due to these mistakes.

So which number is most accurate – 98,000 or 440,000? We simply don’t know. Dr. Lucian Leape, a physician and professor at Harvard School of Public Health and a pioneer on patient safety, was a key contributor to the IOM estimates. Dr. Leape has since acknowledged the 440,000 estimate is more likely to be accurate.

Using federal and state data from the Kaiser Family Foundation website, total hospital admissions in the U.S. during 2012 was 34.8 million. Of this, Iowa had about 340,000 total facility admissions, a number substantiated by Iowa Hospital Facts.

By calculating the death per admissions nationally, using 98,000, 440,000 and an arbitrarily-selected mid-point of 250,000 lives, we can then use each ‘conversion’ factor to determine what the estimated fatalities are for individual states based on each national estimate.*

The slide below illustrates the estimated number of medical error fatalities for Iowa and five neighboring states, using the three national estimates. When factoring the 98,000 fatalities as reported by the IOM, Iowa would have an estimated 959 lives lost annually within our hospitals due to preventable medical errors. This number is similar to the population of the city of Lansing, Iowa. If national fatalities are about 250,000 lives annually, a calculation of 2,444 patients die annually within Iowa, or about the size of the city of Kalona. Finally, the 440,000 estimate equates to about 4,300 Iowans dying annually due to hospital medical errors – roughly the size of the city of Jefferson.

Within the slide, due to the larger populations of Minnesota, Missouri and Illinois, Iowa compares favorably with lower-estimated fatalities. However, the estimated fatality numbers found in Iowa are greater than those found in the less-populated states of Nebraska and South Dakota.

If any of the guesstimates are correct in the next 10 years, Lansing becomes the size of Norwalk, Kalona the size of Marshalltown and Jefferson the size of Ankeny. Isn’t it time to start reporting, measuring and documenting ‘actual’ data and stop guessing and theorizing? Unfortunately, we live with faceless statistics when it comes to medical errors.

Bob Dylan had it right. How many more lives have to be lost before we do the right thing?

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*CAUTIONARY NOTE: Using the same national factor for every state assumes that outcomes from each state are equal to one another, which is a BIG assumption. Thanks largely to the Dartmouth Atlas of Health Care, we do know that care-quality varies wildly in different parts of our country, state and even across town. Healthcare, like politics, is all local, but we don’t know whether using a national norm is better or worse than the Iowa ‘norm’ because fatality metrics due to medical errors within each state are elusive. Therefore, quality-adjusted care was not baked into these estimates.

Confronting THE ‘Silent Killer’

Posted on: 03.04.15 By: David P. Lind

Keeping silent. What IS the third leading cause of death in the U.S.?

The safety of the people shall be the highest law.
Marcus Tullius Cicero

A democratic society values freedom of speech, protection from harm and unjust imprisonment. Unfortunately, one of these values has been glaringly absent for some time.

While preparing this particular blog, I am reminded that countless towns, cities and states have silly, if not outrageous ordinances and laws. Take Iowa – some laws have been on the books for many years and are grossly outdated – most likely due to oversight or just plain laziness. For example:

A man with a moustache may never kiss a woman in public.
One-armed piano players must perform for free.
Kisses may last for no more than five minutes.
In Dubuque, any hotel in the city limits must have a water bucket and a hitching post in front of the building.
Marshalltown forbids horses to eat fire hydrants.

If these comical, yet ridiculous laws are still in existence (some are now repealed), can you imagine just how many ‘violations’ have occurred since they were implemented? Having such laws or ordinances legislated to control harmless acts within our towns and state borders are quite meaningless, don’t you think?

So then, why are we not concerned about having legitimate legislation that attempts to protect every patient from harm, even when the harm is mostly ‘silent’ and assumed to be unintended? Allow me to explain…

If the Centers for Disease Control (CDC) were to include preventable medical errors in hospitals as a category, it would be the third leading cause of death in the United States, behind heart disease and cancer. When it comes to reporting these mistakes around the country, however, doctors and nurses have been fired when they speak up. This code of silence is, to say the least, deafening. Medical errors, no doubt, have become THE ‘silent killer.’

In its 1999 “To Err Is Human” report, the Institute of Medicine (IOM) called for a nationwide, mandatory reporting system for state governments to collect standardized information about “adverse medical events” resulting in death and serious harm. Interestingly, this call for a national reporting system was not implemented.

However, as of November 2014, 27 states and the District of Columbia now have variations of authorized adverse event reporting systems. Oregon’s reporting system is voluntary. As of this January, Texas now reports such events. Many of Iowa’s neighboring states, such as Illinois, Minnesota and South Dakota have reporting requirements.

What about Iowa? Not much.

To improve the care we receive, we first must understand how prevalent this problem is in Iowa and elsewhere. In 2010, Harvard published a report in the New England Journal of Medicine indicating that about 25 percent of all patients are harmed by medical mistakes. In 2014, Massachusetts completed a survey of its residents and determined that 23 percent received medical errors.

So are preventable medical errors in Iowa similar to these alarming reports, or is care provided within our borders somehow insulated from the dismal results found elsewhere? That becomes the big question – we simply don’t know. In Iowa, we have no independent trusted source to publicly provide ongoing transparency about this ‘silent killer.’

A quote from noted cancer surgeon, Dr. Marty Makary, refers to the importance of openness and transparency – which easily applies to this particular subject matter:

“Health care costs are not going to be reigned by different ways of financing our system, but by making it more transparent so that patients can fix the system. I’m convinced that the government is not going to fix health care. And doctors are not going to fix health care. It’s going to be the patients.”

There are different ways to scale over this ‘Wall of Silence.’ Perhaps a good, first step may be to establish reporting requirements, much like the other 27 states are now doing. By taking this approach, health workers who desire to do the right thing by reporting errors can be protected from workplace retaliations. Another, more immediate strategy is to ask Iowans about their experiences – a simple process that establishes a baseline for later, more deliberate, actionable solutions to make safety-of-care a statewide priority. To ultimately improve patient safety and quality, public reporting and provider feedback is critical.

We must not tolerate secrecy and demand ‘sunlight’ within the medical care we receive. A preventable medical error becomes egregiously INTENTIONAL when nothing is done to prevent it from occurring again in the future. By staying quiet, opportunities to learn and improve the quality of care will be lost.

Now, well into the 21st Century, it is time to assess which laws best serve our citizens. Limiting a kiss to five minutes does not have the life-changing consequence when compared to addressing and eliminating THE ‘silent killer’ of our time.

Isn’t it time to take action? I welcome your thoughts on this very important issue.

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Having the BHAG to shoot for the Moon

Posted on: 12.03.14 By: David P. Lind

The BHAG we need in healthcare safety should be nothing short of landing on the moon.

Did you know that up to 440,000 lives are lost annually in our hospitals due to preventable mistakes?

Because of this, we desperately need a Big, Harry, Audacious Goal (or BHAG) to solve this national tragedy, and it cannot happen soon enough. By the way, BHAG was a phrase coined by author Jim Collins.

On May 25, 1961, President John F. Kennedy addressed a joint session of Congress stating that the U.S. should set a goal of “landing a man on the moon and returning him safely to the earth” by the end of the decade. By making this bold statement, Kennedy captured the attention, imagination and collective will of our country. Eight years later, his BHAG was accomplished. Amazingly, we put a man on the moon using 1960’s technology.

In December 1999, the Institute of Medicine (IOM) released a seminal book, ‘To Err is Human: Building a Safer Health System.’ This book raised eyebrows and presumably generated supposed action. Using the annual estimate of 98,000 preventable hospital deaths, the IOM report attempted to galvanize this frightening number of avoidable deaths and set forth a worthy goal: “Given current knowledge about the magnitude of the problem, the (IOM) committee believes it would be irresponsible to expect anything less than a 50 percent reduction in errors over five years.”

Was the IOM goal reached in five years? No. In 15 years? Definitely not. Based on recent reports, preventable hospital deaths in the U.S. are greater than previously understood.

In 2013, the Journal of Patient Safety estimated that up to 440,000 lives may be lost annually in our hospitals due to preventable errors – over four times the number reported by the IOM. This equates to three jumbo jets falling from our sky EACH DAY, incurring 1,200 casualties. Another 10- to 20-times this number are seriously injured in our hospitals due to preventable errors. At best, we are making glacial progress.

Since the IOM report was released, the estimated number of lives lost due to hospital errors is alarming – between 1,470,000 and 6,600,000. Why such a chasm in numbers? Most errors go unreported for various egregious reasons. Our cobbled ‘system’ may kill as many people every eight days than were lost on 9/11 and in the Iraq and Afghanistan wars (9,469). Since 1999, more Americans have needlessly died in our hospitals than had died or were wounded throughout our entire history of wars (2.7 million).

‘To Err Is Human’ suggests that the problem is not bad people working in healthcare, but good people working in bad ‘systems.’ It is ironic that the very system we trust to ‘do no harm’ causes a great deal of lethal harm. Unlike actual jets falling from the sky, lives lost in our hospitals happen silently, one at a time. These fatal errors cannot be managed and improved if they are not first acknowledged and measured. Trust must be earned in healthcare, not blindly given. Without broad and consistent public outrage, this national tragedy will continue to persist with little hope of sustained improvement.

In our 2014 Iowa Employer Benefits Study, a top priority of Iowa employers is patients’ safety of care. Employers correctly perceive the safety issue has been inadequately addressed.

Because healthcare is local, solutions must be local. Hospital board members must insist that patient safety is paramount in setting their hospital’s long-term vision and mission. Their safety culture should permeate throughout the entire organization through policies, decision making, resource allocation, and most importantly, complete public transparency. Embracing this culture with words alone is nothing more than deceptive marketing fluff that silently kills.

If efforts to reach the moon were similar to how we confront safety of care, we would still be floating in boundless black space with little hope of reaching our destination. The BHAG we need in healthcare safety should be nothing short of landing on the moon by having the courageous willpower to get there – just like we did in the ’60s.

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Voices on Hospitals: Efficiency and Coordination of Care among Providers

Posted on: 07.30.14 By: David P. Lind

Evidence remains strong that the U.S. healthcare ‘system’ is not efficient. In fact, according to the Institute of Medicine, about one-third of the $2.6 trillion spent on healthcare in the U.S. in 2010 was identified as being wasteful and inefficient.

In healthcare, cost and quality do not correlate with one another. Some lower-cost physicians (and hospitals) can produce high-quality care, while some high-cost health providers produce low-quality care. As stated in our ‘Voices for Value’ white paper, rewarding and making transparent cost, quality and safety measures will lead to improved efficiency without adversely affecting quality.

Indicator #8: Efficiency

When assessing the efficiencies of hospitals within their communities, Iowa employers give statewide hospitals an un-weighted score of 6.5, or a grade of ‘C.’ When segmented into five regions using size-weighted scores, four regions received ‘D’ grades, while the northwest region received a ‘mid-C’ grade.

Indicator #9: Coordination of Care among Providers

If there is one performance indicator that can be very frustrating to patients, care coordination among providers might be the one most widely criticized.

According to the Agency for Healthcare Research and Quality (AHRQ):
“Care coordination involves deliberately organizing patient care activities and sharing information among all of the participants concerned with a patient’s care to achieve safer and more effective care. This means that the patient’s needs and preferences are known ahead of time and communicated at the right time to the right people, and that this information is used to provide safe, appropriate, and effective care to the patient.”

Within the five Iowa regions, employers view ‘coordination of care’ efforts similar to ‘efficiency’ standards – in other words, no ringing endorsements from employers. Employers give statewide hospitals an un-weighted score of 6.4, or a grade of ‘C.’ When segmented into five regions using size-weighted scores, the northwest region scored a ‘mid-C’ while the other regions received ‘Ds.’

Interestingly, hospitals in Polk County received a failing grade (‘F’) when graded by 144 Iowa employers within that county. Needless to say, key hospitals in Polk County have plenty of room for improvement in this category.

When Iowa employers experience annual premium increases that exceed the overall inflation rate, it is reasonable to expect health outcomes delivered to be at least commensurate with the inflated premiums they pay. Achieving high value for patients must become the overarching goal of our healthcare delivery system, with value simply being defined as “the health outcomes achieved per dollar spent.”

Without question, Iowa employers do not believe they are receiving top value healthcare for what they are expected to pay.

Next week, we will review how Iowa employers graded hospitals on ‘Transparency in Medical Outcomes’ – performance indicator #10 in our “Voices on Hospital” series.

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Voices on Hospitals: ‘Trust’

Posted on: 07.09.14 By: David P. Lind

Regardless of the role we serve – whether personally or professionally – the ‘trust’ factor is critical. In business, trust must be earned. It’s the power-brand that represents the DNA of any organization.

However, I’m not so certain that it’s occurring in our current healthcare ‘system.’

In healthcare, many times trust is blindly given when it is not warranted. To better illustrate this point, the Des Moines Register recently published a story, “Ex-staffer: Risk to 2 patients hidden.”

The story is about Robert Burgin, an infection-control specialist for Mercy Hospital in Council Bluffs. Mr. Burgin resigned his position because his employer was unwilling to tell the truth to patients whose health may have been compromised due to medical mistakes. Based on this article, I commend Mr. Burgin for holding firm with his beliefs that patient safety is paramount.

Secrecy in healthcare hasn’t changed much in 15 years since the Institute of Medicine’s ‘To Err is Human’ book was published. The practice of health providers suppressing similar stories from public knowledge is reprehensible. As patients, we trust our providers to do the right thing, regardless of the circumstances involved. Medical organizations that are sincere about pursuing and maintaining an enduring culture of trust should establish initiatives to emotionally connect with their patients to perpetuate that trust.

Indicator #5: Trusting our Hospitals
‘Trusting our Hospitals’ is our fifth performance indicator. Overall, Iowa employers give statewide hospitals an un-weighted score of 7.2, or a grade of ‘B-.’ When segmented into five regions using size-weighted scores, four regions received a ‘mid-to-high C’ grade while the northwest region graded at a ‘B-.’ Keep in mind, these are ‘average’ scores/grades — some hospitals have better-than-average grades, while others have below-average grades.

Going forward, Iowa hospitals must address whether or not having mid-level grades on ‘trust’ are acceptable. Since competition can be fierce within certain markets, low trust in a particular hospital can adversely impact hospital revenue over time.

Hospitals may advertise their quality – perhaps a national publication has included them in one of their quality rankings. But merely telling the public they provide quality is far different from consistently demonstrating this over the long term.

Given the pressure that Mr. Burgin was under to keep this information hidden, he should be recognized for his courageous intent on maintaining the public’s trust. Why not create a special award for those who demonstrate this selfless quality? We could call it “Profiles in Health Care Safety Courage,” to promote similar actions by other health care workers. I would like to think that this on-going award would be recognized by the media and others who want to help promote the ‘trust’ factor in healthcare. It’s certainly something to think about and I welcome any ideas you may have on this topic.

Trust should NOT be something we randomly give away. It is one performance indicator that can be greatly improved through a systematic and transparent approach. Isn’t it time to do so?

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Healthcare Waste & Inefficiency – an Inconvenient Truth?

Posted on: 03.19.14 By: David P. Lind

The Iowa House and Senate leaders recently announced a joint budget agreement on spending levels for the state of Iowa’s 2015 fiscal year, which begins July 1, 2014. The budget target agreed upon? $6.97 billion – a great deal of money, for sure.

This amount, however, pales in comparison to the net worth of some of the billionaires around the world. For example, when compared to Forbes‘ latest list of the world’s billionaires, the announced 2015 Iowa budget would fall somewhere between #191 and #196 of the most wealthy people on the list. Bill Gates sits atop at $76 billion while Warren Buffett weighs in at the #4 position, with a ‘pithy’ net worth of $58.2 billion.

In short, Bill Gates’ net worth is 11 times greater than Iowa’s annual state budget. A fun fact to recite at tonight’s dinner table, right?

Try this not-so-fun fact: According to a 2010 report from Institute of Medicine (IOM), the U.S. healthcare system wastes about one-third of the $2.6 trillion we all spend on healthcare. This equates to about $765 billion wasted annually — and growing!

According to IOM, the six areas of waste and inefficiency are:

Missed Prevention Opportunities – $55 Billion
Unnecessary Services – $210 Billion
Inefficiently Delivered Services – $130 Billion
Prices that are Too High – $105 Billion
Excess Administrative Cost – $190 Billion
Fraud – $75 Billion

Based on these stats, one might reason that our health insurance premiums are about a third higher than they should be. No wonder our health premiums continue to increase more than the consumer price index, year-after-year! Let’s be honest, merely tweaking our insurance plans (by increasing deductibles, copayments, offering limited-provider networks, implementing value-based benefit plans, etc.) will NOT remotely make up the difference that we lose in annual waste.

It is about time that we confront this ‘inconvenient truth’ (thank you, Al Gore) and think differently about truly reforming our healthcare system.

To put the $765 billion of healthcare waste and inefficiency into context with other budgeted costs, consider the following:

The proposed 2015 budget for the Department of Defense is $549 billion.
The president’s 2015 budget proposal would run a deficit of $561 billion.
The proposed 2015 budget for Education is $1.014 trillion.
As mentioned earlier, the 2015 State of Iowa fiscal year budget is $6.97 billion. That puts national healthcare waste about 110 times greater than Iowa’s state budget EACH YEAR!

So, the next time you wonder why your health insurance premiums and out-of-pocket healthcare costs are so high, you might remind yourself that we currently live with a VERY wasteful healthcare system that is in desperate need of an efficient and high-value care transformation.

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