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Unnecessary costs contribute to price of health insurance

The debate over healthcare reform in the U.S. has often focused on trimming costs from the current system in order to make health insurance policies more affordable.

More than $1.2 trillion is spent each year on healthcare, and a recent report by notes that there are plenty of opportunities for cost-cutting within this figure. For example, the article says that up to $210 billion is wasted on over-testing that is ordered by doctors who are increasingly worried about being sued.

“Sometimes the motivation is to avoid malpractice suits, or to make more money because they are compensated more for doing more. Many are also convinced that doing more tests is the right thing to do,” the report quoted Dr Arthur Garson, former dean of the University of Virginia medical school, as saying.

Other potentially wasteful factors that contribute to higher health insurance premiums are said to include inefficient processing of claims forms, which is thought to account for over $200 billion in unnecessary spending, while ignoring doctors’ orders reportedly accounts for about $100 billion in unneeded expenditures, along with unwarranted emergency room visits, which apparently cost the system about $14 billion – slightly less than the $17 billion said to be lost to medical errors.

An article by Women’s Health cites some of the same factors in looking at trimming costs from the healthcare system.

The magazine notes that administrative costs account for about one-third of all U.S. healthcare expenditures, and that the current system is often geared more toward treating a disease rather than on the potentially more cost-effective strategy of preventing it in the first place. One statistic cited says that by investing about $10 per person each year on healthy living programs, about $16 billion could be saved from the current system.

However, not everyone is sold on the possible money-saving effects of preventive care. For example, Congressional Budget Office director Douglas Elmendorf recently wrote to members of Congress warning that this method could actually lead to unexpected costs.

“When analyzing the effects of preventive care on total spending for health care, it is important to recognize that doctors do not know beforehand which patients are going to develop costly illnesses. To avert one case of acute illness, it is usually necessary to provide preventive care to many patients, most of whom would not have suffered that illness anyway,” wrote Elmendorf.

When it comes to saving money on health insurance premiums, the Women’s Health article notes that healthcare costs may be tax deductible if they add up to 7.5 percent or more of one’s income, and that other useful strategies can include negotiating with insurance companies and enlisting the aid of a patient advocate.

The costs particularly add up when considering statistics from the National Coalition on Health Care NCHC) which found that the U.S. is expected to spend 20 percent of its gross domestic product on healthcare by 2017, up from 17 percent in 2008. By 2016, the dollar amount of healthcare spending is expected to reach $4.3 trillion, according to the organization.

The NCHC also says that the U.S. spends six times more per capita on healthcare administration costs than many western European nations, and that there is about $480 billion in excess spending in the system each year.

Finally, a recent report on notes that there is also a growing chorus in the medical community calling for patients to be held more accountable for their own choices, which could potentially hold down costs in the long run.

“Having health insurance coverage doesn’t make a person healthy. It’s what you do with that coverage and your personal choices that make the difference,” MSNBC quoted former healthcare administrator Lisa Herrington as saying.

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Posted: August 11, 2009

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