Broken, Bankrupt, and Dying: How to Solve the Great American Healthcare Rip-off by Brad Spellberg

Author:Brad Spellberg
Language: eng
Format: epub
Publisher: BookBaby
Published: 2020-06-01T19:40:13+00:00

☤☤☤☤☤

I mentioned Dr. Don Berwick’s review of waste in the US healthcare system in chapter 2. He and his colleague estimated that in 2012, the US healthcare system spent more than $900 billion (inflation-adjusted to more than $1 trillion in 2018 dollars) on pure waste.4 Waste in healthcare has been the subject of a number of other studies since then, all of which have agreed with their general conclusions.

The most recent analysis was published in 2019 in the leading medical journal JAMA. The study was authored by Drs. William Shrank, Teresa Rogstad, and Dr. Natasha Parekh. The latter two authors were academics based at the University of Pittsburgh Medical Center. Interestingly, the first author, Dr. Shrank, worked for the for-profit, health insurance industry giant, Humana.

Just for context, Humana earned $60 billion in revenue from July of 2018 to June of 2019, which was a 14 percent increase versus the year before.5 However, like many companies in the healthcare industry, Humana has been under cost pressure. As costs of healthcare have risen, their profit margin has fallen. While Humana’s revenue rose 14 percent in 2018, their costs rose by more than 14 percent. As a result, in 2019, Humana reported that its annual profit for 2018 fell below analysts’ expectations due to higher costs, causing the stock price to dip.6

Before you become concerned that Humana may end up in the poorhouse, their net profit fell to “only” $1.7 billion.7 So…they’re still doing okay. But since their costs are rising, putting pressure on their profits and therefore stock price, do you think that may be why even a health insurance industry giant like Humana is now interested in eliminating medical waste?

The study by Shrank and colleagues reviewed more than fifty separate peer-reviewed publications on waste in healthcare. From this review, they gleaned an estimate that waste costs the US healthcare system between $760 and $935 billion per year. In an accompanying editorial, Don Berwick pointed out that some additional types of waste were not evaluated, and adding in those additional wastes would likely push these numbers over a trillion dollars in waste per year, accounting for a third or so of total healthcare spending in the US.8 So, nothing changed between 2012 and 2019. We haven’t advanced. We haven’t gotten better. We’re still as wasteful and unnecessarily expensive as ever.

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