Dean CoddingtonThe presidential election is over, meaning no more annoying TV ads, and no more debates. However, that doesn't mean that we won't hear a lot more about bending the cost curve, especially Medicare and Medicaid.

For me, it seems strange to discuss changes in Medicare and Medicaid, and their impact on providers and patients, without acknowledging how much waste there is in the health care system. I prefer the terms inappropriate and unnecessary care.

A physician leader of a large integrated system in the Eastern part of the country emphatically disagreed when I said that 30 percent of everything in health care is inappropriate and unnecessary. He slammed his fist on the table and said, "Dean, you are too low; it is closer to 45 percent."

There are a number of ways to look at this. For example, I am familiar with a primary care group practice that takes care of Medicare Advantage patients for 72 percent of what Medicare would normally pay in a fee-for-service setting; this is for both primary care and specialty services.

McKinsey Global Institute has produced three studies all showing that health care spending in the United States, after adjusting for wealth, was 45 percent higher than would be expected compared with other developed countries; two-thirds of the difference was in outpatient services.

Thomson Reuters refers to waste as healthcare spending that could be eliminated without reducing the quality of care; they estimated this at $700 billion (34 percent) annually for 2006. The biggest category of waste? Unwarranted use, at $250 billion to $325 billion per year.

Then there is the Dartmouth Atlas. Over the past three decades, Dartmouth has highlighted huge geographic variations in Medicare spending. For example, spending on seniors in Florida (adjusted for age and health status) is three times higher than in Colorado. We know from experience that Medicare patients in Casper, Wyo., where there is a physician-owned surgical hospital, are six times more likely to undergo spinal surgery than patients living in the Bronx.

Earlier this year, the Institute of Medicine estimated that waste in the healthcare system was $750 billion, or about 30 percent.

Why don't politicians or healthcare leaders talk about the amount of waste in the system? I have yet to visit to a lay person who would agree that treatments for their own ailments, from diagnostic tests to surgeries, were not necessary. The healthcare industry has done a great job of convincing patients that the care they receive is essential.

However, in looking at the big picture, we see many opportunities for improvement. For example, there have recently been stories in local papers about hospitals being "penalized" for high levels of readmissions. What is rarely mentioned is that given new financial incentives, reductions in readmissions are startling.

So what? I am arguing that we can't have intelligent discussion of health policy issues, like bending the cost curve, without consideration of the huge potential to take waste out of the U.S. healthcare system. I can understand why hospital leaders may be reluctant to tackle this matter; it would lead to a reduction in revenues and earnings and perhaps a drop in public confidence. Specialist physicians would be hard hit financially. Primary care physicians are the key to making this happen, and they are in short supply and usually not adequately compensated for anything other than face-to-face patient care.

Dean is a senior consultant at McManis Consulting in Denver.

Publication Date: Thursday, November 08, 2012