It is not controversial to say that Medicare & Medicaid spending is bankrupting the United States. Given that we're already broke, and with Baby Boomers retiring in droves, future bills we can't pay will only make a bad situation worse. An interesting graph published recently by the Economist caught my eye (hat tip, Tim Iacono).
Estimated waste in American health-care spending
America has a talent for wasting money on health care. It has devised many ingenious ways to do this. A patient may see many skilled specialists, none of whom coordinate with one another. Payment systems are unfathomably complex and highly variable. Doctors order duplicative or unnecessary tests. The country excels at treating sick people and does a horrible job keeping them from getting sick in the first place. All these problems, however, are due to a simple, structural failing: the more services a hospital provides, the more it is paid.
You can easily see that unnecessary care leads the field by a wide margin, with fraud and abuse coming in a distant second. I consider myself an educated man, and pretty smart, too. Still, I am perplexed when I try to understand why unnecessary care is not a form of fraud and abuse. I am sure there are fine distinctions one could make to explain the difference, though I'm not particularly interested in them. And then there are the extremely fine distinctions required to separate unnecessary care from avoidable care, not to mention uncoordinated care.
But I digress.
Eyeballing that chart, the U.S. wasted roughly $845 billion (maximum, dark blue) in 2009 on health care. But did we really? Was it all a total waste?
Consider this jobs chart I took from Mike Shedlock's Interactive Map: Employment History Since 2001 by Job Type (Healthcare, Education, Mining, Construction, Finance, Real Estate, etc).
If you look at the top panel (absolute difference in jobs, millions) you will see that new health care jobs (dark red) leads all the other categories by a very wide margin. The percent difference (bottom panel) is right up there too, indicating that the U.S. is adding health care jobs left and right.
Obviously, you must ask yourself an important question: could the U.S. have added all those health care jobs to the economy without those trillions of dollars of waste and fraud over the last decade? No way!
You must stop thinking of "waste and fraud" as waste and fraud. Start thinking of it as integral to the economy. Where would we be without it? Similar remarks apply to the Defense Industry, Big Finance, Insurance, and God Knows What Else.
America is a fraudulent society, and in a fraudulent society, one man's waste is another man's paycheck.
Bonus Video — America, you can't be forever blessed...
I totally agree with you on the health care and DOD. These are both basically giant jobs programs. Any kind of meaningful cut in either health care costs or defense spending is going to cost a lot of jobs. Therefore, don't hold your breath.
I am inclined to disagree with regards to Finance and Insurance. Not that these industries are any less fraudulent. It's just that I don't think they add much in the way of jobs, per se. In fact, the BEA data shows that essentially no jobs (full-time equivalent employment) were added by these industries between 2002 and 2009. I think what they do do is transfer and concentrate wealth without actually adding any tangible, useful, productive value to the society. You could argue that these entire industries have more risk than benefit, that their very existence is fraudulent and, therefore, that any employment in those industries is also fraudulent. But, for all their money and power, they aren't _adding_ much in the way of jobs.
Posted by: Brian M | 06/23/2011 at 12:20 PM