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A Health Dividend for America

The Opportunity Cost of Excess Medical Expenditures
      As of 2010, health care–related expenditures in the U.S. totaled some $2.6 trillion (17.9% of the gross domestic product [GDP]). Year after year, healthcare spending rises at double the rate of overall GDP growth, and total healthcare spending growth consistently outpaces overall inflation. This exuberant growth would be welcome if health care were thriving because of its efficiency. Instead, it is among the least-efficient parts of the economy, and much of the healthcare spending does not improve health outcomes substantially.
      IOM
      The healthcare imperative: lowering costs and improving outcomes.
      Indeed, the IOM recently conservatively estimated that some $750–$765 billion spent on health care in the U.S. is in excess
      The IOM calculated “excess” costs in six domains: unnecessary services, services inefficiently delivered, prices that are too high, excess administrative costs, missed prevention opportunities, and medical fraud. Total excess costs were calculated through three separate methods: extrapolation from geographic variation healthcare expenditures (estimated at $750 billion); comparison of U.S. expenditures with other OECD nations' (estimated at $760 billion); and consensus estimates from IOM workshops (estimated at $765 billion).
      aThe IOM calculated “excess” costs in six domains: unnecessary services, services inefficiently delivered, prices that are too high, excess administrative costs, missed prevention opportunities, and medical fraud. Total excess costs were calculated through three separate methods: extrapolation from geographic variation healthcare expenditures (estimated at $750 billion); comparison of U.S. expenditures with other OECD nations' (estimated at $760 billion); and consensus estimates from IOM workshops (estimated at $765 billion).
      of what should be spent to achieve the observed health outcomes.
      IOM
      The healthcare imperative: lowering costs and improving outcomes.
      Others have estimated the excess to be between $700 billion
      • Orszag P.
      Behavioral economics: lessons from retirement research for health care and beyond.
      to upward of $1.2 trillion.
      PricewaterhouseCoopers Health Research Institute
      The price of excess: identifying waste in healthcare spending.
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