09/25/2012 08:16 am ET Updated Nov 25, 2012

The Truth About Health Care Costs

Whether we are Democrats or Republicans, all Americans can agree that our health care costs are unsustainable -- and the sooner we acknowledge that, the better. A new report from the Institute of Medicine reveals the truth about the way our health care dollars are spent. The IOM committee, made up of 19 members from various organizations, including the Carnegie Foundation, Harvard Medical School, University of Pennsylvania School of Nursing, and private health care systems from across the nation, points out that "the U.S. health care system squanders $750 billion a year -- roughly 30 cents of every medical dollar -- through unneeded care, Byzantine paperwork, fraud and other waste." The main areas of waste, including unnecessary services ($130 billion), excess administrative costs ($190 billion), inflated prices ($105 billion), prevention failures ($55 billion) and fraud ($75 billion), expose a status quo in health care that is shockingly inefficient and wasteful.

Flaws in the current system of cancer treatment contribute to this unnecessary spending. Too many diagnostic scans, too many blood tests, and too many medical procedures are costing our nation's health care system at least $200 billion annually.

As Mark Smith M.D., the Chair of the IOM committee, said, "We're spending money in ways that don't seem to improve people's health."

The good news is, as the report details, health care costs can be cut, without sacrificing quality. In fact, the quality of care may actually be enhanced. According to the IOM, eliminating wasteful spending for just one year ($750 billion) would be "equal to more than 10 years of Medicare cuts" under the ACA and "more than enough to care for the uninsured."

The IOM had many practical recommendations to improve health care and contain costs, such as the adoption of digital systems to collect patient data and making it more widely available, setting better standards of care, and eliminating unnecessary medical tests.

Revising the HIPPA (Health Insurance Portability and Accountability Act) to make it less burdensome for health care facilities to share patient data and for doctors and researchers to access it would also make health care more cost-effective. Clinical data could be more readily shared, and that would streamline patient care and clinical research.

One of the sources of waste listed by the IOM is "prevention failures." Prevention is probably the most cost-effective way to reduce health care costs, and improve the health of millions of Americans. Yet, just five cents of every health care dollar we spend goes towards prevention efforts for cancer, heart disease, and diabetes -- the diseases responsible for 7 out of 10 deaths and 75 percent of the nation's health care spending. For cancer, in particular, we fall woefully short: Only 2 percent ($232 million) of the $5 billion budget of the National Cancer Institute is dedicated to prevention and early detection of cancer.[1] In 2010, an estimated $125 billion was spent for the direct costs of cancer treatment, including fees for physicians and hospitals. Factor in the indirect costs of cancer, due to loss of employment and lost productivity, and the costs skyrocket to $264 billion in 2010. So, cancer costs the United States 400 billion dollars a year and still we do not focus enough attention on the smartest, most cost-effective approach: prevention.

Just recently, the House of Representatives voted 236 to 183 to repeal the Affordable Health Care Act's Prevention and Public Health Trust Fund. This fund was designed to prevent disease, promote wellness, and protect against public health emergencies, on a community and state-wide basis. Critical objectives included: establishing programs for obesity and tobacco use control, training the nation's health workforce, improving vaccine systems, and fighting health disparities.

Clearly, the repeal of this legislation is a setback for the first attempt to dedicate funding to national prevention efforts.

Scientific evidence indicates that attention to diet, exercise, limiting alcohol, ending smoking and taking vitamin D all contribute to a cancer-free life. At least 50 percent of all cancers could be prevented by applying these basic changes. With the support of the federal government, that percentage could grow. Environmental toxins that increase cancer risk could be eliminated, and more funding could be dedicated to finding safe new ways of detecting cancer in its earliest stages.

Prevention saves lives and money. The IOM concluded that, "By one estimate, roughly 75,000 deaths might have been averted in 2005 if every state had delivered care at the quality level of the best performing state."

The Trust for America's Health, a non-profit, non-partisan organization dedicated to making disease prevention a national priority, reported that every $1 spent on proven community-based programs for prevention could yield a return of $5.60. In addition, a stronger, more vibrant society saves money in lost productivity and a variety of interventions needed to support an ailing workforce.

We have the chance to end spiraling health care costs, and the shameful waste that currently exists. We should demand the enactment of the Prevention and Public Health Trust Fund, and commit as a nation to the prevention of diseases.

America cannot afford to do less.

For more by Margaret I. Cuomo, M.D., click here.

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Margaret I. Cuomo, M.D. A World Without Cancer: The Making of a New Cure and the Real Promise of Prevention. Pennsylvania: Rodale Books. 2012