NCPA - National Center for Policy Analysis

Inefficiencies in Health Care Cost Employers $390 Billion a Year

June 11, 2002

A group representing large employers estimates that $390 billion a year is being wasted on outmoded and inefficient medical procedures. In a new report, the nonprofit Midwest Business Group on Health also urges employers and other purchasers of health care to select and reward doctors and hospitals that switch to more efficient processes and "best" practices.

  • Poor health care costs a typical employer an estimated $1,700 to $2,000 for each covered employee each year.
  • That amounts to about one-third of the $4,900 spent for each employee on health care last year.
  • If present trends continue, the cost of poor-quality care will likely exceed $1 trillion by 2011, the study warned.

The report says factors pushing up costs include the overuse of surgical procedures, tests and medicines; the failure to routinely provide flu and pneumonia vaccines or appropriate tests and follow-up medicines for heart and diabetes patients; and inadequate screening for breast cancer, depression and certain venereal diseases.

Source: Milt Freudenheim, "Study Finds Inefficiency in Health Care," New York Times, June 1, 2002; "Reducing the Cost of Poor-Quality Health Care through Responsible Purchasing Leadership," June 10, 2002, Midwest Business Group on Health.


Browse more articles on Health Issues