We spend $750 billion on unnecessary health care. Two charts explain why.

September 7, 2012

America spent $2.6 trillion on health care last year; about one in every six dollars went into the health-care system. A third of that spending — a full $750 billion — did nothing to make anyone healthier.

That's the big takeaway from an Institute of Medicine report out Thursday, which looks at our big health-care spending problem. The report clocks in at a hefty 381 pages, but there are two graphs, in particular, that I found helpful in thinking about wasteful health-care spending.

The first is this pretty simple breakdown of the sources of health-care overspending:

That comes from the IOM's analysis of its own 2010 data. You can see there are a whole bunch of sources for unnecessary spending that range from inefficient services to excess services and administrative costs.

This second chart offers a different sort of explanation, a look at how the organization of our system creates an environment in which it's incredibly easy to waste health-care dollars.

This graphic focuses on elderly patients, who tend to have some of the most complicated (and most expensive) health care needs. As you can see, there's a lot of space for waste. Not enough preventive care happens, meaning that costly complications may develop. Self-management is a challenge, with seniors literally taking dozens of prescriptions. A lack of coordination between doctors compounds problems later down the line.

So much wasteful spending leaves a lot of space for fixes. The Institute of Medicine recommends a number of solutions and many boil down to a pretty simple idea: Health care should be better-coordinated. Doctors should follow up with patients. There should be continuity of care, meaning that patients see the same doctors who have a better sense of their medical background. Wider adoption of digital records, another IOM recommendation, can help with that.

I'll leave you with this monster graphic that walks through the IOM recommendations, and the various industries that show us exactly how to implement them:

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Ezra Klein · September 7, 2012