Wasteful spending accounts for $1.2 trillion of healthcare costs

Nearly 50 cents of every dollar spent in healthcare is wasted, according to Pricewaterhouse Cooper's Research Institute. The organization found that unnecessary price gouging makes up $1.2 trillion of the $2.2 trillion spent on healthcare nationwide, CNN.com reports.

"Our best estimate is that for the country as a whole, probably half of what we're spending on healthcare delivery today is technically waste from a patient's perspective," said Dr. Brent James, chief quality officer for Intermountain Healthcare in Salt Lake City, Utah. "There are better ways of doing it."

Cindy Holtzman, a consumer advocate with Medical Billing Advocates of America, pointed out several examples, like a patient in Florida who was charged $140 for one Tylenol pill. Another patient in South Carolina was hit with a $1,000 fee for a toothbrush. A patient in Georgia who used one bag of IV saline solution was charged for 41 bags to the tune of $4,000. In the case of the Georgia patient, insurance paid for the entire claim.

"Usually any kind of bill under $100,000, they [insurance companies] don't look at the details. And that's where something like this can be paid in error," Holtzman said. After an investigation by Holtzman, the bill was fixed, and the insurance company was refunded.

Rich Umbdenstock, president and CEO of the American Hospital Association claims hospitals mark up costs to adjust for the lower payments from Medicare and Medicaid. "They're making up for underpayments elsewhere," Umbdenstock said. "Certainly if you're the patient to whom the cost is being shifted, you feel you are paying more than you should. The public programs need to pay their fair share. At the same time, hospitals are trying to lower their cost of providing care, so they don't have as great a gap."

Another contributor to waste is how a doctor decides to care for a patient. The variety of treatment options account for an estimated $10 billion of unnecessary cost each year, according to the report.

"The old belief that better care is more care, turns out it's just not true," James said. "Most of the savings go back to insurers or the government. We're nearly always financially punished every time we save money."

To learn more:
- read this CNN.com article