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Study shows 25 percent of Medicare cost is wasted

Research conducted by Aaron Schwartz, a doctoral student in the Harvard Medical School Department of Health Care Policy, and J. Michael McWilliams, associate professor of health care policy at Harvard Medical School, and colleagues has found that $1.9 billion of Medicare costs in 2009 were spent on needless tests and procedures. The research was reported in the May 12, 2014, edition of the journal JAMA Internal Medicine. The researchers conclude that this level of waste is just a small sample of the true waste of Medicare dollars in the United States health system.

Attorney General Eric Holder holds a Medicare fraud news conference at the Justice Department May 14, 2013, in Washington.
Photo by Chip Somodevilla/Getty Images

The researchers describe the waste of Medicare funds on tests that predict nothing and procedures that have no curative value are pervasive across the medical system in the United States. Unlike previous studies that reflect the level of waste in Medicare, this study relies on direct evidence and does not base its conclusions on comparative evidence. The researchers intend that the study be utilized as a more reliable tool to reduce the waste in Medicare spending that is rampant in the United States.

The total estimated loss to the taxpayer is estimated to be in the range of $8.4 billion. The research estimates that 42 percent of Medicare beneficiaries receive treatments, tests, and drugs that do nothing to improve their health or address a health condition. Previous attempts to revise the systems have met with failure and an increase in abuse.

The Affordable Care Act has provisions that may reduce some waste by forcing the medical system to make reports of their spending and quality control measures. Penalties are involved for those physicians and medical care facilities that abuse the Medicare system for financial gain. A few facilities and physicians have already been prosecuted for using Medicare as their piggy bank.

The problem is only bound to get worse. As the baby boomer generation continues to retire and rely on Medicare, the number of people contributing to Medicare will diminish. The answer to the problem may be more proactive interest on the part of the patient in reducing costs to Medicare. This concept has no hope of reality because people feel they are entitled to Medicare and all the benefits they can squeeze out of it. The majority of people that use Medicare will use all the money they and their employers contributed to Medicare in the first major surgery.