Califano criticizes health-care system Inefficiency is cited

October 22, 1990

Joseph A. Califano Jr., former secretary of health, education and welfare, told over 200 business leaders attending a recent Baltimore County Chamber of Commerce meeting that it is time for major rethinking on how health care is delivered in the United States.

Speaking at the Chamber breakfast sponsored by Maryland Blue Cross and Blue Shield, Mr. Califano said that by year-end, Americans will be spending $2 billion a day on health care.

"Most troubling," Mr. Califano said, "is the overwhelming evidence that at least 25 percent of the money Americans spend on health care is wasted."

A member of Chrysler Corp.'s Board and chairman of its health-care committee, Mr. Califano noted that the company's cost containment programs have resulted in it paying $1.5 billion less for health care since 1982 than if its costs had risen at the same rate as for business generally.

On the other hand, he said Chrysler is projecting a 12 percent increase in its health care costs in 1990, more than double the expected rise in the consumer price index.

Despite the continued increase in health-care costs and spending, Mr. Califano contended that Americans are not buying better health care.

He said the $2,600 spent on health care for each man, woman and child is 50 percent more than will be spent by Canada, the nation with the next highest expenditures; more than twice what Japan will spend, and almost triple what Britain will spend.

Mr. Califano recited a list of problems confronting the health-care system.

In particular, he pointed to "millions of unnecessary procedures" as a major part of the problem, citing an editor of the Journal of the American Medical Association who said that more than half of the 40 million medical tests performed daily "do not really contribute to a patient's diagnosis or therapy."

Mr. Califano decried what he called a "medical malpractice racket."

Last year, he said, doctors and hospitals paid almost $8 billion in malpractice insurance premiums. But, he added, "insurance premiums are the smallest part of the cost. To protect themselves against a lawsuit, doctors are compelled to perform millions of useless tests and procedures at an annual cost of at least $20 billion."

He also criticized what he called the "health-care-cost shell game ... the shifting of costs among government and private payers.

"Employers have been burned too often by Medicare and Medicaid savings schemes that allow hospitals and doctors to recoup revenues by performing more procedures on private patients and charging them higher prices," Mr. Califano declared.

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