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What could we buy with Medicare's wasted billions?

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Medical billing errors are costly and rampant—so much so that in 2010 some $6.7 billion in Medicare money was wasted on errors. This comes from a report issued by the Office of the Inspector General, which also states that the errors were worth 21 percent of evaluation and management spending that year, and that a whopping 42 percent of claims contained errors. And these reimbursements don’t include emergency room visits, hospital stays or certain diagnostic procedures—all of which produce even more billing errors.

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There are many reasons for these mistakes, perhaps none bigger than the fee-for-service system, in which all procedures, visits and tests are charged and added to the bill individually. When there are thousands of possible charges, errors are more likely, and some of the most common errors are indeed largely due to this method of billing. Another factor is that health care information technology is relatively new, and many hospitals and health care providers are still new to electronic health records. Any new system has to store a lot of information privately and securely while still being efficient and user-friendly for medical staff, and most systems are not yet optimized.

Still, $6.7 billion is a lot of money, and most people could think of better ways to spend it. Let’s take a look at just what $6.7 billion can—and can’t—do.

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Spending options

Medicare isn’t the only area of government spending that could use a little help, of course. There are simple and obvious places we could spend that money, like just putting it toward the national debt. But at $17.5 trillion and counting, it would take more than 2,600 years to pay off the current national debt with $6.7 billion per year. Here are some ways we could put the money back into our economy, and pay that debt off faster.

Fix the VA. The Department of Veterans Affairs has been in the news a lot lately, and it has recently come to light that some of its scheduling equipment hasn’t been updated since the mid-1980s. The VA has already budgeted $3.9 billion to start this in 2015, but that’s up only $200 million from last year. Considering the current bid for a new system is $11 billion, combining the existing budget with the hypothetical $6.7 billion would cover almost the entire cost of the upgrade. And a new scheduling system would go a long way toward improving the quality of health care for our veterans.

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Upgrade military facilities. The combined military budget for fiscal year 2015 is set to be $495.6 billion, with $16.2 billion going toward improving facilities. Most of that will go toward Army and Air Force facilities, but $6.2 billion will go toward Navy, Marine, special ops, and missile defense upgrades. Medicare’s wasted money could certainly be put to good use there.

Student loan relief. By using the money to lower the payments of federal student loan holders, those in debt could either pay off the loans quicker or have more disposable income immediately. However, total student loan debt is estimated to be at $1.11 trillion, so relief would be at a rate of about 0.6 percent per year.

Boost education spending. Speaking of students and loans, why not help make college cheaper for existing students or make primary and secondary education more effective? Spending on education is relatively low: $68.6 billion is budgeted for 2015. You could speculate that a 9.8 percent increase in that budget would strengthen our schools and make college more affordable.

Borrow less. The United States is set to borrow about $564 billion in 2015, and $6.7 billion is only 1.2 percent of that. Even so, we all pay interest on that and the $17.5 trillion we’ve already borrowed, so it makes sense to just borrow a little less.

Of course, all of this is hypothetical, done really to show the extent of one source of waste: medical billing errors. Before we can use the money wasted on these errors, though, we have to fix the source.

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A better system

Since so much money is wasted on errors within the Medicare payer system as is, it seems to follow that $6.7 billion would be a nice start for the implementation of a better system. Of course, anything new costs a lot of money in a large government, but it’s a good start.

Electronic health records and billing systems cost about $60,000 for the first five years of implementation and maintenance per physician, and most providers take Medicare. That means that the excess cash would cover about 112,000 providers per year and sustain them for five years each, and after eight years all of America’s estimated 850,000 primary and specialty physicians could be covered, and then some.

Lacie Glover writes for NerdWallet Health, a website that empowers consumers to find high quality, affordable health care and insurance.