In a wide-ranging meta-study of 54 peer-reviewed studies of wasteful spending in the U.S. healthcare system, healthcare policy researchers have published an analysis in the Journal of the American Medical Association (JAMA) online, in which they conclude that, after decades of work attempting to reduce waste, fully 25 percent of expenditures in the U.S. healthcare delivery system remain wasteful.
In their article, “Waste in the US Health Care System: Estimated Costs and Potential for Savings,” William H. Shrank, M.D., MSHS, Teresa L. Rogstad, M.P.H., and Natasha Parekh, M.D., M.S., write, “The United States spends more on health care than any other country, with costs approaching 18% of the gross domestic product (GDP). Prior studies estimated that approximately 30% of health care spending may be considered waste. Despite efforts to reduce overtreatment, improve care, and address overpayment, it is likely that substantial waste in US health care spending remains.”
What’s more, the researchers write, “A search of peer-reviewed and “gray” literature from January 2012 to May 2019 focused on the 6 waste domains previously identified by the Institute of Medicine and Berwick and Hackbarth: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity. For each domain, available estimates of waste-related costs and data from interventions shown to reduce waste-related costs were recorded, converted to annual estimates in 2019 dollars for national populations when necessary, and combined into ranges or summed as appropriate.”
As the researchers note, “The review yielded 71 estimates from 54 unique peer-reviewed publications, government-based reports, and reports from the gray literature. Computations yielded the following estimated ranges of total annual cost of waste: failure of care delivery, $102.4 billion to $165.7 billion; failure of care coordination, $27.2 billion to $78.2 billion; overtreatment or low-value care, $75.7 billion to $101.2 billion; pricing failure, $230.7 billion to $240.5 billion; fraud and abuse, $58.5 billion to $83.9 billion; and administrative complexity, $265.6 billion. The estimated annual savings from measures to eliminate waste were as follows: failure of care delivery, $44.4 billion to $93.3 billion; failure of care coordination, $29.6 billion to $38.2 billion; overtreatment or low-value care, $12.8 billion to $28.6 billion; pricing failure, $81.4 billion to $91.2 billion; and fraud and abuse, $22.8 billion to $30.8 billion. No studies were identified that focused on interventions targeting administrative complexity. The estimated total annual costs of waste,” they write, “were $760 billion to $935 billion and savings from interventions that address waste were $191 billion to $282 billion.”
The article’s authors conclude that “The estimated cost of waste in the US health care system ranged from $760 billion to $935 billion, accounting for approximately 25 percent of total health care spending, and the projected potential savings from interventions that reduce waste, excluding savings from administrative complexity, ranged from $191 billion to $282 billion, representing a potential 25 percent reduction in the total cost of waste. Implementation of effective measures to eliminate waste represents an opportunity reduce the continued increases in US health care expenditures.”