Donald Berwick, M.D., who has been a well-known and well-respected leader in the U.S. healthcare for decades, and who was administrator of the federal Centers for Medicare and Medicaid Services from July 2010 through early December 2011, has authored a probing analysis of the problem of waste in the U.S. healthcare industry, as part of an ensemble articles on the subject of waste.
Dr. Berwick’s editorial, in JAMA (the Journal of the American Medical Association Online), entitled “Elusive Waste: The Fermi Paradox in US Health Care,” was published online on October 7. As Dr. Berwick began the essay, “In 1950, at lunch with 3 colleagues, the great physicist Enrico Fermi is alleged to have blurted out a question that became known as “the Fermi paradox.” He asked, “Where is everybody?” referring to calculations suggesting that extraterrestrial life forms are abundant in the universe, certainly abundant enough that many of them should have by then visited our solar system and Earth. But, apparently, none had.”
Berwick writes in his article that “Health care in the United States has its own version of the Fermi paradox. It involves the strong evidence of massive waste that is updated in the Special Communication by Shrank and colleagues in this issue of JAMA. The authors recalculate the proportion of US health care expenditures that is waste. Their estimates, which they suggest are conservative, are similar to other major reports of the past decade, which came up with median estimates of waste amounting to 30 percent to 35 percent of total health expenditures. Shrank and colleagues estimated that waste represents 20 percent to 25 percent of US health care expenditures, but they explicitly did not include some extrapolations from Medicare data to the population at large. The authors further reviewed the literature on efforts to reduce waste, which, they claim, suggests that about 25 percent of that amount—approximately 5 percent of total health care spending—could be reduced with implementation of well-documented, current programs.”
As Berwick notes, “These are massive numbers. With US health care expenditures exceeding $3.5 trillion annually, 25 percent of the total would amount to more than $800 billion per year of waste (more than the entire 2019 federal defense budget, and as much as all of Medicare and Medicaid combined). Even 5% of the total cost is more than $150 billion per year (almost 3 times the budget of the US Department of Education). That is worth repeating: by many pedigreed estimates, annual waste in US health care equals or exceeds the entire annual cost of Medicare plus Medicaid.”
Meanwhile, he adds, “But, to paraphrase Fermi, ‘Where is it?’ Shrank and colleagues, like the prior studies they channel, examined 6 categories of waste: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity; they estimated the amount of each. In one sense, ‘There it is!’ But that is not the proper analogy to Fermi’s paradox. The paradox is that, in an era of health care when no dimension of performance is more onerous than high cost, when many hospitals and clinicians complain that they are losing money, when individuals in the United States are experiencing financial shock at absorbing more and more out-of-pocket costs for their care, and when governments at all levels find that health care essentially confiscates the money they need to repair infrastructures, strengthen public education, build houses, and upgrade transportation—in short, in an era when health care expenses are harming everyone—as much as $800 billion in waste (give or take a few hundred billion) sits untapped as a reservoir for relief. Why?”
Dr. Berwick goes into a number of the explanations around why massive waste continues forward in healthcare, and concludes that our current fee-for-service system continues to encourage wasteful decision-making specifically among practicing physicians. He recommends reducing overtreatment, improving care coordination, and following the recommendations contained in the American Board of Internal Medicine’s Choosing Wisely program, which he suggests “could be much bolder in its next iteration. In local markets, physicians can champion changing payment from fee-for-service to shared risk and forms of global payment that encourage everyone to end wasteful care. In the end, physicians can and should act with strong voices and political courage to openly oppose greed and deception in pricing policies wherever they arise. In large measure,” he concludes, “the challenge of removing waste from US health care and reinvesting that harvest where it could do much more good is not a technical one. It is a political one. In short, removing waste from US health care will require both awakening a sleepy status quo and shifting power to wrest it from the grip of greed.”