Healthcare costs in the United States are approaching 18% of the country’s gross domestic product, a figure greater than in any other nation in the world. However, according to a 2012 analysis, up to 34% of this spending could be categorized as waste. A recent study published in JAMA reviewed data from reports and articles published between 2012 and 2019 to determine the current levels of waste spending and potential savings in the US healthcare system based on 6 previously developed domains.
Researchers extracted data from 54 peer-reviewed publications, government-based reports, and reports from gray literature to generate 71 estimates of annual cost of waste. The cost and savings were translated from individual studies to national figures, and all costs and savings were converted to 2019 dollars. Estimates identified from the various reports fell into 6 domains: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity. Overall, the estimated total cost of waste was assessed to be as high as $935 billion, with potential savings as high as $282 billion when interventions to address waste were considered. These figures account for approximately 25% of total healthcare spending in the United States (projected as $3.8 trillion for 2019). In categories including failure of care coordination, failure of care delivery, and overtreatment or low-value care, the researchers estimated more than $200 billion in waste.
The category that yielded the greatest contribution to waste was the administrative complexity category, yet none of the studies surveyed targeted administrative complexity as a solution to reduce spending waste. Although there have been recent proposals, such as by the Office of the National Coordinator of Health Information Technology, to promote data interoperability to address administrative spending waste, the researchers say that the greatest opportunity to reduce administrative complexity waste is enhanced collaboration between payers and health systems or clinicians using value-based payments, which delegate some administrative tools for reducing waste to physicians. They point out that all health systems presumably have measures in progress to reduce administrative complexity, although additional study and evidence are needed to quantify waste and resulting savings.
The researchers who performed the analysis acknowledge that there are some limitations to their work. One is that the study is a broad review and is therefore not necessarily precise. The data used in the study were applied to a variety of populations, making the assessment of waste across all populations impossible. Additionally, reductions in cost by improving treatment and prevention of chronic disease were difficult to measure; determining actual return on investment and cost savings was not entirely possible. Another limitation was that most of the data were gathered from research on populations with Medicare, which may not have provided waste reduction analyses that were applicable to the Medicare population as a whole.
As shown by the study data, interventions to reduce healthcare spending waste could theoretically save almost $300 billion. Implementing policies across the stated domains could thus provide an avenue to slow the increase of US healthcare expenditures and reduce healthcare spending waste.
Shrank WH, Rogstad TL, Parekh N. Waste in the US health care system: estimated costs and potential for savings [published online October 07, 2019]. JAMA. doi:10.1001/jama.2019.13978