Wasteful spending in health care could reach almost $1 trillion, according to new research published in JAMA.
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Review “of the current literature of the cost of waste in the U.S. health care system and evidence about projected savings from interventions that reduce waste suggest that the estimated total costs of waste and potential savings from interventions that address waste are as high as $760 billion to $935 billion and $191 billion to $282 billion, respectively,” William Shrank, MD, chief medical and corporate affairs officer at Humana, and colleagues wrote in an article published Oct. 7, 2019, in JAMA.
“These estimates represent approximately 25% of total health care expenditures in the Unites States, which have been projected to be $3.82 trillion for 2019,” the authors noted, adding that it is a little lower than other estimates that have waste as high as 34% of spending.
Authors looked at waste across six domains, including failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity.
adding that there are no studies that identified savings from interventions to alleviate administrative complexity.
“Some of that complexity results from fragmentation in the health care system,” they stated. “Recent proposals by CMS [the Centers for Medicare & Medicaid Services] and the Office of the National Coordinator of [sic] Health Information Technology to foster data interoperability and government initiatives such as Blue Button 2.0 will hopefully alleviate some burden as information flows more freely and billing and authorization processes become more automated.”
They also point to greater use of value-based payments as a possible avenue toward greater cost savings in this category.
The second largest contributor is pricing failure, which is estimated to be in the range from $230.7 billion to $240.5 billion, with interventions generating savings ranging from $81.4 billion to $91.2 billion.
And as the health care system evolves to a value-based paradigm, it is expected to have the least impact in this category “since pharmaceutical pricing represents a major component of this waste domain and would not be affected by new approaches to care delivery and reimbursement,” Dr. Shrank and colleagues wrote.
That being said, the authors stated that policy interventions “are needed to drive meaningful reductions in waste in this domain. Additionally, in the dynamic health care marketplace, where profit-motivated firms will respond to any new policy with strategies to protect their margins, no single policy is likely to suffice; a coordinated policy effort is likely needed to create long-standing change that will meaningfully reduce waste resulting from pricing failure.”
The three domains of failure of care delivery, failure of care coordination, and overtreatment or low-value care combined to account for $200 billion in waste, and the authors stated that there is “compelling empirical evidence in all three categories that interventions can produce meaningful savings and may reduce waste by as much as half.”
SOURCE: Shrank W et al. JAMA. 2019 Oct 7. doi: 10.1001/jama.2019.13978.