25% of Total US Health Care Spending Estimated to be Waste
Bottom Line: A new study estimates about one-quarter of total health care spending in the United States is waste, with a price tag ranging from $760 billion to $935 billion.
The United States spends more on health care than any other country. For this analysis, the authors identified government-based reports, articles and peer-reviewed publications from 2012 to 2019 that focused on estimates of costs or savings related to six areas of waste.
There were 71 estimates from 54 publications and those estimates were combined into ranges or totaled. Study authors report total estimated annual cost of waste was $265.6 billion for administrative complexity (billing and coding waste, physician time spent reporting on quality measures); $230.7 billion to $240.5 billion for pricing failure (prices increase far from those expected in a well-functioning market); $102.4 billion to $165.7 billion for failure of care delivery (poor execution or lack of widespread adoption of best care processes); $75.7 billion to $101.2 billion for overtreatment or low-value care; $58.5 billion to $83.9 billion for fraud and abuse; and $27.2 billion to $78.2 billion for failure of care coordination (unnecessary admissions or avoidable complications and readmissions).
The authors also searched the published literature to find estimates of the potential to reduce waste in each of the categories listed by scaling proven strategies. Projected potential savings from efforts to reduce waste ranged from $191 billion to $282 billion, a potential 25% reduction in the total cost of waste. The authors highlight the opportunity to reduce waste through insurer-clinician collaboration and data interoperability.
This analysis has limitations, including that the studies used may not represent all costs and savings in each area of waste, and that data from some of the studies may not be generalizable to the U.S. population. Implementing effective measures to decrease waste is a chance to reduce continued increases in U.S. health care costs.
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Authors: William H. Shrank, M.D., M.S.H.S., Humana Inc., Louisville, Kentucky, and coauthors