In a Special Communication published October 7 in the Journal of the American Medical Association (JAMA), researchers from Humana Inc. and the University of Pittsburgh School of Medicine estimated the cost of waste in the United States health system.
The study found that approximately 25% of healthcare spending can be characterized as waste—between $760 billion and $935 billion annually. The findings can be accessed by clicking here.
The U.S. spends more on healthcare than any other country, with costs approaching $3.6 trillion, or 18% of the gross domestic product, according to a press release.
These findings highlight the sources of inefficiencies in the U.S. healthcare system, opportunities to address those inefficiencies, and underscore several key solutions to make healthcare more affordable for all Americans.
The study is a follow up to the 2012 JAMA study—“Eliminating Waste in US Health Care,” by Donald M. Berwick, MD, MPP, and Andrew D. Hackbarth, MPhil.
The goal of the new study was to estimate the levels of waste in the U.S. healthcare system in six previously developed domains and to report estimates of potential savings for each domain.
The authors conducted a search of medical literature from January 2012 to May 2019 focused on the six waste domains identified by the Institute of Medicine.
These domains are:
• failure of care delivery
• failure of care coordination
• overtreatment or low-value care
• pricing failure
• fraud and abuse
• administrative complexity
“This study highlights the opportunity to reduce waste in our current health care system,” William Shrank MD, Humana’s chief medical and corporate affairs officer, said in the release.
“By focusing on these opportunities, we could make healthcare substantially more affordable in this country. In the national debate about health reform, we do not need to start over. We can build on the strengths in today’s system to deliver higher quality care and reduce costs, while also producing the necessary savings to expand coverage to all Americans.”
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 where necessary and combined into ranges or summed as appropriate.
The review yielded 71 estimates from 54 publications, government-based reports and reports from the grey literature.
Computations yielded the following estimated ranges of total annual cost of waste and estimated annual savings from interventions:
“This research is so important because our industry is wasting money that could be used to improve the care experience so people can lead healthier lives,” Bruce D. Broussard, Humana’s president and CEO, said.
“Each of the domains studied may require a different kind of action, and the drive toward data interoperability and value-based care payment models can reduce this wasteful spending. But if we collaborate as health plans and providers, in conjunction with the government, we can deliver more effective care and improve health.”
The estimated total annual costs of waste and savings from interventions that address waste were $760 billion—$935 billion and $191—$282 billion, respectively, according to the study.
These savings do not include interventions for the area identified as the largest waste area, administrative complexity.