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“This review of the current literature of the cost of waste in the US health care system and evidence about projected savings from interventions that reduce waste suggests 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 $286 billion, respectively. These estimates represent approximately 25% of total health care expenditures in the United States, which have been projected to be $3.82 trillion for 2019.⁶⁸ These estimates are lower than the estimates provided by the IOM report (31%)² and by Berwick and Hackbarth³ (34%, using authors’ mid-range cost estimate), although those estimates included savings from administrative costs. However, the best available evidence about the cost savings of interventions targeting waste, when scaled nationally, account for only approximately 25% of total wasteful spending. These findings highlight the challenges inherent in rapidly changing the course of a health system that accounts for more than $3.8 trillion in annual spending, 17.8% of the nation’s GDP.⁶⁸“

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“The review yielded 71 estimates from 54 unique peer-reviewed publications, government-based reports, and reports from the gray literature. Computations yielded the following estimated ranges of total annual cost of waste: failure of care delivery, $102.4 billion to $165.7 billion; failure of care coordination, $27.2 billion to $78.2 billion; overtreatment or low-value care, $75.7 billion to $101.2 billion; pricing failure, $230.7 billion to $240.5 billion; fraud and abuse, $58.5 billion to $83.9 billion; and administrative complexity, $265.6 billion. The estimated annual savings from measures to eliminate waste were as follows: failure of care delivery, $44.4 billion to $97.3 billion; failure of care coordination, $29.6 billion to $38.2 billion; overtreatment or low-value care, $12.8 billion to $28.6 billion; pricing failure, $81.4 billion to $91.2 billion; and fraud and abuse, $22.8 billion to $30.8 billion. No studies were identified that focused on interventions targeting administrative complexity. The estimated total annual costs of waste were $760 billion to $935 billion and savings from interventions that address waste were $191 billion to $286 billion.”

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“Because the US health care system is so fragmented, there is not a clearly dominant entity to set administrative standards and force adoption. The federal government is the largest payer, but its market power is not concentrated because its payments flow through hundreds of different programs, including 50 unique Medicaid programs, Medicare, hundreds of Medicare Advantage plans, ACA insurance exchanges, federal employee health benefits, the military health system, Veterans Affairs, and the Indian Health Service. Each of these programs has governance over its administrative rules. Some programs, such as Covered California, use their local market power to force standardization of administrative elements, such as benefit design. The private sector alternatives lack either geographic reach or local market scale. The largest private sector entities are the payers United Healthcare and Anthem. However, neither of these companies are positioned to be administrative standard setters. United Healthcare lacks local market scale because it usually only accounts for 10% to 20% of patients for clinicians. Anthem lacks geographic scale because it only operates in 23 states. Only the Medicare system operates in all states and is accepted by nearly all health care organizations, which means changes to Medicare’s administrative rules are adopted nearly universally. Medicare is also a large payer, through the Medicare Advantage program, to the largest commercial payers, which could enhance Medicare’s ability to serve as an administrative standard setter. This makes Medicare the only participant with the market power to set administrative standards.

“The federal government can use regulatory authority to reduce administrative costs. The opportunity today is both larger than in 2010 when the ACA targeted administrative simplification and more readily capturable as a result of improvements in information technology. The authority derived from the ACA should be used to implement the third wave of administrative simplification regulations, which requires auto-adjudication of claims and prior authorizations and, as a by-product, creates long-awaited payment system and electronic health record interoperability. The Trump administration launched the Patients Over Paperwork program to reduce administrative burden. This program has simplified documentation for office visits and reduced reporting burden for many programs, and claims to have saved health care organizations an estimated $6.6 billion and 42 million hours of labor through 2021.⁵ More opportunity likely exists to rationalize the more than 1700 metrics that Medicare collects, which is estimated to incur $15.4 billion in annual data collection and reporting costs.⁶ There are additional opportunities that technology such as artificial intelligence may be capable of addressing, including a national clinician credentialing system; risk adjustment relying on data science models instead of physicians coding hierarchical condition categories; and identifying fraud, waste, and abuse.”

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“In many countries, evidence exists for the overuse of aggressive care for dying patients and simultaneous underuse of appropriate palliative care. Despite evidence that the majority of people around the world would prefer to die at home,^141–46 about half die in hospital worldwide, with considerable variation among countries.¹⁴⁷ Inappropriately aggressive cancer care near the end of life has been identified as a common problem in Canada,¹⁴⁸ the USA,¹⁴⁹ and the UK,¹⁵⁰ with regional variations observed.¹⁵¹ Overuse of aggressive end-of-life care in the UK, for example, includes futile insertion of percutaneous endoscopic gastrostomy tubes¹⁵¹ and administration of chemotherapy that hastens death.¹⁵² Furthermore, ineffective intensive care unit treatment at the end of life has been reported in Canada,¹⁵³ the USA,¹⁵⁴ and Brazil.¹⁵⁵ A study from Korea found that the majority of terminal cancer patients received futile intravenous nutrition during the last week of life, with discussions of palliation in only 7% of cases.¹⁵⁶“

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“High rates of inappropriate use of screening tests have been documented, often in the context of concurrent underuse in appropriate populations. In the USA, where there is widespread public support for cancer screening,¹⁰⁶ overuse of screening for cervical cancer^107,108 in women at very low-risk, and overuse of mammography in women with short life expectancy, who are unlikely to benefit from diagnosis and treatment,¹⁰⁹ has been documented. Furthermore, inappropriate use of colonoscopy screening has been found in both the USA and Canada.^110–12

“Few studies have evaluated rates of inappropriate cancer screening outside of North America.”

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“The influence of the pharmaceutical and medical device industry could be further restricted so patients and clinicians can base their decisions on unbiased and independent information. The United States and New Zealand are two of the few countries that still allow direct to consumer advertising. Regarding the marketing to clinicians, the United States already improved the transparency of payments with the Physician Payments Sunshine Act in 2010, although it has yet to be shown that disclosure affects marketing practices or the opinion of consumers.^35,36 Other opportunities lie in restricting industry ties in research and education.³⁷“

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“The use of LVC [Low Value Care] is costly. For example, the annual cost of LVC for the US Medicare population was estimated to be $8.5 billion, which is almost 3% of total Medicare spending [7]. LVC is a concern both for individual patients and health care systems, and in order to provide evidence-based care to patients, there is a need to deimplement the use of LVC in addition to implementing evidence-based practices. De-implementation involves a structured and planned process using a set of activities to reduce or stop the use of LVC [8]. However, despite dissemination of numerous lists of LVC practices that should be abandoned, e.g. in the Choosing Wisely® campaign [9], the problem with LVC persists. This indicates that lists identifying LVC are not sufficient for these practices to be de-implemented [10].”

Source: Augustsson, H., Ingvarsson, S., Nilsen, P. et al. Determinants for the use and de-implementation of low-value care in health care: a scoping review. Implement Sci Commun 2, 13 (2021). https://doi.org/10.1186/s43058-021-00110-3

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World Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems in the US and sixteen other nations.

Page last updated July 16, 2023 by Doug McVay, Editor.