Wasteful Healthcare Spending - World Health Systems Facts

World Health Systems Facts currently has sections on the US and sixteen other OECD nations. The links below lead directly to national subsections on Wasteful Healthcare Spending.

“Linking actors – patients, clinicians, managers and regulators – to key drivers of waste – errors and suboptimal decisions, poor organisation and co-ordination, incentives misaligned with health care system goals, and intentional deception – helps to identify three main categories of wasteful spending:

“● Wasteful clinical care covers avoidable instances when patients do not receive the right care. This includes duplicate services, preventable clinical adverse events – for instance, wrong-site surgery and many infections acquired during treatment – and low-value care – for instance, medically unnecessary caesarean sections or imaging.

“● Operational waste occurs when care could be provided using fewer resources within the system while maintaining the benefits. Examples include situations where pharmaceuticals or medical devices are discarded unused or where lower prices could be obtained for the inputs purchased (for instance, by using generic drugs instead of originators). In other instances, costly inputs are used instead of less expensive ones, with no additional benefit to the patient. In practical terms, this is often the case when patients seek care in emergency departments, end up in the hospital due to preventable exacerbation of chronic disease symptoms that could have been treated at the primary care level, or cannot be released from a hospital in the absence of adequate follow-on care.

“● Governance-related waste pertains to resources that do not directly contribute to patient care. This category comprises unneeded administrative procedures, as well as fraud, abuse and corruption, all of which divert resources from the pursuit of health care systems’ goals.”

Source: OECD (2017), Tackling Wasteful Spending on Health, OECD Publishing, Paris. dx.doi.org/10.1787/9789264266414-en

“Health care policymakers and administrators are prioritizing the re-evaluation and optimization of services with greater attention on ‘appropriate care’ as an important element of health system performance and high-quality care delivery [1]. Given the scarcity of resources and financial constraints that exist in public health systems, this optimization has often been approached by creating health system capacity via the reduction of treatments, services, or procedures which are unlikely to provide benefit to the patients, have the potential to cause harm, and/or incur unnecessary cost and resource use given their limited efficacy [[2], [3], [4]]. There is no widely accepted definition and various terms have been synonymously used to describe this concept (‘inappropriate care’, ‘unnecessary care’, ‘overuse’, ‘waste’), but low-value care has emerged as the common term to encapsulate the broad overuse or misuse of care that negatively impacts both patients and healthcare systems [1,[5], [6], [7]].”

Source: Warkentin LM, Tjosvold L, Bond K. An inventory of policy levers to reduce low value care: Results of a rapid scoping review. Health Policy. 2026;164:105508. doi:10.1016/j.healthpol.2025.105508

“The use of low-value care is common, with estimates of the related costs running into the billions of dollars for some high-income countries [[8], [9], [10]]. To date, over a thousand low-value care recommendations have been identified through various research methods [[11], [12], [13], [14], [15]]. While several approaches have been developed to help ensure that patients receive proven clinical- and cost-effective care (e.g., health technology assessments, clinical practice guidelines), methods focusing on avoiding or reducing low-value health services have yet to be equally widely employed [16]. Historically, healthcare systems have relied on passive disinvestment or natural attrition to reduce the use of low-value care, and there is growing agreement that existing approaches are insufficient. Efforts to reduce low-value care have also been hindered by the entrenchment of low-value services in clinical practice (status quo bias) and other biases such as, attribution bias, omission regret and framing effects, and sunken cost bias [17,18].

“There are a range of policy levers (the tools or mechanisms available to decisionmakers to affect policy change) that may guide the optimization of service utilization. However, the selection of which policy lever to use for the particular low-value service or within a specific practice context remains challenging [[18], [19], [20]]. In particular, when attempting to identify policy levers that have been rigorously evaluated to address a specific low-value recommendation, evidence supporting these strategies is often sparse. For example, in a health technology reassessment that examined endoscopic use in patients with dyspepsia or gastroesophageal reflux disease symptoms, only a single study targeted the reduction of low-value utilization [21].”

“Research indicates that the US spends more on health care administration than comparable nations. One estimate from the Peterson Foundation, based on 2021 data from the OECD, finds that the US spends $1,055 per capita on administrative costs—by far the highest amount on a list of twelve OECD nations plus the US. The country with the next highest level of per capita administrative spending is Germany, at $306 per capita.

“There are also international differences in amounts spent on personnel (labor) with primarily administrative functions. In a 2011 publication, Cutler and Dan Ly found that compared with Canada, the US health system has 44 percent more administrative staff and US physicians devote a higher percentage of their time to administrative tasks than do their Canadian counterparts (13 percent of working hours in the US versus 8 percent in Canada).”

Source: “The Role Of Administrative Waste In Excess US Health Spending, “ Health Affairs Research Brief, October 6, 2022. DOI: 10.1377/hpb20220909.830296

“According to most experts, payment structure emphasizing volume over value impacts the uptake of de-implementing low-value care initiatives. The experts described that fee-for-service payment models are a barrier to reducing this low-value care as clinicians have concerns about their ability to sustain revenue. With clinicians incentivized to do and bill for more, some focus efforts on protecting the viability of their jobs and their specialty. Some, however, even in light of these barriers advocate for the reduction of low-value care. For example, a Choosing Wisely recommendation from the Netherlands aims to reduce unnecessary x-rays for acute abdominal pain. One expert observed that this was resisteddue to the risk that it may lead to several radiologists losing their jobs. Depending on the payment structure, generating revenue is sometimes not a direct factor for clinicians, but an indirect factor through the managers who want to maintain organizational financial health. Also, there exist risk that low-value care can increase when new care practices, especially new technologies, are reimbursed before the cost-effectiveness is evaluated. Two experts reported that Canada is more restrictive towards new technologies than the United States.”

Source: Verkerk, E. W., Van Dulmen, S. A., Born, K., Gupta, R., Westert, G., & Kool, R. B. (2022). Key Factors that Promote Low-Value Care: Views of Experts From the United States, Canada, and the Netherlands. International Journal of Health Policy and Management, 11(8), 1514-1521. doi: 10.34172/ijhpm.2021.53

“According to the experts, the pharmaceutical and medical device industry has a powerful influence promoting the use of potentially unnecessary care. In addition to their direct contact with clinicians, they also exercise influence through education and guidelines. Experts shared that clinicians face advertising, which can lead them to believe that the product provides high-quality care. Product developers fund medical research and education, which can lead to biased knowledge. An expert mentioned a lawsuit that was initiated by the industry to encourage the use of opioids, and another expert mentioned the provision of a research fund as a reward for the use of their products. The industry can also influence political decisions to increase product sales. After it was announced that an orphan drug would not be reimbursed in the Netherlands for its high cost and lack of clinically relevant effect, the company that produced it put forward patient stories in the media, resulting in a re-evaluation and eventual reimbursement of the drug.

“Patients are also exposed to direct or indirect marketing. Whereas direct marketing of drugs is prohibited in Canada and the Netherlands, marketing the disease is legal. Companies raise awareness on for example prostate cancer and recommend the public to go to their doctor, increasing the necessary but also unnecessary use of their product. According to the experts, patient organizations sometimes receive financial support from the industry, which can help these organizations to support the patient population. It, however, also places them at risk of providing biased information to patients or the interests for which they advocate.”

“Similar to the public, experts discussed that clinicians overestimate the benefits of treatments, underestimate the harms, and are influenced by anecdotal stories about rare diseases. The industry, fear of litigation, medical education and biased evidence contribute to this culture. Many clinicians are hooked on new technology and have the tendency to be ‘better safe than sorry’ to avoid uncertainty. An expert reported that not doing anything can feel counter-intuitive. Clinicians, also, desire to provide high-quality care and a positive experience for patients, which can guide them to meet patients’ wishes. Without the time for further conversation about care options, this can lead to decision-making supporting low-value care. The clinicians’ roles can be conflicting: they are expected to show compassion and support and to do what is in the patients’ best interest. An expert from Canada reported that medical centers in the United States and clinicians in private practice compete with each other to attract patients. They, therefore try to meet their wishes to obtain additionally requested labs and imaging, whereas in Canada this pressure from competition is less common. A Dutch expert agreed with this and stated that clinicians in the Netherlands are more used to withhold care from patients.”

“Most experts agree that many clinicians are afraid of being sued by or getting complaints from patients and, therefore, practice defensive medicine and deliver more care. They described that a lawsuit is very upsetting personally and causes significant stress for clinicians. This fear can lead them to order more tests, procedures, or treatments that are unnecessary but provide additional documented evidence in support of their clinical decisions to prevent such lawsuits. Several Dutch experts suggested that malpractice lawsuits are less frequent in the Netherlands, possibly because the claims are lower, and therefore there might be less defensive medicine. According to the experts, it is not only the lawsuit but also the fear of making a mistake and having dissatisfied patients that motivate clinicians to overuse tests, procedures, or treatments.”

“Several experts reported that the evidence for many tests, procedures, and treatments overestimates their effects in the real world. This bias is caused by publication bias, the ambition of researchers, and industry-sponsored research. An expert reported that the design of trials can be tainted by the wish to get favorable outcomes, making the evidence from these trials unreliable. In addition, it takes time for knowledge (biased or unbiased) to reach clinical practice. Clinicians need strong and solid evidence to accept that a care practice does not help the patient, when they have believed otherwise for years or when it makes sense that they work, based on pathophysiological reasoning. An expert stated that this biased evidence is not country-specific but affects the whole world.”

“Health care systems in which coverage is provided by a single entity generally have lower administrative costs than multi-payer systems, partly because they enjoy more economies of scale (Mossialos et al., 2002). Enrolment, collection of contributions, claims processing, benefits management, sales and marketing, and insurance funds’ compliance with government and non-government regulations and accreditation need only a single accounting and processing system in single-payer schemes, whereas multi-payer systems by their nature multiply the same functions (Bentley et al., 2008). The same holds true for purchasing and contracting, which creates an additional burden at the provider level.

“Moreover, in multi-payer systems, costly and technically demanding risk-equalisation and resource transfer mechanisms are frequently required to counter issues of patient selection, ensure equal basic benefit packages, or indeed avoid budgetary difficulties of payers. Such systems exist, for instance, in Belgium, the Czech Republic, Germany, Japan, the Netherlands and Switzerland (Paris et al., 2010; van de Ven et al., 2013) but are not required in single-payer systems.”

Source: OECD (2017), Tackling Wasteful Spending on Health, OECD Publishing, Paris. dx.doi.org/10.1787/9789264266414-en

“Use of health care practices (e.g. interventions, programmes and services) with little or no benefit to patients is a widespread problem [1]. Such practices are referred to as low-value care (LVC), which is “care that is unlikely to benefit the patient given the harms, cost, available alternatives, or preferences of the patient” [2]). Estimates show that 12–15% of patients receive at least one LVC practice a year [3] and 72% of US physicians stated that they normally prescribe unnecessary tests or procedures at least once a week [4].

“The Choosing Wisely® campaign has produced over 550 recommendations for practices that are considered LVC, including use of antibiotics for upper respiratory infections, imaging for nonspecific low back pain and vitamin D testing [5]. Yet, practices identified as LVC in some clinical circumstances might be of high value in others. Thus, a key challenge is that interventions proven to be effective for specific patient populations are inappropriately applied to patients for whom benefit has never been demonstrated [6].”

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). doi.org/10.1186/s43058-021-00110-3

“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].”

“Professionals’ fear of malpractice, for instance, due to missing a diagnosis, or of becoming the target of litigation, was another determinant found in this review that is rarely identified as an implementation determinant. It may seem paradoxical that fear of malpractice was a driver of using LVC since providing LVC may be directly harmful to patients. However, a potential explanation is that some LVC practices, e.g. computed tomography scans of the head in patients with minor head injury [47], were considered relatively harmless, relative to the risk of missing a serious diagnosis. Fear of litigation is likely a more prominent determinant in countries that have a system in which such legal actions are fairly common.”

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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 and policies in the US and sixteen other nations.

Page last updated March 4, 2026 by Doug McVay, Editor.