As Mark Twain reputedly said about the weather, everybody talks about waste in the U.S. healthcare system, but nobody does anything about it.
A new study puts numbers on the scale of that waste and nails down its sources. But it leaves open the question of what to do about it. That’s especially true of the largest single source identified by the authors: “administrative complexity,” which accounts for as much as $265.6 billion in waste a year, or as much as one-third of the total. Yet that’s the one category for which the authors could find not a single article offering solutions for cuts.
The study was published Monday in the Journal of the American Medical Assn. by William H. Shrank and Teresa L. Rogstad of Humana, a big health insurance carrier, and Natasha Parekh of the University of Pittsburgh.
They divided waste in the system into six categories. In addition to administrative complexity, these are:
–Failure of care delivery, which includes hospital-acquired illnesses and other “adverse events” and lack of preventive care (as much as $165.7 billion a year in wasteful spending);
–failure of care coordination, which includes unnecessary hospital admissions and avoidable complications (up to $78.2 billion);
–overtreatment or low-value care, such as using branded drugs instead of generics and prescribing unneeded screening or tests (up to $101.2 billion);
–pricing failure, such as excessive payments for drugs and excessive insurance reimbursements for services (up to $240.5 billion); and
–fraud and abuse (up to $83.9 billion).
Taken together, the sheer magnitude of these numbers, which range from $760 billion to as much as $935 billion a year or about 25% of all U.S. healthcare spending, is stunning yet not entirely surprising.
Previous studies have estimated waste at 30% to 35% of all spending, but Shrank and his team deliberately tried to be conservative.
Around the midpoint of the authors’ estimate, observes Donald M. Berwick, a former administrator of the Centers for Medicare and Medicaid Services, in an accompanying editorial, the wastage would account for “more than the entire 2019 federal defense budget, and as much as all of Medicare and Medicaid combined.”
Even if only a fifth of the waste could be eradicated, Berwick adds, that would yield more than $150 billion a year, or “almost three times the budget of the U.S. Department of Education.”
As Shrank and his colleagues observe, remedies for some wasteful practices are well understood, and some are even being implemented….[ ]