A new study published October 7 in JAMA, finds that at least $760 billion per year —roughly 20 percent to 25 percent of US health care spending— is wasted. As in useless and unnecessary. Some steps that would eliminate $200 billion in annual waste have been identified but not implemented.
William Shrank, MD, the lead author is chief medical officer of Humana, the giant health insurance company. Shrank and colleagues searched for findings published since 2012 and found “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 $93.3 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 $282 billion.”
The New York Times deemed the JAMA study worthy of a story in the business section October 8. Reporter Aaron Frakt observed that $760 billion (the low-end estimate of annual waste) is “comparable to government spending on Medicare and exceeds national military spending, as well as total primary and secondary education spending” Moreover, Frakt noted, “If we followed the evidence available, we would save about $200 billion per year, about what is spent on the medical care for veterans, the Department of Education and the Department of Energy, combined. That amount could provide health insurance for at least 20 million Americans, or three-quarters of the currently uninsured population.”