How much spending in U.S. health care is wasteful?
As much as 25 percent, according to a literature review by Humana Inc. (NYSE: HUM) and researchers with the University of Pittsburgh School of Medicine.
The review found that between $760 billion and $935 billion of spending in health care is wasted annually. Annual health care spending in 2019 is estimated to be about $3.6 trillion. That’s about 18 percent of the U.S.’s gross domestic product, according to the review.
A gem in this review: 25 percent wasteful spending could be considered and improvement. (More on that below.)
“By focusing on [opportunities to reduce waste], we could make health care substantially more affordable in this country,” Dr. William Shrank said in a news release from Humana. Shrank is chief medical and corporate affairs officer for Humana and one of the authors for the review.
“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,” he said.
The review looked at 71 spending and savings estimates from 54 unique peer-reviewed publications, government-based reports and reports published in non-commercial channels from Jan. 1, 2012 to May 15, 2019.
Here’s a rundown of the six areas that the review looked at with specific estimates for wasteful spending:
- Administrative complexity, $265.6 billion;
- Pricing failure, $230.7 billion to $240.5 billion;
- Failure of care delivery, $102.4 billion to $165.7 billion;
- Over treatment or low-value care, $75.7 billion to $101.2 billion;
- Fraud and abuse, $58.5 billion to $83.9 billion;
- Failure of care coordination, $27.2 billion to $78.2 billion.
The review is inspired by and is an update on previous research by Dr. Donald Berwick and Andrew Hackbarth which found that a mid-range estimate of potentially wasteful spending in the U.S. in 2011 was about 34 percent.
The review also looked at waste reduction initiatives in the same six categories. On the whole, the reduction initiatives reviewed led to $191 billion to $282 billion in savings:
The review didn’t identify studies or investigations that focused on administrative complexity, the largest source of potentially wasteful spending identified by the review.
“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,” Humana President and CEO Bruce Broussard, said in the release. “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.”
Date: October 11, 2019
Source: Biz Journals