JAMA study reports 25% of US healthcare system spending is wasteful

Oct. 8, 2019

A new study published in JAMA online October 7, 2019, reviewed previous literature and based on 6 previously identified domains of healthcare spending waste, found the estimated cost of waste in the US healthcare system ranged from $760 billion to $935 billion.

This accounts for approximately 25% of total healthcare spending, and the projected potential savings from interventions that reduce waste, excluding savings from administrative complexity, ranged from $191 billion to $282 billion, representing a potential 25% reduction in the total cost of waste. The research team was lead by William H. Shrank, MD, MSHS1, from Humana.

Computations yielded the following estimated ranges of total annual cost of waste in 6 areas:

·   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.

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