“How 25% of U.S. Health Spending Is Wasted” From NEJM Journal Watch

Here is the link to the Journal of the American Medical Association (JAMA) article, Waste in the US Health Care System:
Estimated Costs and Potential for Savings of October 7, 2019. The article is worth reading.

And the three editorials in the same issue are also very much worth reading:

Waste in the US Health Care System:

[Excerpt from the above editorial]

The authors’ analyses also suggested that an estimated $191 billion to $282 billion, or 5% to 8% of total US costs (based on total health care spending of $3.5 trillion),4 could be saved if interventions to reduce waste were implemented and were successful. However, that estimate does not include any savings from reducing administrative complexity because insufficient contemporary US data were available that provided reasonable estimates of potential savings. The administrative complexity that exists in the United States was recently highlighted in an article by Tseng et al*, who estimated the time to generate billing and insurance-related activities in primary care, the emergency department, general medicine inpatient stays, and ambulatory surgical procedures. In these 4 areas, professional billing costs were estimated to represent a range of 8% to 25% of professional revenue.

*Link is to Administrative costs associated with physician billing and insurance-related activities at an academic health care system [PubMed Abstract] [Full Text HTML]. JAMA. 2018 Feb 20;319(7):691-697.

Toward Evidence-Based Policy Making to Reduce Wasteful Health Care Spending

Elusive Waste: The Fermi Paradox in US Health Care 

 This editorial is the most depressing as it suggested that there is little likelihood that we can get the waste out of healthcare:

.  .  .  by many pedigreed estimates, annual waste in US health care equals or exceeds the entire annual cost of Medicare plus Medicaid.

But, to paraphrase Fermi, “Where is it?” Shrank and colleagues, like the prior studies they channel, examined 6 categories of waste: failure of care delivery, failure of care coordination, over-treatment or low-value care, pricing failure, fraud and abuse, and administrative complexity; they estimated the amount of each. In one sense, “There it is!”

So, where is this waste? Why, with 25% or 30% of all costs not helping achieve health or relieve disease, has not a single hospital or clinic or integrated health system drawn on that “waste account” to reduce its costs thrillingly? Not even one?

There are at least 4 plausible explanations. First, maybe the waste is not really there. Second, maybe the waste cannot, technically, be extracted. Third, maybe it is not interesting enough, yet, to reduce waste. And fourth, maybe politics paralyzes change.

The fourth explanation, politics, is the most plausible explanation of all. What Shrank and colleagues and their predecessors call “waste,” others call “income.” People and organizations (for-profit and not-for-profit) making big incomes under current delivery models include very powerful corporations and guilds in a nation that tolerates strong influences on elections by big donors. Those donors now include corporations whose “right” to “free speech” as “persons” has been certified by the US Supreme Court, conferring on them an unlimited license to support political candidates financially. When big money in the status quo makes the rules, removing waste translates into losing elections. The hesitation is bipartisan. For officeholders and office seekers in any party, it is simply not worth the political risk to try to dislodge even a substantial percentage of the $1 trillion of opportunity for reinvestment that lies captive in the health care of today, even though the nation’s schools, small businesses, road builders, bridge builders, scientists, individuals with low income, middle-class people, would-be entrepreneurs, and communities as a whole could make much, much better use of that money.

In large measure, the challenge of removing waste from US health care and reinvesting that harvest where it could do much more good is not a technical one. It is a political one. In short, removing waste from US health care will require both awakening a sleepy status quo and shifting power to wrest it from the grip of greed. [Emphasis Added]

This post on How 25% of U.S. Health Spending Is Wasted  contains excerpts from the October 8, 2019 issue of NEJM Journal Watch By Joe Elia Edited by David G. Fairchild, MD, MPH, and Jaye Elizabeth Hefner, MD:


JAMA article (Free)

Editorial #1 (Bauchner) (Free)

Editorial #2 (Joynt Maddox) (Free)

Editorial #3 (Berwick) (Free)

Roughly a quarter of the $3.8 trillion spent on healthcare in the U.S. is wasted each year, according to a JAMA study.

Based on the past 7 years of research, researchers estimated the amount of waste in the system and the amount of savings possible with the implementation of published cost-saving strategies. Waste amounted to over $800 billion annually, a quarter of which might be saved through, for instance, better drug-pricing strategies or emphasizing high-value care.

The top three areas of waste were, in order, administrative complexity (for which the authors found no published studies of cost-saving strategies), overpricing by drugmakers and hospitals, and lack of care coordination.


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