25% of US healthcare spending is wasted
That's over $700 billion a year.
Although the US spends more on healthcare than any other country, the results aren’t exactly stellar.
In 2017, the United States spent about $3.5 trillion (or 18% of the GDP) on health expenditures — more than twice the average among developed countries — and the figure continues to grow year by year. However, despite this, the US isn’t exactly doing all that well in terms of healthcare. It has fewer hospital beds and physicians per capita than almost any country in the developed world, despite spending more per capita than any other country.
A new study might help explain at least a part of that discrepancy: the US system is highly inefficient. For the analysis, the authors analyzed 54 publications from 2012 to 2019 that focused on costs or savings related to six areas of waste in healthcare expenditure.
The results show that around 25% of the total money is wasted, a total sum that amounts to a whopping $760 billion to $935 billion annually.
The largest greatest source of waste, at over a quarter trillion dollars annually, is administrative complexity. The US healthcare system is a fragmented mammoth, with many differences between states and even different counties. Pricing inefficiency, in particular drug pricing, was another major source of inefficiency, accounting for around $240 billion wasted. Failure of care delivery, failure of care coordination, and over-treatment accounted in total for around $300 billion.
The good news, however, is that around half of this waste could be eliminated through the implementation of effective clinical strategies — strategies which already exist. Simply put, even just by building and improving existing practices, hundreds of billions of dollars could be saved annually, offering equal or even better care.
“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 study reads. “Implementation of effective measures to eliminate waste represents an opportunity to reduce the continued increases in US health care expenditures.”
While the analysis does have its limitations, it paints a compelling picture of generalized problem and offers some suggestions as to how to solve it — at least partially. The bulk of the waste represents a varied and systemic problem, for which a systemic solution would be required.
The study was published in JAMA.
