Like Mark Twain said supposedly about climate, everyone talks about waste in the US health care system, but nobody does anything about it.
A new study places numbers on the scale of these wastes and fixes their sources. But it leaves open the question of what to do about it. This is especially true of the largest single source identified by the authors: "administrative complexity," accounting for up to $ 265.6 billion in waste per year, or up to a third of the total. However, this is the category for which the authors have not found a single article offering solutions for cuts.
The study was published Monday in the Journal of the American Medical Assn. by William H. Shrank and Teresa L. Rogstad of Humana, a major health insurance provider, and Natasha Parekh of the University of Pittsburgh.
Removing waste from US health care will require awakening a sleepy status quo and transferring power to eliminate it from the clutches of greed.
Health Specialist Donald M. Berwick
They divided the waste in the system into six categories. In addition to administrative complexity, they are:
–Service failure, which includes hospital-acquired illness and other "adverse events" and lack of preventive care (up to $ 165.7 billion a year in unnecessary spending);
– failure to coordinate care, which includes unnecessary hospitalizations and preventable complications (up to $ 78.2 billion);
– overtreatment or low value care, such as using branded rather than generic drugs and prescribing unnecessary tests or exams (up to $ 101.2 billion);
– price failure, such as overpayments for medicines and excessive insurance reimbursements for services (up to $ 240.5 billion); and
– fraud and abuse (up to $ 83.9 billion).
Taken together, the magnitude of these numbers, which range from $ 760 billion to $ 935 billion a year, or about 25 percent of all US health spending, is impressive but not entirely surprising.
Earlier studies estimated waste to be between 30% and 35% of all spending, but Shrank and his team deliberately tried to be conservative.
Around the midpoint of the authors' estimate, notes Donald M. Berwick, former administrator of the Medicare and Medicaid Service Centers, in a follow-up editorial, the waste would represent "more than the entire federal defense budget of 2019 and all Medicare and Medicaid combined."
Even if only a fifth of the waste could be eradicated, Berwick adds, it would yield more than $ 150 billion a year, or "nearly three times the US Department of Education budget."
As Shrank and his colleagues note, the remedies for some useless practices are well understood and some are being implemented.
Under pressure from Medicare and other government agencies, for example, hospitals are taking stronger steps to reduce infections and doctors are offering programs to prevent diabetes and other chronic conditions. "Responsible care organizations" that get paid to oversee their patients' health rather than charge for the service are gaining ground (if slowly). Suppliers are trying to reduce overuse of expensive diagnostic equipment and prescribe generics whenever possible. In Washington, lawmakers are talking at least about ways the government can force drug prices to go down.
However, the system remains stubbornly resistant to adopting these remedies more broadly. “In an age of health, when no dimension of performance is more costly than high cost,” Berwick asks, “up to $ 800 billion in waste (roughly a few hundred billion) is untapped as a reservoir for relief. Why?"
Among the responses offered by Karen E. Joynt Maddox of the University of Washington in St. Louis and Mark McClellan of Duke in another follow-up editorial it is partly administrative complexity. Some of the solutions to the other five waste sources are complex.
In addition, there are incentives built into our profit-oriented medical system to spend more for higher profits. Many of the new payment models designed to move US medicine away from the fee-for-service model, which encourages overuse, "are still dominated by financial incentives that favor hospitalization and more utilization," write Maddox and McClellan.
As Berwick notes, some of the options Shrank and his colleagues identify "would reduce the profitability of the healthcare organizations that use them." The truth, he writes, is that "what Shrank and colleagues … call 'waste', others call it 'income'."
These income generators include "very powerful corporations and guilds in a nation that tolerates strong influences in big donor elections … When big money in the status quo makes the rules, removing waste means a loss of elections."
The result is a bipartisan pact to avoid trying to extract significant amounts of health waste, "even if schools, small businesses … and communities as a whole can make much, much better use of that money."
Berwick concludes that, unfortunately, this is nothing new. Making the US health system more efficient is not a technical but a political problem. "Removing waste from US healthcare will require awakening a sleepy status quo and shifting power to eliminate it from the clutches of greed."