The U.S. health care system is one of the most expensive in the world, hampering the nation’s financial and economic health. US health care costs will total $4.3 trillion in 2021, averaging about $12,900 per person. By comparison, her average per capita health care cost in other wealthy countries is less than half that. Additionally, 34% of the country’s health care costs are funded by the federal government, straining the federal budget and increasing the national debt.
One commonly cited reason for the prohibitive cost of the US health care system is waste. About 25% of healthcare spending in the United States is considered waste, and about a quarter of that money could be recovered through interventions that address such waste.
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What is wasteful medical spending and where does it come from?
Wasteful spending in healthcare is generally defined as:
- Services and processes that are not harmful or beneficial
- Extra costs avoided by replacing services or products with cheaper alternatives with equal or better benefits
According to a 2019 study by medical scholars published in the Journal of the American Medical Association, the annual cost of wasteful spending in health care has ranged from $760 billion to $935 billion in recent years, accounting for nearly a quarter of total healthcare spending. is equivalent to 1 of Such expenditure can generally be categorized as administrative waste, expenditure on inefficient clinical care, or operational waste.
Healthcare administration costs are the biggest cause of waste in the healthcare system
About $266 billion, the largest cause of waste in the healthcare system, is due to administrative costs.
Management complexity. The United States spends significantly more on healthcare than other wealthy nations. In 2021, the US spent her $1,055 per person on such expenses, while her second highest level of such spending was in Germany where she spent $306 per person. Part of the difference is due to the administrative complexity of having multiple payers in the US healthcare system. As a result, there are high costs associated with claims and insurance-related expenses such as claims management, clinical documentation and coding, and pre-approval issues. The complexity of this administration is illustrated by the fact that the estimated time spent addressing billing-related issues is $68,000 per physician per year. However, much of the disparity in spending across countries stems from the fact that the U.S. health care system operates differently than other OECD countries, especially those with single payer schemes. should be noted.
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fraud and abuse. Another component of government waste is fraud and abuse, which costs the healthcare system $59 billion to $84 billion annually. Medical fraud and abuse includes misrepresenting the type of services provided to a patient, claims for services not provided or not properly documented, or requests for improper reimbursement.
What is inefficient clinical care spending?
Inefficient spending focused on the clinical aspects of the healthcare environment costs an estimated $345 billion annually. This includes services that provide little or no benefit to the patient, may cause harm, impose unnecessary costs on the patient, or waste limited medical resources. In this category, he has three specific areas: care delivery failure, low-value care, and care coordination failure.
Failure to provide care. Broadly speaking, in the sense of “doing the wrong thing” (errors and adverse events) or “not doing the right thing” (not providing the care known to be most useful), this field is It will cost the healthcare system an estimated $102 billion. to $166 billion annually. Specifically, one study estimated the annual cost of measurable medical errors (such as pressure ulcers and post-operative infections) at the cost of patients at $17 billion. Not adopting best practices also leads to such wasted costs. For example, routine immunizations and cholesterol testing are effective in preventing adverse long-term health outcomes, but such services are often overlooked due to concerns about cost coverage. There is. Researchers estimate that failure to implement preventive care could cost up to $111 billion annually.
low value care. Low-value care provides little or no benefit to the patient, may cause harm, impose unnecessary costs on the patient, or waste limited medical resources. Defined as a medical intervention. A particular aspect of low-value care is overtreatment. This is care that does not bring any benefit to the patient. For example, order multiple diagnostic tests. A study of physicians, costing an estimated $76 billion to $101 billion annually, found that overtreatment was prevalent, driven by a variety of factors, including fear of malpractice, patient demands, and difficulty accessing previous medical records. motivated by a number of factors.
Failure to coordinate care. Care coordination failures account for an estimated $27 billion to $78 billion annually. This type of spending captures poorly or incompletely maintained electronic medical records and a lack of communication and collaboration among healthcare providers.
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How does operational waste contribute to wasted healthcare spending?
Operational waste is a tiny fraction of wasted health care spending and occurs in cases of pricing failures and misuse of medical materials.
Pricing failure. Pricing failures in the healthcare sector lead to inconsistent pricing of care as different entities pay different prices. Pricing varies by facility setting (eg, inpatient vs. outpatient), location (eg, rural vs. metropolitan), and type of insurance. For example, in his 2021 study by the Radiological Society of North America, the median negotiated price for an MRI scan of his lower spinal canal is $1,311 if paid in the commercial market, compared with $269 for Medicare. I understand. Pricing failures often lead to over-pricing, affecting the prices of medicines, payer-based medical services, laboratory-based and outpatient services. Because the healthcare sector operates differently than other markets, pricing failures are estimated to cost the healthcare system $231 billion to $241 billion annually in waste. However, what some research sees as a pricing failure may actually just reflect market conditions in a particular sector.
Misuse of medical materials. Misuse of medical materials occurs when cheaper and equally effective alternatives are not used or when medical materials are wasted. A common example of using cheaper alternatives is replacing brand-name drugs with generics. increase. In the pharmaceutical sector, medical material waste can manifest itself as large volumes of discarded unused medicines from over-prescriptions, patient non-adherence to prescribed treatment policies, and poor hospital medicine inventory management. . Researchers estimate that hospitals waste $3 billion worth of medicine each year.
Conclusion
Health care costs are a major contributor to the US’ unsustainable financial outlook. The waste or inefficiency of a country’s healthcare system is a notable factor contributing to the sector’s costs. Governments pay about two-fifths of all health care costs, so eliminating wasteful spending where possible can help reduce the country’s debt. Luckily, there are many solutions that can help reduce wasteful healthcare costs and lessen the financial impact on both individuals and governments.
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