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Thirty Percent of Health Spending is Wasted

The National Academy of Medicine has noted that patients get effective care only about half the time, that gaps in coordination remain widespread, that serious preventable medical errors are common, and that perhaps more than 30 percent of healthcare costs could be avoided by improving quality and efficiency.

Moreover, researchers have broken that estimate of waste down into key areas for action:

 
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Unnecessary Services

This category includes care that is rooted in outmoded habits, that is driven by providers’ preferences rather than those of informed patients, that ignores scientific findings, or that is motivated by something other than provision of optimal care for a patient. Approximately $309 billion ($942 per person) is wasted on unnecessary services each year.

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Excess Administrative Costs

The excess spending that occurs because private health insurance companies, the government, or accreditation agencies create inefficient or flawed rules and overly bureaucratic procedures. Approximately $280 billion ($852 per person) is wasted on excess administrative costs each year.

Example: Billing Errors

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Inefficient Care Delivery

Includes the problems that occur when patients experience care that is fragmented and disjointed—for example, when the care of patients transitioning from one care setting to another is poorly managed. These problems can include unnecessary hospital readmissions, avoidable complications, and declines in functional status, especially for the chronically ill. Approximately $190 billion ($583 per person) is wasted on inefficient care delivery each year.

Example: Test Results Not Shared

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Fraud

In addition to fake medical bills and scams, this category includes the cost of additional inspections and regulations to catch wrongdoing. Approximately $110 billion ($336 per person) is wasted on healthcare fraud each year.

Example: False Claims

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Prevention Failures

This category includes poor execution or lack of widespread adoption of best practices, such as effective preventive care practices or patient safety best practices. Approximately $81 billion ($247 per person) could be saved  by eliminating prevention failures each year.

 Example: Missed Flu Shot

 

Sources: Waste estimates from Institute of Medicine, Best Care at Lower Cost: The Path to Continuously Learning Health Care in America (2013). Amounts have been updated to 2018 using Centers for Medicare and Medicaid Services, National Health Expenditure Accounts (NHEA).