health policy briefreducing waste in health care
billion, or 18 percent to 37 percent of theapproximately $2.6 trillion annual total of all health spending in 2011. Spending in theMedicare and Medicaid programs, includingstate and federal costs, contributed about one-third of this wasteful spending, or $166 billionto $304 billion (Exhibit 1). Similarly, a panelof the Institute of Medicine (IOM) estimatedin a September 2012 report that $690 billionwas wasted in US health care annually, not in-cluding fraud.
categories of waste:
Researchers haveidentified a number of categories of waste inhealth care, including the following:
• Failures of care delivery.
This category includes poor execution or lack of widespreadadoption of best practices, such as effectivepreventive care practices or patient safety best practices. Delivery failures can result inpatient injuries, worse clinical outcomes, andhigher costs. A study led by University of Utah researcher David C. Classen and published in the April2011 issue of
found that adverseevents occurred in one-third of hospital ad-missions. This proportion is in line with find-ings from a 2010 study by the Department of Health and Human Services’ Office of Inspec-tor General (OIG), which found that Medicarepatients experienced injuries because of their care in 27 percent of hospital admissions.These injuries ranged from “temporary harm events,” such as prolonged vomitingand hypoglycemia, to more serious “adverseevents,” such as kidney failure because of med-ication error. Projected nationally, these typesof injuries—44 percent of which were foundto be clearly or likely preventable—led to anestimated $4.4 billion in additional spendingby Medicare in 2009, the OIG found. Berwickand Hackbarth estimate that failures of caredelivery accounted for $102 billion to $154 bil-lion in wasteful spending in 2011.
• Failures of care coordination.
Theseproblems occur when patients experiencecare that is fragmented and disjointed—for example, when the care of patients transition-ing from one care setting to another is poorly managed. These problems can include unnec-essary hospital readmissions, avoidable com-plications, and declines in functional status,especially for the chronically ill.Nearly one-fifth of fee-for-service Medicarebeneficiaries discharged from the hospitalare readmitted with 30 days; three-quartersof these readmissions—costing an estimated$12 billion annually—are in categories of di-agnoses that are potentially avoidable. Fail-ures of care coordination can increase costsby $25 billion to $45 billion annually. (See theHealth Policy Brief published on September 13, 2012, for more information on improvingcare transitions.)
This category includescare that is rooted in outmoded habits, that isdriven by providers’ preferences rather thanthose of informed patients, that ignores sci-entific findings, or that is motivated by some-thing other than provision of optimal care for a patient. Overall, the category of overtreat-ment added between $158 billion and $226 bil-lion in wasteful spending in 2011, accordingto Berwick and Hackbarth. An example of overtreatment is defensivemedicine, in which health care providers order unnecessary tests or diagnostic procedures toguard against liability in malpractice lawsuits. A September 2010
study led by Harvard University researcher Michelle M.Mello estimated that in 2008, $55.6 billionor 2.4 percent of total US health care spend-ing was attributed to medical liability systemcosts, including those for defensive medicine.
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