The US about three and a half trillion dollars on healthcare every year.
To put that in perspective, it's 18% of the GDP.
And a new Special Communication published in JAMA estimates
that approximately 25% of that spending is waste.
As we try to build quality healthcare in the US, we're going to have to reckon with that waste.
To me the word quality refers to the match between the work you do, and the products
and services you make, and the need you're trying to meet.
That's Don Berwick, former administrator for Medicare and Medicaid.
If you meet the need, that's quality.
If you fail to meet the need, that's not quality.
If that's the definition of quality, then waste is the opposite of quality.
It's doing stuff that doesn't help.
Will Shrank, one of the authors of the new study,
joined JAMA's Editor-in-Chief Howard Bauchner to discuss this on a recent podcast.
You're all set?
And we're recording.
Let's give people the totals.
Ding ding ding, or whatever the sound is for a cash register.
The actual amount is somewhere between $760 and $935 billion a year.
That's the total estimated waste.
So let's break down how the money is being wasted.
The authors estimated waste in six categories.
Starting with an obvious one: fraud and abuse.
Here's the price tag.
Another obvious one: pricing failure, or high prices that are way out of proportion
to the value of services and products.
But that's only the second largest category.
The largest category of waste is administrative complexity: the costs of infrastructure
for billing, coding, documentation and payment.
There's waste in clinical practice, too.
That's these three categories.
Things like medical errors, overtesting, lack of adoption of preventive care,
unnecessary ED visits, and inefficient use
of high cost clinicians and hospitals are also waste.
Collectively these categories account for as much as 345 billion.
Right about now you might be thinking: something should be done.
We didn't want to, sort of, tell a helpless story about how much waste there is.
The goal, I think, was to be able to, at the end of this, say not only where are we in terms
of waste, but how do we deploy what we know today to better address those problems?
So the authors took the analysis one step further and quantified the potential savings
from evidence-based interventions.
The total they came up with is 191 to 282 billion.
That's what could be saved if interventions were implemented and were successful.
Notice how administrative complexity, the biggest category of waste,
doesn't have a savings estimate? Interestingly enough,
there aren't really any good quality studies looking at interventions
to reduce administrative complexity.
That's a signal there's something wrong.
I mean, if that, that's low-hanging fruit.
And it should be an object of tremendous amount
of activity to get that out of the system.
It doesn't help anybody.
It certainly doesn't help the patient.
So more than 260 billion dollars are wasted on administrative complexity,
and no good data to estimate whether that could be reduced.
Evidence for interventions in the other categories is there,
but we haven't implemented them nationally.
Now imagine if we could free up those dollars and use them elsewhere.
You know, at $10,000 per individual, that's what the cost of care is in the US,
$250 billion lets you insure 25 million people.
That's such an important context.
Yeah, those are the round numbers.
But, you know-- We could insure all Americans by just making some of these changes.
Of course it's a bit more complicated than that.
This waste is there.
We know it.
And so you'd expect that there'd be tremendous activity to get it
out to reduce cost, to reduce the burden.
And everyone's complaining about the burden.
Everyone is worried about cost.
How come we're not getting it out of the system?
It's got to be viewed as a paradox, because the opportunity is so massive.
Part of what makes it difficult to redirect
that money is the way the healthcare system is set up in the US.
And because of the complex payment system
of American healthcare moving the money is tough.
The people that actually harvest the waste may not be the ones that --
harvest the resources from waste may not be the ones that need to reinvest it.
And we're going to have to -- we would have to struggle, both locally and at a state level
and nationally, about how you can move that money around.
It is a tough problem.
And that's not to mention that another way to look waste is as revenue.
And as long as we're fee-for-service driven and activity driven,
it's a little less interesting to say, "Well,
let's stop that because it's really not needed," if money is being made at it.
I don't think that's venality, but it is certainly illogical
to work against your own interest.
So the billions of dollars we've been talking about might not buy any value,
but it's still money flowing into the system that pays salaries and bonuses,
funds building and equipment upgrades,
and new programs that attract more patients and insurance dollars.
When you think about it that way, it's easy to see why any policy
to reduce waste will have pushback.
When a policymaker wants to make moves that would really reduce waste in healthcare,
there's going to be pushback from people that donate to campaigns.
And I think that political nexus is, it's a pretty deep and important explanation
for why we're living with this really unconscionable amount
of non-value-added activity.
And the policies that have made it
through congress haven't had the wholesale effects that some expected them to.
So, one of the main ways that the federal government has tried
to address waste is they're changing the payment paradigms.
That's Karen Joynt Maddox, she's a cardiologist and health policy researcher
at Washington University, and she's referring to value-based payment.
So value-based payment really has bipartisan support, which in this day and age is important.
Really the devil is in the details.
While these programs sound straighforward-- reward good quality, penalize poor quality--
implementing them has been really tricky.
Some of that is due to the difficulty of actually measuring quality.
Right now, we measure a whole bunch of measures, there's almost 300 quality measures
in the current outpatient payment program and it makes it very difficult
to know what quality really means
when any health system can just pick their favorite ones to report on.
And most quality measures do not adequately account for socioeconomic factors that influence
patients' health and their ability to access health care services.
This means that value-based payment might penalize providers who serve
vulnerable populations.
To make matters worse, some providers don't have the internal capacity
to even participate in payment reform programs.
So there are now a number of consulting agencies, programs, companies that will come in
and will help hospitals participate in value-based payment.
So we now have a scenario in which hospitals are paying consultants millions of dollars
to participate in a program that's ultimately supposed to save Medicare money.
The calculus there of the dollars, and where they're going, and is it actually cost savings,
have just not yet been worked out.
So we need to take a hard look at the unintended consequences of interventions to reduce waste.
But in the meantime, we can begin
to implement interventions already shown to be effective.
The question is whether the collective will is there to do it.
As I've said in other podcasts, my greatest fear is that the economy is healthy.
And so states have generally done well the last couple years,
but when economy inevitably will be less robust, and there's less state revenues,
I think the specter of the cost particularly of Medicaid is going to come up again.
So I'm really fearful, like, if we don't figure this out now when the economy's healthy,
it is gonna be a struggle when the economy is less healthy,
and the states have less resources.
So, I do think that we may be in a sweet spot now where there's enough concern
about growing healthcare costs, but at the same time, enough sort of cushion in the system
for people to be able to get around a table and talk about how to change things.
And in order for us to truly reduce waste, everybody is gonna have
to get a little bit of a haircut.
This is not a drug company problem, this is not a hospital industry problem,
it's not a private insurer problem, and it's not a government problem, it's a collective problem.
So, everyone agreeing that we have to move in the direction of better value is the only way
to get, to get people on board and make meaningful change.
Otherwise, it will just devolve into a shouting match, which will get us nowhere.
And that means it's time to remind ourselves that the goal
of healthcare is not to generate profits, create jobs, and keep getting bigger,
but rather to keep patients healthy.
There's a lot of detail in the Special Communication, and we were only able
to scratch the surface in this video.
So for a more in-depth discussion, make sure to listen
to the entire interview with study author Will Shrank.
You can find that at jamanetworkaudio.com or wherever you listen to podcasts.