The analysis, published in JAMA on Monday, estimated that about 25 percent of total health care expenditures in the U.S. — total costs in 2019 are expected to reach a staggering $3.82 trillion — are wasteful. That means at least $760 billion per year goes to waste, a number comparable to the country’s entire defense budget in fiscal 2019.
The biggest source of waste, according to the study, is administrative costs, including inefficient rules, forms and requirements. In total, it costs about $265.6 billion per year. In spite of the steep amount of waste, the study identified no way to reduce it.
Another major factor in the soaring amount of health-care spending waste includes high drug prices, costing between $230.7 billion to $240.5 billion, exacerbated by a lack of competition among major pharmaceutical companies.
Over the next decade, the Centers for Medicare and Medicaid Services forecast that spending on prescription drugs will become the fastest-growing cause of rising health care expenditures. In order to reduce the soaring cost of drugs, the study concluded that a number of policy proposals, including enhanced market competition and the reimportation of drugs from less expensive nations, are necessary.
Another category contributing to the billions of dollars in waste includes the failure of care delivery, costing at least $102.4 billion (but up to $165.7 billion). This addresses the lack of hospitals or doctors to adopt best practices, such as preventative care.
However, overtreatment of patients — meaning care that essentially offers no benefits to patients, like providing them with a brand-name drug instead of a cheaper generic — also added to health care waste, at $75.7 billion to $101.2 billion.
Fraud and abuse accounted for $59 billion to $84 billion per year.
Finally, the study looked at the cost of failure of care coordination — $27.2 billion to $78.2 billion — which includes unnecessary admissions, or avoidable complications.
“The challenge of removing waste from U.S. health care and reinvesting that harvest where it could do much more good is not a technical one,” Donald Berwick, a physician and former CMS administrator, wrote in an editorial on the JAMA study. “It is a political one. In short, removing waste from US health care will require both awakening a sleepy status quo and shifting power to wrest it from the grip of greed.”