Michael Hiltzik: There's enormous waste in US healthcare, so why isn't anyone doing anything about it?

Michael Hiltzik, Los Angeles Times on

Published in Business News

As Mark Twain reputedly said about the weather, everybody talks about waste in the U.S. healthcare system, but nobody does anything about it.

A new study puts numbers on the scale of that waste and nails down its sources. But it leaves open the question of what to do about it. That's especially true of the largest single source identified by the authors: "administrative complexity," which accounts for as much as $265.6 billion in waste a year, or as much as one-third of the total. Yet that's the one category for which the authors could find not a single article offering solutions for cuts.

The study was published Monday in the Journal of the American Medical Association by William H. Shrank and Teresa L. Rogstad of Humana, a big health insurance carrier, and Natasha Parekh of the University of Pittsburgh.

They divided waste in the system into six categories. In addition to administrative complexity, these are:

-- Failure of care delivery, which includes hospital-acquired illnesses and other "adverse events" and lack of preventive care (as much as $165.7 billion a year in wasteful spending);

-- failure of care coordination, which includes unnecessary hospital admissions and avoidable complications (up to $78.2 billion);


-- overtreatment or low-value care, such as using branded drugs instead of generics and prescribing unneeded screening or tests (up to $101.2 billion);

-- pricing failure, such as excessive payments for drugs and excessive insurance reimbursements for services (up to $240.5 billion); and

-- fraud and abuse (up to $83.9 billion).

Taken together, the sheer magnitude of these numbers, which range from $760 billion to as much as $935 billion a year or about 25% of all U.S. healthcare spending, is stunning yet not entirely surprising.


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