Waste in Health Care: Behind the Numbers

The recently published  health spending research meta-analysis, Waste in the US Health Care System: Estimated Costs and Potential for Savings (10/7/19 JAMA ) has received attention from a number of health policy/health news scribes.  “One quarter of what we spend on health care is waste!” is a long-time, surefire eye-grabber; and “the total waste amounts to over $935 billion!” is practically a headline all by itself.
But I’m older, and tireder, so I have to squint at articles like these. And when I do, I find myself slowly making a fist and shaking it at a passing cloud. “Waste is big, and bad” is the easy part; finding & taking down the bad guy is inevitably harder. Why?
First, the authors identify 6 — count ’em, 6 — “domains” of waste. Warning sign one: “focusing” on 6 different places where waste might be found and reduced will probably be … complicated.
Here are their numbers:
Low High Gap
care delivery $102.40 165.7 61.8%
care coordination 27.2 78.2 187.5%
overtreatment (low-value care) 75.7 101.2 33.7%
pricing 230.7 240.5 4.2%
fraud waste abuse 58.5 83.9 43.4%
administrative complexity 265.6 NA
Totals 494.5  $ 935.10 89.1%



Second,  the authors’ analysis of 50+ studies of waste in these areas indicates that there’s probably not a lot of definition consensus around what “waste” is. Consider the range of estimates of the volume of waste their review reveals: estimates of the waste resulting from shoddy or non-existent care coordination vary by a factor of close to 3; the “difference of opinion” about  the waste entailed in pricing failure is only 4%. That suggests a disparity of methodologies for spotting & computing waste that is….possibly unhealthy.
Third, “pricing failure” accounts in their analysis for over 1/4 of total waste, and the apparent consensus around the extent of waste attributable to pricing failure is by far the strongest among the domains the authors reviewed. You’ll recall that “pricing failure” is shorthand for “we’re not getting value for dollars spent on care”, or more colloquially, “prices are too damn high”. The implication is that prices can be made to fail less by shrewder buying by some unnamed force (*cough* Medicare/Medicaid *cough*). Well,ok, maybe….
Fourth, the analysis paints a BIG target on the foreheads of Rx manufacturers: over 70% ($170 billion) of the estimated $230-240 billion in pricing failure waste is attributed to overspending on drugs. So, this analysis identifies the biggest waste item in the most significant waste domain as medicines.
Finally, the authors casually introduce a waste “basket” that apparently has not attracted research scrutiny in the past — “administrative complexity” — and assign it a value of $266 billion, or almost 30% of the total waste that might be reduced. To their credit, I suppose, they have not included any estimate of the potential waste recoverable by simplifying administrative processes, but the unspoken assumption has to be that there would be large savings to be had by ‘simplifying’ things. Maybe by making one program For All, for example? Who can say what their intentions are. They certainly don’t.
The one silver — copper? — lining in the JAMA piece may be that the analysis suggests “only” 25% of all spending is waste. That’s down from Berwick’s 34% guesstimate from 8 years back. Hey, we’ve reduced waste almost 26% without even trying! Numbers are fun.