Approximately 25 percent ($760 billion to $935
billion) of total U.S. health care spending can be characterized as
waste
$191 to $282 billion could be saved from
interventions that address waste
In a Special Communication published today in the Journal of the
American Medical Association (JAMA), researchers from Humana Inc.
(NYSE: HUM) and the University of Pittsburgh School of Medicine
estimated the cost of waste in the United States (U.S.) health
system. The study found that approximately 25 percent of health
care spending can be characterized as waste – between $760 billion
and $935 billion annually. The findings can be accessed by clicking
here.
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Humana JAMA Study Snapshot
The U.S. spends more on health care than any other country, with
costs approaching $3.6 trillion, or 18 percent of the gross
domestic product (GDP). These findings highlight the sources of
inefficiencies in the U.S. health care system, opportunities to
address those inefficiencies, and underscore several key solutions
to make health care more affordable for all Americans.
The study is a follow up to the well-known 2012 JAMA study –
“Eliminating Waste in US Health Care,” by Donald M. Berwick, MD,
MPP and Andrew D. Hackbarth, MPhil.
The goal of the new study was to estimate the levels of waste in
the U.S. health care system in six previously developed domains and
to report estimates of potential savings for each domain. The
authors conducted a search of medical literature from January 2012
to May 2019 focused on the six waste domains identified by the
Institute of Medicine:
- failure of care delivery
- failure of care coordination
- overtreatment or low-value care
- pricing failure
- fraud and abuse, and
- administrative complexity
“This study highlights the opportunity to reduce waste in our
current health care system,” said lead author William Shrank M.D.,
Humana’s Chief Medical and Corporate Affairs Officer. “By focusing
on these opportunities, we could make health care substantially
more affordable in this country. In the national debate about
health reform, we do not need to start over. We can build on the
strengths in today’s system to deliver higher quality care and
reduce costs, while also producing the necessary savings to expand
coverage to all Americans.”
For each domain, available estimates of waste-related costs and
data from interventions shown to reduce waste-related costs were
recorded, converted to annual estimates in 2019 dollars for
national populations where necessary, and combined into ranges or
summed as appropriate. The review yielded 71 estimates from 54
publications, government-based reports, and reports from the grey
literature.
Computations yielded the following estimated ranges of total
annual cost of waste and estimated annual savings from
interventions:
Waste domain
Estimated range of total annual cost of
waste
Estimated annual savings from
interventions
failure of care delivery
$102.4 - $165.7 billion
$44.4 - $93.3 billion
failure of care coordination
$27.2 - $78.2 billion
$29.6 - $38.2 billion
Overtreatment or low-value care
$75.7 - $101.2 billion
$12.8 - $28.6 billion
pricing failure
$230.7 - $240.5 billion
$81.4 - $91.2 billion
fraud and abuse
$58.5 - $83.9 billion
$22.8 - $30.8 billion
administrative complexity
$265.6 billion
*
* No studies were identified that focused on interventions
targeting administrative complexity.
“This research is so important because our industry is wasting
money that could be used to improve the care experience so people
can lead healthier lives,” said Bruce D. Broussard, Humana’s
President and Chief Executive Officer. “Each of the domains studied
may require a different kind of action, and the drive toward data
interoperability and value-based care payment models can reduce
this wasteful spending. But if we collaborate as health plans and
providers, in conjunction with the government, we can deliver more
effective care and improve health.”
The estimated total annual costs of waste and savings from
interventions that address waste were $760 billion - $935 billion
and $191 - $282 billion, respectively. These savings do not include
interventions for the area identified as the largest waste area,
administrative complexity.
Several key findings can be drawn from this study:
- The greatest source of waste, at over a quarter trillion
dollars annually, is administrative complexity. Some of this waste
is due to a fragmented health care system. More seamless data
interoperability, as is currently being driven by CMS, will produce
new savings. The movement to value-based care – which focuses on
alignment of incentives and increased collaboration between payor
and provider – could meaningfully reduce this source of waste as
many of the administrative tools used by payers to reduce waste
(such as prior authorization) can be discontinued or delegated to
the clinicians, reducing administrative complexity for all
stakeholders.
- Pricing inefficiency, in particular drug pricing, represents
the second greatest source of waste. These inefficiencies have
arisen in a highly regulated market-based system, and suggest that
policies that systematically promote competition and price
transparency should foster substantial savings.
- Approximately $300B in waste results from failure of care
delivery, failure of care coordination, and overtreatment. However,
there is clear evidence that if proven, effective clinical
strategies to improve care available today were scaled nationally,
approximately 50 percent of that waste could be avoided.
For the last several years, Humana has been focusing on
advancing the concept of interoperability and leveraging the
transformative power of the value-based care model to lower costs.
According to the company’s 2017 annual report, medical costs for
patients who were affiliated with physicians in Humana Medicare
Advantage value-based agreements were 15.6 percent lower than
original Medicare fee-for-service.
Humana has an extensive and growing value-based care presence.
As of June 30, 2019, Humana had approximately 2.3 million
individual Medicare Advantage members and approximately 115,000
commercial members who are cared for by more than 58,000 primary
care physicians in more than 1,000 value-based relationships across
43 states and Puerto Rico. Humana’s total Medicare Advantage
membership is more than four million members, which includes
members affiliated with providers in value-based and standard
Medicare Advantage settings. For more information, visit
humana.com/provider/support/vbc.
About Humana
Humana Inc. (NYSE: HUM) is committed to helping our millions of
medical and specialty members achieve their best health. Our
successful history in care delivery and health plan administration
is helping us create a new kind of integrated care with the power
to improve health and well-being and lower costs. Our efforts are
leading to a better quality of life for people with Medicare,
families, individuals, military service personnel, and communities
at large.
To accomplish that, we support physicians and other health care
professionals as they work to deliver the right care in the right
place for their patients, our members. Our range of clinical
capabilities, resources and tools – such as in-home care,
behavioral health, pharmacy services, data analytics and wellness
solutions – combine to produce a simplified experience that makes
health care easier to navigate and more effective.
More information regarding Humana is available to investors via
the Investor Relations page of the company’s web site at
www.humana.com, including copies of:
- Annual reports to stockholders
- Securities and Exchange Commission filings
- Most recent investor conference presentations
- Quarterly earnings news releases and conference calls
- Calendar of events
- Corporate Governance information
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version on businesswire.com: https://www.businesswire.com/news/home/20191007005615/en/
Alex J. Kepnes Humana Corporate Communications 502-580-2990
akepnes@humana.com
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