The price of excess: Identifying waste in healthcare spending

Don’t believe that over half of the $2.2 trillion we spend on healthcare is due to waste?  Check out the recent pwc article, “The Price of Excess: Identifying Waste in Healthcare.”  It’s a compelling argument that expands – though only marginally – prior estimates by various researchers (including the Institutes of Medicine in their seminal but still valid 1999 report “To Err is Human”)  that waste represents between 35% and 50% of all health services spending in the US.

Not unlike the Institutes of Medicine, pwc defines waste as one or more of three types of use: overuse, underuse, and misuse.  But the pwc study categorizes waste in three buckets:

• Behavioral where individual behaviors are shown to lead to health problems and have potential opportunities for earlier, non-medical interventions.
• Clinical where medical care itself is considered inappropriate or misses opportunities for earlier interventions or where overt errors leading to quality problems for the patient, plus cost and rework.
• Operational where administrative or other business processes appear to add costs without creating value.

Our May blog on Atul Gawande’s article “Overkill” higlighted how the medical system can fairly be characterized as performing unnecessary tests that reveal problems that aren’t quite problems to then be unnecessarily but expensively fixed – sometimes at great risk – “while we avoid taking adequate care of the biggest problems that people face—problems like diabetes, high blood pressure, or any number of less technologically intensive conditions.”  The pwc study reinforces what we at the CBGH have argued all along: employers need to find a way to shift spending to evidence-based primary care practices and risk reduction programs where chronic diseases can be either averted, delayed, or better managed.