25% of Health Spending is Waste

October 9, 2019

Medicare will cut payments to 2,583 hospitals by anywhere from 0.01 percent to the maximum of 3 percent for excessive readmissions.

Orb Health

A quarter of total U.S. health care spending — between $760 and $935 billion every year — is waste, according to a new JAMA study lead by William Shrank, who is Humana’s chief medical officer.
Why it matters: We all pay for this waste through our premiums, out-of-pocket spending and taxes, and every dollar of it ends up in someone else’s pocket. Meanwhile, the health care industry is thriving.  Read the JAMA study here.

By the numbers: The study breaks down the wasteful spending into 6 categories.
1. Failure of care delivery: $102.4–$165.7 billion
2. Failure of care coordination: $27.2–$78.2 billion
3. Overtreatment or low-value care: $75.7–$101.2 billion
4. Pricing failure: $230.7–$240.5 billion
5. Fraud and abuse: $58.5–$83.9 billion
6. Administrative complexity: $265.6 billion

The bottom line: This system-wide bloat contributes to everyday Americans’ struggle to afford their health care and the large profits being made by the companies that provide it.|

This is why a highly effective and Medicare reimbursed Chronic Care Management program is critical and Collaborative Virtual Care is a great way to extend care capacity as virtual service to meet the growing demand of the chronically ill.  By increasing care capacity and extending care between office visits without requiring additional staff, office space, or out of pocket expenses, emergency utilization dramatically drops (54% reduction in one ACO at a Florida FQHC) as seen in this 2019 Orb health study.  Since approximately 23% of ED visits result in a hospital admission, a dramatic drop in admissions is seen with the reduction in ED utilization as a result.  A scalable CCM program will dramatically reduce the waste that is seen in this space and help with value-based incentives from CMS in the process.