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US Healthcare Waste rises to US$740 billion

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It has been reported that the amount of waste in the US healthcare system is currently estimated at US$740 billion. Few would argue that the aim of improving healthcare quality and controlling costs can only be achieved if the staggering amount of waste is reduced. The majority of this waste comprises of treatments which are ineffective, redundant and unnecessary whilst offering no positive effect on outcomes. There are three categories in which wastage is caused by ineffective care:


Overuse can occur when the risks from receiving a treatment are not worth the benefits purported or if the cost for these benefits is not justified. This includes circumstances where lower-cost services which offer identical or superior health benefits are not utilized. Due to overuse, patients are sometimes exposed to unnecessary risks which have no added benefits.


Underuse can occur when patients are not provided with medically beneficial treatments. Although the practice of underuse in the healthcare system may lead to a short term reduction of costs, the long term expenditure on worsening medical conditions due to ineffective treatment increases greatly.


Misuse of medical services refers to avoidable complications and medical errors in the consideration of patient safety. Examples of misuse include pressure ulcers and hospital acquired infections.

Causes & Solutions

There are three main causes behind the aforementioned inappropriate care. Firstly, each medical practitioner has his or her own working style and unique approach when recommending patient care. In situations where there is no general agreement on the best treatment plan for a particular medical condition, the quality of service and amount of waste is largely determined by the working style of each practitioner. This discrepancy can be streamlined with the development of evidence-based guidelines. Such guidelines can work to standardize the quality of healthcare whilst providing clearly defined treatment plans for specific situations, thus reducing waste.

Secondly, inappropriate care can also be attributed to thefragmentation of patient care delivery, the result from a lack of provider coordination incentives. Solutions to this include care delivery models such as Accountable Care Organizations whichemploy a “shared risk” component. This works as an incentive towards a more coordinated approach to patient care and at the same time, reduces waste. Additionally, the increased use of electronic medical records also works towards aninfrastructure focused on care delivery and coordination.

Lastly, the fee-for-service system of payment is another factor contributing to inappropriate care. Due to the characteristics of the payment model, there are strong financial incentives to carry out a high volume of services and tests, irrespective of the whether a patient will benefit from this care or not. Reforms to the payment model, such as paying a case rate and bundled payments, may facilitate by removing previously inefficient incentives and instead offering motivation to better manage patient care.

The success of any of these efforts relies heavily on medical care providers. It is essential that evidence-based guidelines are adhered to in order to acquire a more defined understanding of quality and efficiency in care. By encouraging appropriate and effective medical care, waste in the healthcare system can be reduced, thereby decreasing the overall cost of care whilst still achieving improvements quality.

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