Waste in the U.S. Health care system: a conceptual framework

Abstract

Context: Health care costs in the United States are much higher than those in industrial countries with similar or better health system performance. Wasteful spending has many undesirable consequences that could be alleviated through waste reduction. This article proposes a conceptual framework to guide researchers and policymakers in evaluating waste, implementing waste-reduction strategies, and reducing the burden of unnecessary health care spending.

Methods: This article divides health care waste into administrative, operational, and clinical waste and provides an overview of each. It explains how researchers have used both high-level and sector- or procedure-specific comparisons to quantify such waste, and it discusses examples and challenges in both waste measurement and waste reduction.

Findings: Waste is caused by factors such as health insurance and medical uncertainties that encourage the production of inefficient and low-value services. Various efforts to reduce such waste have encountered challenges, such as the high costs of initial investment, unintended administrative complexities, and trade-offs among patients', payers', and providers' interests. While categorizing waste may help identify and measure general types and sources of waste, successful reduction strategies must integrate the administrative, operational, and clinical components of care, and proceed by identifying goals, changing systemic incentives, and making specific process improvements.

Conclusions: Classifying, identifying, and measuring waste elucidate its causes, clarify systemic goals, and specify potential health care reforms that-by improving the market for health insurance and health care-will generate incentives for better efficiency and thus ultimately decrease waste in the U.S. health care system.

Figure 1

Waste Schematic

Figure 2

Percentages of National Health Expenditures Spent on Health Administration and Insurance Source: Davis et al. 2007.