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Clinical Review & Education

JAMA   Special Communication

Waste in the US Health Care System
Estimated Costs and Potential for Savings
William H. Shrank, MD, MSHS; Teresa L. Rogstad, MPH; Natasha Parekh, MD, MS
Viewpoint
IMPORTANCE The United States spends more on health care than any other country, with

costs approaching 18% of the gross domestic product (GDP). Prior studies estimated that
approximately 30% of health care spending may be considered waste. Despite efforts to
reduce overtreatment, improve care, and address overpayment, it is likely that substantial
waste in US health care spending remains.

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OBJECTIVES To estimate current levels of waste in the US health care system in 6 previously
developed domains and to report estimates of potential savings for each domain.
EVIDENCE A search of peer-reviewed and “gray” literature from January 2012 to May 2019

focused on the 6 waste domains previously identified by the Institute of Medicine and
Berwick and Hackbarth: failure of care delivery, failure of care coordination, overtreatment or
low-value care, pricing failure, fraud and abuse, and administrative complexity. 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 when necessary, and combined into ranges or summed as appropriate.
FINDINGS The review yielded 71 estimates from 54 unique peer-reviewed publications,
government-based reports, and reports from the gray literature. Computations yielded the
following estimated ranges of total annual cost of waste: failure of care delivery, $102.4 billion
to $165.7 billion; failure of care coordination, $27.2 billion to $78.2 billion; overtreatment or
low-value care, $75.7 billion to $101.2 billion; pricing failure, $230.7 billion to $240.5 billion;
fraud and abuse, $58.5 billion to $83.9 billion; and administrative complexity, $265.6 billion.
The estimated annual savings from measures to eliminate waste were as follows: failure of
care delivery, $44.4 billion to $93.3 billion; failure of care coordination, $29.6 billion to
$38.2 billion; overtreatment or low-value care, $12.8 billion to $28.6 billion; pricing failure,
$81.4 billion to $91.2 billion; and fraud and abuse, $22.8 billion to $30.8 billion. No studies
were identified that focused on interventions targeting administrative complexity. The
estimated total annual costs of waste were $760 billion to $935 billion and savings from
interventions that address waste were $191 billion to $282 billion.
CONCLUSIONS AND RELEVANCE In this review based on 6 previously identified domains of
health care waste, the estimated cost of waste in the US health care system ranged from
$760 billion to $935 billion, accounting for approximately 25% of total health care spending,
and the projected potential savings from interventions that reduce waste, excluding savings
from administrative complexity, ranged from $191 billion to $282 billion, representing
a potential 25% reduction in the total cost of waste. Implementation of effective measures
to eliminate waste represents an opportunity reduce the continued increases in
US health care expenditures.

Author Affiliations: Humana Inc,
Louisville, Kentucky (Shrank,
Rogstad); Division of General Internal
Medicine, University of Pittsburgh
School of Medicine, Pittsburgh,
Pennsylvania (Parekh).
Corresponding Author: William H.
Shrank, MD, MSHS, Humana Inc,
500 W Main St, Louisville, KY 40202
(wshrank@humana.com).

JAMA. doi:10.1001/jama.2019.13978
Published online October 7, 2019.

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T

he United States spends more on health care than any other
country, with costs approaching 18% of the gross domestic
product (GDP) and more than $10 000 per individual.1 In
2010 the Institute of Medicine (IOM) attempted to estimate the
amount of waste in US health care spending and proposed 6 categories of potential sources of waste (Table 1).2 In an updated analysis
published in 2012, Berwick and Hackbarth3 reported that approximately 34% of US health care spending in 2011 (according to the authors’ midrange estimates) could be categorized as waste. Since then,
there has been additional focus on the sources of excess spending
identified by Berwick and Hackbarth, such as the cost of drugs in the
United States4-8 and administrative complexity.9-11 Also, in the intervening years since the previously published estimates of waste in
health care, a burgeoning body of research on low-value health care
services has emerged.12-14 In addition, initiatives to help control health
care spending, including both payment reform (eg, accountable care
organizations, bundled payments, and value-based payment arrangements with primary care physicians) and delivery reform (improved care coordination, patient-centered medical homes, and the
Partnership for Patients initiative) have evolved since previous estimates of wasteful spending. However, despite efforts to reduce various forms of overspending and initiatives to replace volume-based
reimbursement with value-based reimbursement, it is likely that substantial waste in US health care spending remains; elimination of that
waste represents an opportunity to help reduce the continual increases in health care expenditures.
This Special Communication provides an update to the IOM and
the Berwick-Hackbarth reviews of the estimated levels of waste in
the US health care system, using evidence from the intervening 7
years to improve understanding of the current sources of waste in
health care spending. A unique contribution of this update is a review of the ability of the health care system to reduce waste, using
recently reported estimates of potential savings from interventions that address each domain of waste. This added context is essential to help guide system-based reform to reduce waste in the
most efficient and effective manner.

Methods
This review used the framework of 6 domains of waste that guided
previous work (failure of care delivery, failure of care coordination,
overtreatment or low-value care, pricing failure, fraud and abuse, and
administrative complexity)2,3 and added estimates of the cost of lowvalue care to the “overtreatment” domain (Table 1). Low-value care
was defined as services that provide no or minimal benefit to a patient in a specific clinical situation.15 In addition to new evidence on
the cost of waste, evidence regarding cost-saving interventions was
reviewed to provide estimates of potential waste reduction in each
domain if those successful interventions were scaled. A targeted literature search was conducted using these resources: (1) PubMed and
(2) databases of national organizations (governmental and private), as listed in eTable 1 in the Supplement.

Study Selection Criteria
Reports and articles were included if published in English from January 1, 2012, to May 15, 2019 (since the Berwick and Hackbarth article was published in 2012); used data collected in 2009 or later
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Waste in the US Health Care System

(since the IOM report produced estimates for the year 2009); were
based on US populations; and were focused on costs or savings related to any of the predefined components of the 6 waste domains
(Table 1). Selection criteria also required that estimates could be
translated to national cost data. For instance, if a study estimated
annual costs for low-value services for a cohort of Medicare enrollees for 2016, the study was included because the cohort costs could
be translated to the entire national Medicare population. However,
if a study reported findings such as annual costs of low-value services for a cohort of Medicare enrollees who had at least 2 hospital
admissions and 1 intensive care unit admission in 2016, the data were
not included because of difficulty translating costs to a broader national Medicare population. Studies were excluded if they were performed at single sites (ie, 1 hospital or 1 clinic), focused only on pediatrics, or, with the exception of overtreatment or low-value care,
focused on single disease states.

Search Strategy
PubMed Search

The PubMed search strategies were developed based on keywords
and Medical Subject Headings (MeSH) terms related to the components within each of the 6 domains and terms such as cost, waste,
and savings. Conceivable search strategies tended to be nonspecific and yielded large numbers of articles. Thus, various limits were
sequentially applied as needed to keep search yields manageable and
to balance sensitivity against specificity; limits included restriction
of terms to title and abstract and/or restriction to systematic reviews, meta-analyses, and reviews (article types). In addition,
PubMed’s Similar Articles feature was applied to the IOM report,2
to the Berwick and Hackbarth article,3 to sources cited by those 2
publications, and to each article that met initial selection criteria. The
Similar Articles feature uses a defined algorithm based on number
of words in common with the source article.16
National Organization Database Search

This strategy involved searching for reports or articles from the following organizations, which were identified by the authors as valuable resources: Agency for Healthcare Research and Quality, Centers for Medicare and Medicaid Innovation, Centers for Medicare &
Medicaid Services (CMS) Office of the Actuary, National Quality Foundation, National Academy of Sciences, Commonwealth Fund, RAND
Corporation, Urban Institute, PriceWaterhouseCoopers Health Research Institute, and the Health Affairs Blog. The approaches used
for these various websites differed based on the structure and organization of the site (listed in eTable 1 in the Supplement).

Study Screening and Data Extraction
Two authors and 3 acknowledged contributors participated in singlereviewer screening of articles/reports according to the inclusion and
exclusion criteria. (T.L.R., N.P., Julie Hutchinson, and Elizabeth C.S.
Swart met weekly to discuss article and report selection and resolve
areas of uncertainty and disagreement.) Articles and reports were categorized according to the 6 domains and whether they assessed cost
of waste, savings from interventions that address waste, or both.
The following data were extracted from each of the selected articles or reports by 1 author or contributor (T.L.R., N.P., and Elizabeth
C.S. Swart): review source (ie, PubMed or organization name), title,
journal, and year of publication; waste domain addressed (from the

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Table 1. Six Waste Domains With Cost and Intervention Components
Berwick and Hackbarth Definition3

Targeted Cost Components

Targeted Intervention Components

Clinician- or hospital-related inefficiency:
variability in care, inefficient use of high-cost
clinicians or hospitals
Practice- and system-based inefficiency:
inefficient clinic processes, redundant testing
Medical errors or adverse events
Lack of adoption of preventive care practices

Clinical pathways, centers of excellence,
physician/hospital benchmarking, bundled
payment models
Quality improvement initiatives
Patient safety initiatives or hospital-acquired
condition reduction
Primary, secondary, and tertiary prevention initiatives

Unnecessary ED visits or admissions
Unnecessary readmissions
Avoidable complications

Interventions focused on reducing admissions: urgent
care, telehealth or retail clinics, observation units,
ED co-pay increases, high-user interventions
Transitions of care and readmission initiatives,
hospital readmissions reduction program
Effective care management for medically
complex patients

Overtreatment or overuse of low-value
treatments (medications and procedures)
Overtesting or overdiagnosis
Overuse in end-of-life care

Clinician facing: choosing wisely, clinician feedback,
clinical pathways, stepped care, incorporating
low-value care in quality measures, shared
decision-making
Insurance facing: prior authorization (for medications,
testing, and procedures)
Pharmacy focused: prior authorization, formulary
design, exclusivity or closed classes, indication-based
pricing, generics or biosimilars, early palliative care
and hospice efforts

Variability and inflation in pricing of medications,
testing, procedures, devices, and durable
medical equipment

Insurance facing: efforts to standardize prices of
services; value-based benefit design; negotiations
for services
Pharmacy focused: drug price negotiations,
value-based contracting for drugs and services
Patient facing: cost transparency initiatives

Costs of fraud and abuse

Interventions that address costs of fraud and abuse

Billing and coding costs
Physician administrative burden
Insurance administrative burden, inefficiencies

Interventions to facilitate billing and coding
Elimination of processes that do not improve quality
and access to care and do not reduce costs
Streamlining administrative personnel and processes

Failure of Care Delivery
“[W]aste that comes with poor execution or lack of
widespread adoption of known best care processes,
including, for example, patient safety systems and
preventive care practices that have been shown to be
effective. The results are patient injuries and worse
clinical outcomes.”
Failure of Care Coordination
“[W]aste that comes when patients fall through
the slats in fragmented care. The results are
complications, hospital readmissions, declines in
functional status, and increased dependency,
especially for the chronically ill, for whom care
coordination is essential for health and function.”
Overtreatment or Low-Value Care
“[W]aste that comes from subjecting patients to care
that, according to sound science and the patients’
own preferences, cannot possibly help them—care
rooted in outmoded habits, supply-driven behaviors,
and ignoring science. Examples include excessive use
of antibiotics, use of surgery when watchful waiting
is better, and unwanted intensive care at the end of
life for patients who prefer hospice and home care.”

Pricing Failure
“[W]aste that comes as prices migrate far from those
expected in well-functioning markets, that is, the
actual costs of production plus a fair profit. For
example, because of the absence of effective
transparency and competitive markets, US prices
for diagnostic procedures such as MRI and CT scans
are several times more than identical procedures
in other countries.”
Fraud and Abuse
“[W]aste that comes as fraudsters issue fake bills
and run scams, and also from blunt procedures of
inspection and regulation that everyone faces
because of the misbehaviors of a very few.”
Administrative Complexity
“[W]aste that comes when government,
accreditation agencies, payers, and others create
inefficient or misguided rules. For example, payers
may fail to standardize forms, thereby consuming
limited physician time in needlessly complex
billing procedures.”

Abbreviations: CT, computed tomography; ED, emergency department; MRI, magnetic resonance imaging;

list of 6 domains); relevant domain component; description of source
of waste or intervention targeting waste; population studied; estimated costs, savings or both; year of cost data; and notable caveats or details. When available, the calculated return on investment,
in addition to cost savings, was captured from articles and reports
describing interventions to reduce waste. The complete list of potentially useful articles and reports was then reviewed and selections were excluded if the results were redundant (less generalizable studies were eliminated) or if updated estimates using the same
methods were available. For instance, the Department of Justice
provided annual cost estimates for fraud and abuse from 2012 to
2018, but only the most recent estimates were included. (T.L.R., N.P.,
Elizabeth C.S. Swart, and Julie Hutchinson) met weekly to resolve
areas of uncertainty and disagreement in data extraction.)

Cost Calculations and Data Categorization
After data extraction, 1 author (N.P.) translated costs and savings from
included studies into national costs and savings. Although some studjama.com

ies reported national estimates for respective cost components, others required the study team to translate costs for the cohort of patients studied into national estimates by multiplying per-member
costs or savings by an estimate for the current corresponding national population. For example, if a study focused on costs of overtreatment or low-value care among 50 000 Medicare enrollees in
2016, the per-enrollee cost was calculated, multiplied by 2018 Medicare enrollment (most recent enrollment figures available), and then
converted the total to 2019 dollars. Many studies focused only on
Medicare populations. Because this population is not representative of the entire US population, costs from Medicare-based studies were translated to national estimates using Medicare enrollment counts rather than total US population counts; thus, these
sources yield conservative estimates of total waste. Once national
estimates for costs and savings for the most relevant articles and reports were determined, costs and savings were converted to 2019
dollars using the Bureau of Labor Statistics Medical Services consumer price index.17
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Table 2. Cost Estimates by Waste Domain
Costs, $US Billion
Domain

Annual Estimates

Total Range

Failure of Care Delivery
Hospital-acquired conditions and adverse events18-22

5.7-46.6

Clinician-related inefficiency (variability in care, inefficient use
of high-cost physicians)27,28

8.0

Lack of adoption of preventive care practices (obesity, vaccines,
diabetes, hypertension)23-26

88.6-111.1

102.4-165.7

Failure of Care Coordination
Unnecessary admissions and avoidable complications19,29

5.9-56.3

Readmissions30,31

21.25-21.93

27.2-78.2

Overtreatment or Low-Value Care
Low-value medication use12,32-35

14.4-29.1

Low-value screening, testing, or procedures14,36,37

17.2-27.9

Overuse of end-of-life care38

44.1

75.7-101.2

Pricing Failure
Medication pricing failure8

169.7

Payer-based health services pricing failure39,40

31.4-41.2

Laboratory and ambulatory pricing41

29.7

230.7-240.5

Fraud and Abuse
Fraud and abuse in Medicare42-44

58.5-83.9

58.5-83.9

Administrative Complexity
Billing and coding waste45

248

Physician time spent reporting on quality measures10

17.6

Total

760-935

After conversion of national costs and savings from each
study to 2019 dollars, the articles and reports within each domain
were grouped according to the predefined cost and savings components of that domain. For example, within the “overtreatment
or low-value care” domain, selected cost estimates could be
grouped as follows: medications; screening, testing, and procedures; and end-of-life care. When multiple selected articles and
reports provided estimates for the same component, a range was
reported for that component. All component estimates were
summed to yield total costs and ranges and total potential savings and ranges for each waste domain. When valid cost estimates were not available for a specific component, published
estimates of savings from a proposed system-wide change in the
health care system were counted in the calculations for both
costs and savings, the rationale being that projected savings from
such a change would represent the amount of current wasteful
spending. To ensure accuracy and consistency, after completing
calculations for each waste domain, 2 team members (T.L.R. or
Rituparna Battacharya) who had not performed the cost calculations reviewed all cost data extraction from original sources, conversions, and calculations.

Results
The review yielded 71 estimates from 54 unique peer-reviewed
publications, government-based reports, and reports from the
“gray” literature (eTables 2-7 in the Supplement). The number of
cost-plus-savings estimates identified for each of the 6 domains
was as follows: failure of care delivery (21), failure of care coordiE4

265.6

nation (11), overtreatment or low-value care (18), pricing failure
(9), fraud and abuse (10), and administrative complexity (2).

Failure of Care Delivery
For the “failure of care delivery” domain, 11 articles18-28 addressed
costs of waste (Table 2) and 10 articles25,26,46-53 addressed potential savings from interventions (Table 3) (2 articles were used for
both costs and savings). Cost studies were classified into 3 subcategories: hospital-acquired conditions and adverse events, clinicianrelated inefficiencies, and lack of adoption of preventive care practices. (The identified examples of clinician-related inefficiencies
included unnecessary costs resulting from variation in specialty
payments despite the existence of clinical guidelines or in spite of
a lack of association between higher intensity practices and outcomes.) The estimated annual cost of waste from these 3 components ranged from $102.4 billion to $165.7 billion. Articles that
assessed savings from interventions that address this domain were
categorized into the following 6 categories: initiatives targeting the
reduction of adverse hospital events and hospital-acquired infections; programs to increase physician efficiency, bundled payment
models to reduce unnecessary variability in care, and prevention
initiatives; integrated physical and behavioral health programs;
Partnership for Patients initiative, a CMS-funded activity that
engaged a large proportion of the nation’s hospitals and encouraged a wide array of improvement activities; standardized pathways in bundled payment models; and prevention initiatives to
address diabetes, obesity, smoking, and cancer. The estimated
potential annual savings ranged from $44.4 billion to $93.3 billion
for these interventions, based on extrapolating the most generalizable results to the entire US population.

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Table 3. Estimates of Savings From Interventions That Address Waste
Savings, $US Billion
Domain

Estimates

Total Range

Failure of Care Delivery
Interventions to address adverse hospital events
and hospital-acquired infections46,47,49

5.4

Incentives to increase physician efficiency48

47.5 million

Integration of behavioral and physical health50

31.5-58.1

Partnership for patients campaign53

3.4

Standardized pathways in bundled payment models51,52

97.9-555.5 million

Prevention initiatives to address diabetes, obesity, smoking,
and cancer25,26

4.0-25.8

44.4-93.3

Failure of Care Coordination
Emergency department–based strategies49,54

3.8-7.4

Care coordination in accountable care organizations55,56

8.3-13.1

Health Information Exchanges57

205-410 million

Transitional care programs58

9.2

Effective care management for medically complex patients59

8.0

29.6-38.2

Overtreatment/Low-Value Care
Optimizing medication use34,35

8.8-21.9

Prior authorization procedures60

250 million

Pioneer accountable care organizations strategies to reduce overuse13

199.7 million

Shared decision-making tactics to reduce unnecessary procedures61

3.2

Expanding hospice access62

395 million-3.0 billion

12.8-28.6

Pricing Failure
Drug pricing interventions63,64

20.3

Insurer-based pricing interventions39,40

31.4-41.2

Laboratory and office visit pricing transparency41

29.7

81.4-91.2

Fraud and Abuse
Recovery from convictions and fraud settlements43,44,65

2.1- 5.1

Legislative, administrative, and integrity strategies65,66

20.6-25.6

22.8-30.8

Administrative Complexity
Not applicable
Total

191-282

Failure of Care Coordination
The 4 studies19,29-31 that assessed costs from failure of care coordination were classified into 2 subcategories (Table 2): unnecessary
admissions or avoidable complications and readmissions. The estimated annual cost of waste from these 2 components ranged from
$27.2 billion to $78.2 billion. The 7 studies49,54-59 that focused on
intervention savings were classified into 5 categories (Table 3): emergency department–based strategies (includes video consultations
and shift to primary care and retail clinics), care coordination within
accountable care organizations (ACOs), health information exchanges, transitional care programs (focused on hospital-to-home
transitions), and effective care management for medically complex patients. The estimated total savings from these care coordination interventions ranged from $29.6 billion to $38.2 billion.

Overtreatment or Low-Value Care
The 9 articles (11 estimates)12,14,32-36,38,67 that addressed costs of
waste from overtreatment or low-value care were classified into the
following categories (Table 2): low-value medication use (branded
vs generics or biosimilars and antibiotic resistance costs); lowvalue screening, testing, procedures; and overuse of end-of-life care.
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The estimated total cost of waste from overtreatment or low-value
care ranged from $75.7 billion to $101.2 billion. The 6 articles
(7 estimates)13,34,35,60-62 on savings from interventions that address overtreatment or low-value care were divided into the following categories (Table 3): optimizing medication use, prior authorization, ACO interventions that address overtreatment or low-value
care, use of shared decision-making to reduce unnecessary procedures, and savings from expanding hospice access (2 articles were
used both for costs and for savings). The estimated amount that
could be saved annually if these successful interventions could be
scaled nationally ranged from $12.8 billion to $28.6 billion.

Pricing Failure
The 4 articles8,39-41 that assessed costs of pricing failure were classified into the following categories (Table 2): medication pricing;
payer-based health services pricing; and laboratory-based and ambulatory pricing. The estimated cost of waste from pricing failure
ranged from $230.7 billion to $240.5 billion. The 5 articles39-41,63,64
that assessed savings from interventions that address pricing failure
(3 articles were used both for costs and for savings) were categorized as drug pricing interventions, payer-focused interventions
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(including all-payer models), and pricing transparency strategies for
laboratory orders and office visits (Table 3). The estimated total
savings from interventions that address pricing failure ranged from
$81.4 billion to $91.2 billion.

Fraud and Abuse
The 3 articles42-44 that addressed costs of waste from fraud and
abuse (Table 2) focused on the Medicare population, and total estimated costs ranged from $58.5 billion to $83.9 billion. Four additional articles43,44,65,66 (5 estimates; 2 articles were used both for
costs and for savings) that assessed savings from governmentbased (Department of Justice, Office of the Inspector General, and
CMS) interventions (Table 3) were categorized into those that addressed recovery from convictions and fraud settlements and those
that focused on legislative, administrative, and integrity strategies.
The estimated annual savings from these interventions ranged from
$22.8 billion to $30.8 billion.

Administrative Complexity
Two articles10,45 addressed cost of waste from administrative complexity (Table 2), and no articles were identified that addressed savings from interventions. The estimated total annual cost of waste
in this category was $265.6 billion.

Discussion
This review of the current literature of the cost of waste in the US
health care system and evidence about projected savings from interventions that reduce waste suggests that the estimated total costs
of waste and potential savings from interventions that address waste
are as high as $760 billion to $935 billion and $191 billion to
$282 billion, respectively. These estimates represent approximately 25% of total health care expenditures in the United States,
which have been projected to be $3.82 trillion for 2019.68 These estimates are lower than the estimates provided by the IOM report
(31%)2 and by Berwick and Hackbarth3(34%, using authors’ midrange cost estimate), although those estimates included savings from
administrative costs. However, the best available evidence about the
cost savings of interventions targeting waste, when scaled nationally, account for only approximately 25% of total wasteful spending. These findings highlight the challenges inherent in rapidly changing the course of a health system that accounts for more than
$3.8 trillion in annual spending, 17.8% of the nation’s GDP.68
The administrative complexity category was associated with the
greatest contribution to waste, yet there were no generalizable studies that had targeted administrative complexity as a source for waste
reduction. Some of that complexity results from fragmentation
in the health care system. Recent proposals by CMS and the Office
of the National Coordinator of Health Information Technology to foster data interoperability and government initiatives such as Blue
Button 2.0 will hopefully alleviate some burden as information flows
more freely and billing and authorization processes become more
automated. The greater opportunity to reduce waste in this category should result from enhanced payer collaboration with health
systems and clinicians in the form of value-based payment models.
In value-based models, in particular those in which clinicians take
on financial risk for the total cost of care of the populations they serve,
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Waste in the US Health Care System

many of the administrative tools used by payers to reduce waste
(such as prior authorization) can be discontinued or delegated to the
clinicians, reducing complexity for clinicians and aligning incentives for them to reduce waste and improve value in their clinical
decision-making. As more clinicians transition into value-based payment arrangements with financial risk, administrative burden and
oversight could be reduced for all health care constituencies, including payers, hospitals, and physician practices; adoption of global
prepayment mechanisms for patients and populations rather than
fee-for-service payments would be expected to accelerate reductions in administrative complexity. Moreover, there is a need for better methods of assessing strategies to reduce administrative complexity while maintaining quality and without increasing spending.
Presumably, all health systems, clinician practices, and payers have
efforts underway to simplify processes and explore digital solutions to reduce administrative complexity. The science describing
the success of these interventions is limited and more evidence is
needed to quantify the waste in this category that could be reduced and the resulting savings.
The category that represents the second largest contributor to
waste in the United States is pricing failure. In many ways, the evolution to value-based care would be expected to produce the least
savings in this category since pharmaceutical pricing represents a
major component of this waste domain and would not be affected
by new approaches to care delivery and reimbursement. New highcost specialty drugs, which will soon exceed 50% of pharmaceutical spending, are raising new questions about how to maintain
affordability.69 Over the next decade, CMS projects that prescription drug spending will be the fastest-growing cause of rising health
care expenditures.68 This topic has thus received considerable attention from policy makers, and numerous proposals are currently
under consideration. These proposals advocate enhanced market
competition, reimportation of drugs from less expensive nations, leveraging pricing negotiated by other nations, and greater transparency of pricing and return of rebates to patients at point of sale. Some
efforts are under way to address the price of care delivery. Numerous policies are under consideration to improve cost transparency
for hospital services and to eliminate out-of-network surprise billing, which can lead to substantial pricing increases for those affected. Importantly, these pricing-related sources of waste have
arisen in the existing competitive US health care marketplace, and
likely result, at least in part, from the complex regulatory framework that governs the health care system. Policy interventions are
needed to drive meaningful reductions in waste in this domain. Additionally, in the dynamic health care marketplace, where profitmotivated firms will respond to any new policy with strategies to protect their margins, no single policy is likely to suffice; a coordinated
policy effort is likely needed to create long-standing change that will
meaningfully reduce waste resulting from pricing failure.
In the failure of care delivery, failure of care coordination, and
overtreatment or low-value care categories, the data from this review suggest that more than $200 billion in waste remains in the
US health care system. There is compelling empirical evidence in all
3 categories that interventions can produce meaningful savings and
may reduce waste by as much as half. Many of these interventions
have arisen in settings where payers are collaborating with clinicians and health systems, either to align payment models with value
or to support delivery reform to enhance care coordination, safety,

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and value. Some experts have noted that the move to value-based
care arrangements has produced less savings than had been anticipated and that care transformation has been slower than they had
hoped for. However, in the setting of broader adoption of valuebased care, there is growing evidence to suggest that some interventions are improving care and reducing downstream costs. While
it is not realistic to expect to eliminate all waste in these categories,
the evidence base to guide future interventions is growing. As valuebased care continues to evolve, there is reason to believe such interventions can be coordinated and scaled to produce better care
at lower cost for all US residents.
It is notable that, as there is greater adoption of value-based care
models in the United States, there is increasing interdependency between these waste categories. Administrative complexity is the greatest source of waste in the United States today and can be a result of
payers’ efforts to reduce waste by reducing overtreatment and lowvalue care. In value-based arrangements, improvements could be
expected to reduce waste in both categories. Similarly, payerhealth system collaboration to improve care coordination and transitions in care could be expected to improve safety and reduce failures in care delivery. Additionally, greater alignment between payers
and clinicians should assist in efforts to reduce fraud and abuse, while
simultaneously reducing low-value care.

ing would be possible if more ROI data were available. The findings
of this review are presented as broad ranges to offer reasonable
bounds for estimated waste and potential cost savings.
Second, much of the research on waste and improvement has
been conducted in Medicare populations. While estimates from cohorts of Medicare enrollees were translated to the broader national Medicare population, data derived from analyses of waste and
waste reduction interventions in traditional Medicare or Medicare
Advantage may not have been fully generalizable to the entire Medicare population. Importantly, there was no attempt in these analyses to generalize Medicare costs or savings to other insurance populations, rendering the findings conservative.
Third, when national samples were not available, studies involving multiple sites were used to make national estimates. Data
derived from these studies may not be generalizable to the US population. Fourth, the estimates for waste do not include wasteful spending for pediatric health care, a domain with limited systematic research. Fifth, wide ranges were derived from the results of studies
reviewed; variability could result from differences in populations
studied, modeling approaches, and even publication bias. This variation might lead to inflated estimates of waste or savings. Sixth, interventions to improve advanced illness and end-of-life care have
demonstrated mixed results in reducing total costs, despite improving quality of care, and estimates are necessarily imprecise.

Limitations
This analysis has several limitations. First, a broad review like this is
meant to be more directional than precise. Considering that the data
sources applied to a variety of populations (defined by type of insurance, clinical factors, or both), the ability to carefully assess and
sum waste across all populations was incomplete in all categories reported. Similarly, included studies may not represent all cost and savings components pertinent to each waste domain. Furthermore, reductions in total cost of care that result from investments in improving
chronic disease have been challenging to demonstrate. Because few
sources took the cost of interventions into account when calculating savings, it was not possible to report estimates of the return on
investment (ROI), ie, the actual cost-savings that can be expected.
More realistic estimates of the potential for reducing wasteful spend-

In this review based on 6 previously identified domains of health care
waste, the estimated cost of waste in the US health care system
ranged from $760 billion to $935 billion, accounting for approximately 25% of total health care spending, and the projected potential savings from interventions that reduce waste, excluding savings from administrative complexity, ranged from $191 billion to
$282 billion, representing a potential 25% reduction in the total cost
of waste. Implementation of effective measures to eliminate waste
represents an opportunity to reduce the continued increases in US
health care expenditures.
3. Berwick DM, Hackbarth AD. Eliminating waste in
US health care. JAMA. 2012;307(14):1513-1516. doi:
10.1001/jama.2012.362

from UPMC Health Plan. No other disclosures were
reported.

ARTICLE INFORMATION
Accepted for Publication: August 26, 2019.
Published Online: October 7, 2019.
doi:10.1001/jama.2019.13978
Author Contributions: Dr Shrank had full access to
all of the data in the study and takes responsibility
for the integrity of the data and the accuracy of the
data analysis.
Concept and design: Shrank, Parekh.
Acquisition, analysis, or interpretation of data:
Rogstad, Parekh.
Drafting of the manuscript: Shrank, Parekh.
Critical revision of the manuscript for important
intellectual content: Rogstad, Parekh.
Statistical analysis: Rogstad, Parekh.
Administrative, technical, or material support: All
authors.
Supervision: Shrank.
Conflict of Interest Disclosures: Dr Shrank
reported receiving support from Humana Inc.
Dr Rogstad reported receiving support from
Humana Inc. Dr Parekh reported employment

jama.com

Conclusions

Additional Contributions: We thank Elizabeth C.S.
Swart, UPMC Health Plan, for her assistance with
literature searching and data abstraction, Julie
Hutchinson, MD, Humana Inc, for her assistance
with literature searching, and Rituparna
Battacharya, PhD, Humana Inc, for her cost data
conversions and assistance with fact checking. All
those listed here are with Humana Inc and did not
receive additional compensation for their work.

4. Dusetzina SB, Huskamp HA, Keating NL.
Specialty drug pricing and out-of-pocket spending
on orally administered anticancer drugs in Medicare
Part D, 2010 to 2019. JAMA. 2019;321(20):20252027. doi:10.1001/jama.2019.4492
5. Califf RM, Slavitt A. Lowering cost and increasing
access to drugs without jeopardizing innovation.
JAMA. 2019;321(16):1571-1573. doi:10.1001/jama.2019.
3846

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