New Humana Study Suggests $1 out of $4 Spent on Healthcare Is Wasted Each Year
Changing from reactive based healthcare to proactive based healthcare could help Americans save millions.
Humana released a study on Monday, October 7 revealing that $265 billion is being wasted on healthcare in the U.S. annually. With medical costs already at staggering highs, many Americans can’t afford to waste money on unneeded healthcare. After all, as CNBC reports, “rising health-care costs are a reality and cause stress for many people…If we are to successfully confront the issues of cost and efficiency in care, we first need to fully understand the systemic problem of wasteful spending.”
The last thing anyone wants to worry about during a medical emergency or when facing a chronic condition is the cost of healthcare. Unfortunately, for many Americans, worrying about healthcare costs is a reality. After all, the U.S. spends more on healthcare than any other country. In order to waste less money, the healthcare system must evolve to deliver more cost-efficient care to each and every patient.
Why Is So Much Money Being Wasted?
The ultimate goal of the study conducted by Humana and the University of Pittsburgh School of Medicine was to estimate the levels of monetary waste on healthcare in the U.S. They focused on the top six aspects of healthcare that are attributed to wasting money, including:
- failure of care delivery
- failure of coordination of care
- low-value care/overtreatment
- fraud or abuse
- administrative complexity
- pricing failure
The study found that the administrative complexity is the greatest source of monetary waste. Administrative complexity involves physician credentials, information systems, processing of medical claims, and administrative operating. Patients expect these responsibilities to be carried out seamlessly, however, clinicians and health plans typically work separately which can contribute to waste.
Each of these domains of healthcare will require different kinds of action to eliminate waste while improving patients’ experiences.
What Steps Have Been Taken To Eliminate Waste?
Prior to this newly released study, various initiatives have been implemented to help mitigate healthcare spending. Some of these initiatives include payment reform (bundled payments, value-based arrangements/reimbursements) and delivery reform (enhanced care coordination, Partnership for Patients initiative). However, these initiatives have only made a minor dent in healthcare spending waste and substantial waste still remains.
Sadly, the authors of the study found no reputable studies that have effectively found ways to reduce administrative complexity. Very few value-based payment options have been able to produce sufficient savings.
Don Berwick, a renowned physician and author of an editorial examining the Humana study, suggests that moving to a single-payer system, simplifying administrative costs, and lowering branded drug prices could help reduce waste.
Additionally, the Affordable Care Act implemented an effective preventative care plan that providers can follow to lower costs and prevent wasted money by treating diseases such as mental illness, diabetes, multiple sclerosis, and many other chronic diseases.
Prioritizing Proactive and Preventative Care Models
Too often, people wait until symptoms become severe to seek medical care. This can contribute to higher healthcare costs and chronic conditions. This is known as the reactive care model. Focusing more on proactive and preventative care, however, can help drive down long term healthcare costs. Proactive healthcare involves targeted communication and improved engagement allowing patients to take control of their own health outcomes. In addition, proactive healthcare focuses on more collaboration among patients and physicians in small-scale practices to help lower administrative costs, therefore, preventing administrative complexity waste.
Reactive healthcare is responsible for more than 75% of healthcare spending. Proactive and preventative healthcare, on the other hand, focuses on preventing chronic disease and improving healthcare outcomes. As a result, conditions can be tackled at the root causes and treated before they become a dangerous problem that requires costly medical care.
Innovative types of healthcare that are focusing on proactive and preventative health include workplace wellness initiatives, age management programs, and concierge medicine. Advocates for changing healthcare using preventative and proactive medicine suggest that “proactive medicine treats diseases before they become a bigger problem – saving patients time and money in the long run.”
Aside from preventing disease, proactive healthcare is also proven to increase retention rates and extend patients’ lifetime value. Retention is vital to keeping healthcare costs low, as it costs 5 to 25 times more to treat new patients than it does to retain old ones.
Americans In Need of Healthcare Reform
While preventative medicine may not be the end-all-be-all solution to wasted healthcare costs, it can certainly play a role in preventing disease in order to keep costs down. It is evident that further research and initiatives need to be done to improve the efficiency of administrative complexity and healthcare spending. It’s safe to say that healthcare reform is critical to lowering costs and expanding healthcare access to all Americans in need without the excessive worry of wasted money.