Wasteful Health Spending on an International Scale

By February 6, 2017Commentary

It will come as no surprise that I cast a jaundiced eye on claims of huge amounts of wasted or unnecessary health spending.  Not that I don’t think there is some, but not sure it the biggest cause of excessive health spending and health spending growth.  The Organization for Economic Cooperation and Development has chimed in with the perspective that this isn’t just a US problem, but occurs at a massive scale all around the world in developed countries.   (OECD Publication)   They claim that 20% of health spending makes no or little contribution to good health or positive health outcomes.  Paying for mistakes made in health care, too many inappropriate procedures, not enough use of generic drugs, too much use of anti-microbials, unnecessary administrative expenses, etc., etc., are said to contribute to the problem.  The report is full of data and tables across developed countries, and summarizes potential approaches to limit wasteful spending.  The primary causes of waste are said to be lack of information and sub-optimal decision-making, poor coordination, responding to financial incentives that actually encourage unnecessary services and intentional fraud or abuse of the health system.  Each of these has a set of potential steps that can be taken to address them, such as changing incentives or having vigorous fraud prosecution.

Not really clear where they get the 20% wasted spending figure from, but it is one that lots of people throw around, without a lot of support.  One example is claiming that if all care was delivered according to guidelines we would save huge amounts of money.  Of course they calculate the care that is delivered that shouldn’t be under the guidelines, but don’t add back the care that isn’t delivered but should be under guidelines.  I think they roughly cancel each other.  And guidelines aren’t perfect, are often found later to be based on bad science, and may inappropriately limit physician judgment on the needs of individual patients.  It is obviously important to ensure that health spending, especially when undertaken by governments as opposed to individuals, is appropriate and is directed toward the all-important goal of getting and keeping each individual in optimum health, but excessive claims of waste may misdirect efforts.  Unit costs of health care are often as much or more of a causative factor and deserve equal attention.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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