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Waste in Health Care

March 15, 2021
pop points

By Mitch Kaminski, MD, MBA, editor-in-chief

The COVID-19 pandemic forced insights into the need to address drivers of health—otherwise known as social determinants of health. But with health care investment approaching 18% of our GDP, how can we afford additional investment? From where will the funds come?

A theoretically simple solution: eliminate wasteful health care.

The Institute of Medicine (IOM) first reported in 2009 that the US spent $750 billion in waste, representing 31 cents of every health care dollar invested.1 Using the same categories of waste defined by the IOM, Shrank, et al,2 more recently analyzed similar opportunities in 2019. According to their calculations, waste represents 25% of spend, but they did not include administrative waste.

Waste in health care has also been called low value care. According to the University of Michigan, Center for Value-Based Insurance Design, low-value care can be defined as “services that provide little or no benefit to patients, have potential to cause harm, incur unnecessary cost to patients, or waste limited healthcare resources.”3

When I discuss waste with health care professionals in our educational programs, we conduct a ranking exercise that includes the following question:

What do you see as the major categories of waste in health care, and how would you rank their relative impact?

The most frequently named culprits (in alphabetical order) are:

  • Defensive medicine (medico-legal risks);
  • Excess administrative cost;
  • Fraud and up-coding;
  • High prices;
  • Inefficiency/error (poor quality);
  • Missed prevention opportunities; and
  • Unnecessary services.

The identified categories above, except for defensive medicine, actually represent the IOM top six categories of waste.

The actual IOM rankings generate useful discussion4: 


I find that most don’t appreciate that “unnecessary services” top the list, representing over one-quarter of health care waste. Physicians are often surprised that defensive medicine (accounting for 2.4% of waste) doesn’t make the top six list—many rank it in the top three. One reader did point out that defensive medicine does spill over into unnecessary services but that indirect influence was not delineated in the IOM report.

The Choosing Wisely campaign5, an initiative founded in 2009 by the American Board of Internal Medicine, promotes efforts to reduce unnecessary testing and interventions.  Over 70 medical specialty societies have published over 400 recommendations of overused tests and treatments that physicians should avoid. These guidelines are evidence-based, usually not controversial, and follow the United States Preventative Services Task Force (USPSTF) recommendations. However, the following key factors limit the impact that Choosing Wisely has had: 

  • Specialists are often unaware of their own society’s recommendations.
  • Patients often believe that more medical care is always better medical care.
  • Purchasers and other stakeholders has been slow to align payment with the guidelines. 

For example, in my community, patients are routinely referred to primary care for “pre-op clearance” for low-risk cataract surgery. An EKG and lab testing are expected, and surgery will not be scheduled without performing and documenting those interventions. Payers reimburse us for these visits and any testing or consultations that follow. This occurs despite the first listed Choosing Wisely recommendation from the American Academy of Ophthalmology: 

“Don’t perform preoperative medical tests for eye surgery unless there are specific medical indications.

For many, preoperative tests are not necessary because eye surgeries are not lengthy and don’t pose serious risks. An EKG should be ordered if patients have heart disease. A blood glucose test should be ordered if patients have diabetes. A potassium test should be ordered if patients are on diuretics. In general, patients scheduled for surgery do not need medical tests unless the history or physical examination indicate the need for a test, eg, the existence of conditions noted above. Institutional policies should consider these issues.”

Although low-cost testing seems innocuous, its high volume cumulatively contributes the most, much more than high-cost interventions, to unnecessary testing.6 In addition, it leads to “care cascades” in which Garguli at al, reported that there were 5 to 11 cascade events per 100 beneficiaries, costing up to $565 per beneficiary or $35 million nationally, according to their analysis of pre-operative cataract practice. This was in addition to $3.3 million for the initial electrocardiograms. 7

In the move from volume to value, the IOM finding that 1/3 of health expenditures qualify as waste would seem a prime opportunity to find funds to address social determinants of health, and to improve the health of our population. But until incentives are better aligned for value-based care, addressing waste will continue to proceed slowly.

jefferson LogoThis article was published in partnership with the Jefferson College of Population Health


Disclaimer: The views and opinions expressed are those of the authors and do not necessarily reflect the official policy or position of Population Health Learning Network. Any content provided by our bloggers or authors are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.   


  1. Smith M, Saunders R, Stuckhardt L, McGinnis JM, Committee on the Learning Health Care System in America; Institute of Medicine, eds. Best Care at Lower Cost: The Path to Continuously Learning Health Care in America. Washington (DC): National Academies Press (US); May 10, 2013.
  2. Shrank WH, Rogstad TL, Parekh N. Waste in the US Health Care System: Estimated Costs and Potential for Savings. JAMA. 2019;322(15):1501-1509. doi:10.1001/jama.2019.13978
  3. University of Michigan, Center for Value-Based Insurance Design. Reintroducing Low-Value Care.,Addressing%20Low%2DValue%20Care accessed March 7, 2021
  4. Vox. 8 facts that explain what’s wrong with American health care. Accessed March 2021.
  5. Choosing Wisely. Accessed March 7, 2021.
  6. Mafi JN, Russell K, Bortz BA, Dachary M, Hazel WA Jr, Fendrick AM. Low-Cost, High-Volume Health Services Contribute The Most To Unnecessary Health Spending. Health Aff (Millwood). 2017;36(10):1701-1704. doi:10.1377/hlthaff.2017.0385
  7. Ganguli I, Lupo C, Mainor AJ, et al. Prevalence and Cost of Care Cascades After Low-Value Preoperative Electrocardiogram for Cataract Surgery in Fee-for-Service Medicare Beneficiaries [published online ahead of print, 2019 Jun 3]. JAMA Intern Med. 2019;179(9):1211-1219. doi:10.1001/jamainternmed.2019.1739

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