One Quarter of Health Care Spending Is Wasted. It Doesn’t Have to Be This Way.
3 MINUTE READ
Research reveals the ways health care dollars are lost to waste – and the opportunities that exist to save them.
By Allen Karp, Executive Vice President for Health Care Management and Transformation
If you look closely, the latest research on wasteful health care spending contains a silver lining.
Without a doubt, a new article from the Journal of the American Medical Association (JAMA) identified plenty of troublesome clouds. The JAMA researchers indicate that waste accounts for about 25 percent of health care spending in the U.S. In other words, the total cost of waste is estimated to be between $760 billion and $935 billion each year.
That alarming amount can be broken up into six categories, including failure of care coordination, fraud, and administrative complexity. Taken together, they contribute to overall health care spending increases that have made the U.S. health care system less affordable for individuals and employers alike.
But the study wasn’t all doom and gloom. Rather, the researchers write, “Implementation of effective measures to eliminate waste represents an opportunity to reduce the continued increases in U.S. healthcare expenditures." Many of these measures focus on value-based care, a model that delivers better care, not just more care, to improve quality and lower costs.
Horizon Blue Cross Blue Shield of New Jersey recognizes that all of us have a role to play in reducing waste. And that’s why Horizon has committed to becoming a national leader in value-based programs.
Horizon has changed the way it works with the health care system, collaborating with like-minded providers to identify goals around quality, cost and member experience that all parties want to achieve.
Horizon’s biggest value-based program is the OMNIA Health Alliance, a unique partnership with health systems and physician groups across New Jersey. The collaborative approach taken by the Alliance partners enabled Horizon to offer OMNIA Health Plans that featured premiums that are, on average, 15 percent lower than comparable plans.
The JAMA researchers praised value-based models for “reducing complexity for clinicians and aligning incentives for them to reduce waste and improve value in their clinical decision-making." This is the approach Horizon takes with its Episodes of Care program.
As part of this innovative model, Horizon works with physicians to define together high-quality standards of care for 26 medical conditions or procedures. The physicians and their teams are responsible for coordinating all aspects of care related to our members. When they do that in a way that achieves the agreed-upon quality and cost goals, they share in the savings. Horizon reduces waste not by reducing services – but by increasing quality and helping deliver the care our members need.
Today, 1.8 million of Horizon’s 3.5 million members are covered under value-based arrangements, and 68 percent of its total medical spending goes through value-based providers.
Of course, one of the significant ways the health care system struggles to achieve value is when it comes to prescription drug costs. Indeed, JAMA authors cited high brand drug prices as a major contributor to wasted costs.
To combat the increasing cost of prescriptions and lack of transparency, Horizon is collaborating with Gemini Health, an independent company, on an innovative software-based tool called Drug-Cost Decision-Support at Prescribing (DDP). The DDP enables physicians in the Horizon network to quickly and accurately prescribe the right medication at the best price during patients’ appointments. Besides helping their patients manage their out-of-pocket costs, doctors and their staffs face fewer administrative steps and time-consuming pharmacy call-backs when changes are required or sought by patients looking to substitute a lower-cost alternative.
Since its launch in March, about 240,000 prescriptions in total have been checked through the Gemini Health DDP – amounting to more than 2,000 prescriptions per day.
While the JAMA article highlights the unacceptable 25 percent rate of wasteful spending, it also reminds us that earlier research pegged the rate at 30 percent. This is a move in the right direction, one that Horizon will continue to champion to make health care more affordable.
Click here to read the JAMA abstract.