Our perspective: The cost of quality healthcare
It’s time to tackle the rising cost of healthcare
In 2019, the U.S. spent $10,866 per person on healthcare, which is about $4,000 more than other comparable high-income nations.1 The U.S. also ranked lowest overall, with the poorest healthcare outcomes2.
If conventional wisdom assumes that higher prices translate to better quality, why are we spending more without getting better results?
One reason is waste. Healthcare waste takes many forms, and reaches across all functions of healthcare, making it difficult to estimate its cost. An analysis of peer-reviewed, government-based, and “gray” literature tried to put an annual price tag on the cost of healthcare waste. Focusing on six categories, the review estimated the following ranges:3,4
- Failure of care delivery (e.g., lack of adherence to best practices): $102.4 billion to $165.7 billion
- Failure of care coordination (e.g., poor management of care transitions): $27.2 billion to $78.2 billion
- Overtreatment or low-value care (e.g., higher-priced services with no health benefits over lower-cost services): $75.7 billion to $101.2 billion
- Pricing failure (e.g., price of a service exceeds that found in a properly functioning market): $230.7 billion to $240.5 billion
- Fraud and abuse (e.g., false medical bills): $58.5 billion to $83.9 billion
- Administrative complexity (e.g., time-consuming billing processes): $265.6 billion
The total ranges between $760 billion and $935 billion each year. All stakeholders — individuals, providers, health plans, employers, and even taxpayers — pay the bill. Beyond the financial burden, healthcare waste can cause harm to patients.
Our perspective: Better care at lower cost is achievable
How we believe health plans can make a difference
Health plans can adopt many strategies to combat healthcare waste and, as a result, improve care. Plans who stand out in the market for their impact on outcomes have a different perspective than most. They realize that better, more affordable care is accomplished not only at the point of treatment — it’s also achieved from inside their own operations. Here’s how plans can improve costs without sacrificing the value of outcomes or depth of care.
Streamlining plan operations
Efficient health plan operations often start with an investment in talent and technology. When the right people have the right tools, health plans of all sizes can simplify processes, eliminate unnecessary manual tasks, improve efficiencies, and achieve cost savings.
To do this, leading health plans are building and sometimes outsourcing teams that have deep experience and that can embrace technologies across all functions. For example, for claims and payment accuracy, payment integrity experts are adopting AI-driven platforms to identify fraud, waste, and abuse. To transform call centers, health plans are decreasing wait times and call volumes by equipping experienced customer service agents with instant access to automated information that resolves issues quickly. To better manage their provider networks, executives use integrated data and analytics to impact provider demographics, relationships, and network performance.
Ensuring accurate claims
The claims process has many moving parts, making it susceptible to costly inaccuracies, as well as waste, fraud, and abuse. While overhauling the entire system isn’t possible, there are ways to improve it.
Health plans are enhancing programs in two ways. First, they’re building a smarter subrogation program to determine who’s responsible for claims that result from injuries due to auto accidents, workplace mishaps, or defective products; specifically, health plans are prioritizing liability investigation and comprehensive claims assessment through programs that minimize or even eliminate member involvement. Second, plans are leveraging AI capabilities and direct provider education and outreach to better address fraud, waste, and abuse.
Making appropriate care easier to deliver in the right setting
Better care doesn’t always involve the latest treatment with the most innovative technology. In fact, leading health plans are realizing that the best care is often the result of recommending the most appropriate care, in the most appropriate setting.
To shift the healthcare system from volume to value, quality-minded health plans are increasingly relying on two best practices in particular: evidence-based clinical guidelines, which align with care with accepted standards of care, and the use of the home as a care setting.
Quality and costs – inextricably linked
The health plans who are helping to improve outcomes are arriving at a similar conclusion in their work: driving better care and reducing unnecessary spending are not separate strategies; they are deeply connected, and in many ways, they depend on each other. With the right expertise, tools, and data, health plans can make a significant impact to both.
See healthcare from our perspective
- Peterson-KFF Health System Tracker, How does health spending in the U.S. compare to other countries?, healthsystemtracker.org., (accessed April 2022).
- Eric C. Schneider et al., Mirror, Mirror 2021 — Reflecting Poorly: Health Care in the U.S. Compared to Other High-Income Countries (Commonwealth Fund, Aug. 2021), https://doi.org/10.26099/01DV-H208.
- PubMed, Waste in the US Health Care System: Estimated Costs and Potential for Savings, https://pubmed.ncbi.nlm.nih.gov/31589283/, (accessed June 2022).
- Health Affairs, Reducing Waste in Health Care, https://www.healthaffairs.org/do/10.1377/hpb20121213.959735/, (accessed June 2022).