$1.9 billion in Medicare waste: 'Tip of the iceberg'

May 12, 2014 by Jake Miller

In the first large-scale study to directly measure wasteful spending in Medicare, researchers found that Medicare spent $1.9 billion in 2009 for patients to receive any of 26 tests and procedures that have been shown by empirical studies to offer little or no health benefit.

By analyzing Medicare claims data, researchers in the Harvard Medical School Department of Health Care Policy found that at least one in four Medicare recipients received one or more of these services in 2009. What's more, those 26 services are just a small sample of the hundreds of services that are known to provide little or no medical value to patients in many circumstances.

"We suspect this is just the tip of the iceberg," said study author J. Michael McWilliams, associate professor of . The study appears today in JAMA Internal Medicine.

The researchers said that the methods utilized in the study will provide useful tools for measuring the effectiveness of reform efforts, like those in the Affordable Care Act, aimed at reducing wasteful spending in Medicare and across the health care system.

Pervasive waste

Health care spending in America is at an all-time high and continues to rise. Efforts to curb wasteful spending in Medicare and throughout the health care system are crucial to attempts to reduce spending while improving or at least preserving quality of care.

"We were surprised that these wasteful services were so prevalent," said Aaron Schwartz, an MD/PhD student in the HMS Department of Health Care Policy and lead author of the study. "Even just looking at a fraction of wasteful services and using our narrowest definitions of waste, we found that one quarter of Medicare beneficiaries undergo procedures or tests that don't tend to help them get better."

Previous attempts to measure waste in Medicare and other systems have relied on comparing overall spending rates between matched patient populations in different geographical areas. The difference between the higher and lower spending areas is attributed to waste. In addition to giving researchers and policy makers a tool to more precisely measure existing waste, the methods used by the researchers can also provide important feedback on reforms designed to curb waste.

Hard to define

Some of the services studied—like arthroscopic debridement for knee osteoarthritis and a form of back surgery that involves filling collapsed disks with cement—almost never provide any health benefit to patients, and are almost always wasteful, according to recent empirical studies of the effectiveness of the procedures. Others are often wasteful but can provide profound benefits for patients in particular clinical circumstances. Lower back imaging for general back pain offers little benefit to patients with muscle soreness, but it can be lifesaving when used to identify cancer or a spinal abscess.

Choosing from hundreds of services that have been found to have little clinical value, the researchers identified 26 that would be detectable using the kind of information available in Medicare claims data. They then searched for examples of the 26 services that were likely wasteful among the claims records of 1,360,908 Medicare beneficiaries from 2009.

The researchers found that varying the criteria used to count wasteful instances of a service can substantially influence the amount of waste measured. A narrower definition would exclude likely beneficial cases but would miss counting some instances of waste. A broader definition would capture more instances of wasteful use, but would also inadvertently count some services that were medically beneficial.

The estimate of overall waste with the narrower criteria found that 25 percent of beneficiaries received at least one of the wasteful services, resulting in a total of $1.9 billion in Medicare spending. The broader version found that 42 percent of beneficiaries were affected at a cost of $8.4 billion in potentially wasteful spending.

"One of the things we learned from this study is that measuring waste is hard," Schwartz said. "How much waste you find varies greatly depending on how you define it. Removed from the clinical details of a particular patient, it is hard to know whether a given procedure might be useful or not."

Measuring reform

"Because the value of a service depends on the patient, it is challenging to devise payment and coverage policies that limit wasteful care but not valuable care. Some tests and treatments that are wasteful across the board are easy targets—we can stop paying for them. But for most services, incentives that allow providers greater discretion at the point of care may be needed to cut significant amounts of waste while minimizing unintended consequences," said McWilliams, who is also a practicing general internist at Brigham and Women's Hospital

Instead of limiting care through coverage design or payment restrictions, the researchers see potential in global payment models that replace fee-for-service reimbursement with incentives to keep spending within a global budget and improve quality of care. These models could allow physicians and provider organizations to use more detailed clinical information to identify many more low-value services while encouraging their elimination. There are numerous low-value services—identified for example by specialty societies through campaigns like Choosing Wisely—that are difficult to measure well with claims data but could nevertheless be targeted by such broader payment reforms.

"That's the theory behind reform experiments being implemented under the Affordable Care Act and through private insurers," Schwartz said. "It's exciting that we now have a tool to measure how well global budgets and similar reforms perform at the specific task of cutting wasteful spending."

Explore further: Study examines patient care patterns in Medicare accountable care organizations

More information: Paper: JAMA Intern Med. Published online May 12, 2014. doi:10.1001/jamainternmed.2014.1541

Related Stories

Study examines patient care patterns in Medicare accountable care organizations

April 21, 2014
A third of Medicare beneficiaries assigned to accountable care organizations (ACOs) in 2010 or 2011 were not assigned to the same ACO in both years and much of the specialty care received was provided outside the patients' ...

Evidence of savings in accountable care organizations and cancer care

December 13, 2013
Approximately 10 percent of Medicare spending is for cancer care, and Medicare spending is nearly four times higher for beneficiaries with cancer than in those without the disease. Little is known about how to curb spending ...

Health care agency passes $1 trillion milestone

March 4, 2014
The government's biggest health care agency is passing the $1 trillion mark in President Barack Obama's new budget, a milestone for the Department of Health and Human Services.

Amount of care similar for rural, urban medicare users

November 7, 2013
(HealthDay)—Although there may be a limited supply of physicians in some rural areas, little difference is found in the amount of health care received by Medicare beneficiaries for rural versus urban areas within the same ...

US medical innovation needs smarter incentives to cut health spending, study finds

April 22, 2014
To help rein in massive health care spending, a new RAND study concludes that U.S. policy makers should urgently find ways to incentivize pharmaceutical companies and device makers to develop products that produce more value.

Medicare spending rates based on regional cost variations unlikely to improve health care

July 24, 2013
A "geographic value index" that would tie Medicare payment rates to the health benefits and costs of health services in particular regions of the country should not be adopted by Congress, says a new congressionally mandated ...

Recommended for you

Blowing smoke? E-cigarettes might help smokers quit

July 26, 2017
People who used e-cigarettes were more likely to kick the habit than those who didn't, a new study found.

Brain disease seen in most football players in large report

July 25, 2017
Research on 202 former football players found evidence of a brain disease linked to repeated head blows in nearly all of them, from athletes in the National Football League, college and even high school.

Safety of medical devices not often evaluated by sex, age, or race

July 25, 2017
Researchers at Yale and the University of California-San Francisco have found that few medical devices are analyzed to consider the influence of their users' sex, age, or race on safety and effectiveness.

Why you should consider more than looks when choosing a fitness tracker

July 25, 2017
A UNSW study of five popular physical activity monitors, including Fitbit and Jawbone models, has found their accuracy differs with the speed of activity, and where they are worn.

Dog walking could be key to ensuring activity in later life

July 24, 2017
A new study has shown that regularly walking a dog boosts levels of physical activity in older people, especially during the winter.

Study finds 275,000 calls to poison control centers for dietary supplement exposures from 2000 through 2012

July 24, 2017
U.S. Poison Control Centers receive a call every 24 minutes, on average, regarding dietary supplement exposures, according to a new study from the Center for Injury Research and Policy and the Central Ohio Poison Center, ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.