Low-Cost Health Services Make Up Most Unnecessary Spending

Marcia Frellick

October 13, 2017

The total cost for low- and very-low-priced healthcare services was nearly twice the total cost for high- and very-high-priced services (65% vs 35%), a large analysis found.

John N. Mafi, assistant professor of medicine at the David Geffen School of Medicine, University of California, Los Angeles, and a natural scientist in health policy at the RAND Corporation, Santa Monica, California, and colleagues, published their analysis online October 11 in Health Affairs. They say the findings may suggest alternative ways to cutting unnecessary spending by targeting high-priced care.

"Instead of pursuing a politically charged strategy to reduce the use of high-profile and higher-cost low-value services, an alternative approach that initially targets the reduction of high-volume and less costly items might be a more strategic way to catalyze the movement to tackle the problem of low-value care," the authors write.

The researchers looked at 2014 data from the Virginia All Payer Claims Database. The data included information on 5.5 million beneficiaries of fee-for-service Medicare, Medicare Advantage, Medicaid, and private commercial insurers that included amounts insurers paid to providers and patients' out-of-pocket spending.

When they used an algorithm to look at 44 low-value services, the researchers found $586 million in unnecessary costs (2.1% of the state's total healthcare costs). Services that were low and very low cost ($538 or less) were delivered much more frequently than services that were high and very high cost ($539 and more).

"Contrary to common belief, low- and very-low-cost low-value services…were administered more than thirteen times more frequently than costlier low value services," the authors write.

One Low-Cost Service Responsible for Half of Waste

The authors note that low-cost baseline preoperative lab testing for low-risk patients having low-risk surgery made up nearly half of all unnecessary spending at a total of $227.8 million.

Low-value services are those without net health benefit in specific scenarios, such as early imaging for diagnosing uncomplicated low back pain. For this study, researchers considered services that were potentially or very likely to be low value, according to expert guidelines.

There is broad agreement that reducing wasteful spending is a priority, but proposals for cuts in high-cost services have run into specialty and advocacy pushback.

Cuts on the lower end would be less likely to have a large effect on any one particular specialty, the authors explain, and may result in less patient dissatisfaction.

Conservative Estimates

The authors point out that although the finding of $586 million, or $2.1% of Virginia's   healthcare spending, in unnecessary costs pales in comparison to previous estimates of 10% to 30% waste, this study did not account for the costs of what happens after the test.

"For example, an abnormal cardiac stress test in an asymptomatic, low-risk patient can lead to a low-value cardiac catheterization," they write. They also do not include unnecessary care that costs even more, such as low-value subspecialty visitor hospital stays.

This work was supported by a Centers for Medicare & Medicaid Services State Innovation Model Initiative grant.  A coauthor is a codeveloper of the Milliman MedInsight Health Waste Calculator and receives royalties from its sale. He also serves as consultant to AbbVie, FMS Inc, Geisinger Health Plan, Janssen, Lilly, MedZed, Merck, Risalto, Sanofi, Sempre Health, Takeda, TriZetto, Wellth, and Zansors.

Health Aff. Published online October 11, 2017. Abstract

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