5 statistics on wasteful health spending

Published 2:00 pm Wednesday, July 19, 2023

5 statistics on wasteful health spending

In the United States, the cost of health care—from medical insurance premiums to office visit copays to prescription drug costs—can be an enormous burden on consumers. However, the money individuals spend on health care pales compared to the government tally for health spending.

In 2021, the United States spent a whopping $4.3 trillion on health expenses—a 2.7% increase from the previous year. To put that huge dollar amount in perspective, consider this: The total spending equates to $12,318 per capita, the highest health care cost per capita among countries in the Organisation for Economic Co-operation and Development (OECD), which comprises 18 countries including Australia, Denmark, and Japan. Germany has the second highest per capita spending in the OECD, but it’s nearly $5,000 less than the United States.

The statistics seem shocking—but what do they mean for people’s health in the United States? To get to the bottom of why this country spends so much on health, DocBuddy compiled five statistics that paint a more detailed picture of waste. The data helps reveal where the money ends up, how Americans fare compared to other countries, and why the United States spends so much per person.

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Read on to discover the true cost of wasteful health spending in the United States.

Doctor using laptop to enter records.

Ground Picture // Shutterstock

The US spent 17.8% of its 2021 GDP on health functions—consistently outpacing all other countries

The United States spends significantly more than other countries on health care—in fact, health care spending is one factor contributing to the rising U.S. national debt. The onset of the COVID-19 pandemic in 2020 only worsened the problem when pandemic-related government spending increases led health care spending to make up 19.7% of GDP.

In 2020, the U.S. spent the most of any country on governance and administration, preventative care, outpatient curative, and rehabilitative care, as a share of GDP. (Data on many of these segments isn’t yet available for 2021.) The aging population, increased enrollment in Medicare, and rising health care costs all contribute to the country’s particularly high health care spending.

Doctor typing on a laptop.

Drazen Zigic // Shutterstock

Per capita, the US spends more than 1.5 times the next leading country on health care

Health care spending in the United States is shockingly high per capita, as well. The United States spent an estimated $12,318 per capita in 2021, a disproportionate amount compared to other similar countries.

Average health care spending for other wealthy OECD member countries, excluding the United States, was just $5,829 per person in 2021. Germany and Switzerland, the countries with the next highest costs, only spent in the $7,000 range per capita.

Unfortunately, the extra thousands of dollars the United States spends per person doesn’t necessarily equate to better health outcomes. The country still ranks on the lower side for life expectancy among OECD member countries, with higher rates of diabetes and obesity.

Medical staff reviewing a document in a busy hospital lobby.

Monkey Business Images // Shutterstock

Some studies have shown that about 30% of US health spending could be considered waste

Where is the extra money going if it isn’t increasing patients’ health? The answer, unfortunately, points to inefficiency and waste. Despite longstanding efforts to minimize overtreatment and address overpayment, an estimated one-third of all U.S. health care spending goes to waste.

An estimated $345 billion in clinical health care spending qualifies as inefficient, meaning it pays for services that don’t provide any tangible benefits to patients, leads to unnecessary patient costs, wastes limited resources, and may cause harm to patients.

Medical team conferring with tablet.

Ground Picture // Shutterstock

Total annual health spending waste is an estimated $760 billion to $935 billion

The U.S. health care system includes multiple payers, which leads to higher costs around billing, prior authorizations, clinical documentation, and other insurance costs, and drives up the amount the United States spends on administrative complexity. The country spent over $1,000 per person on administrative costs in 2021—significantly higher than the second-highest spending country, Germany, at $306 per capita.

To underscore the point, the average among OECD countries is just $194 per person. Additionally, some estimates suggest that U.S. spending on administrative costs is more than twice the spending for cardiovascular disease care and three times for cancer care. Some studies even suggest that about half of all U.S. administrative spending on health care is wasteful.

Doctor using tablet during a consultation with patient.

PeopleImages.com – Yuri A // Shutterstock

The reference report found no studies that looked at reducing administrative expense

Although the numbers might seem overwhelming, experts say cost-saving measures can help curb the amount of health spending that goes to waste. One report in the Journal of the American Medical Association suggested that interventions to reduce waste in areas other than administrative complexity could reduce waste by a quarter.

Meanwhile, other policymakers and experts have suggested sweeping overhauls to the health care system to cut down on waste due to administrative complexity, such as standardized benefits, a centralized claims clearinghouse, standardized or limited prior authorization, and harmonized reporting.

Of course, these reforms aren’t likely to happen overnight: Many would require efforts from the federal government, and each would take time to implement on a national scale. Until the federal government takes action, a substantial reduction in wasteful health spending remains unlikely.

Additional research by Paxtyn Merten. Story editing by Jeff Inglis. Copy editing by Kristen Wegrzyn. 

This story originally appeared on DocBuddy and was produced and
distributed in partnership with Stacker Studio.