The United States spends more than $4 trillion a year on health care services. We have the highest per-capita spending of any nation, about twice the average of other similarly developed nations by comparison. There are many reasons these costs are so high we’re exploring several in this series, but three that stand out are fraud, waste, and abuse.
Estimates vary, and it’s difficult to get an exact number on how much fraud, waste, and abuse occur year to year, but it could be anywhere from 30% to 40% of all our health care spending.
Fraud, waste, and abuse are often lumped together in discussions about health care spending, but the three are different, and each requires a unique approach to combat.
Health care fraud is committed by physicians or business professionals who intentionally file false claims with payers to make a profit. They collect illegal reimbursements from the Centers for Medicare and Medicaid Services (CMS) and private insurers.
The National Conference of State Legislatures estimated that health care fraud accounted for between 3% and 10% of total health care spending in 2017. However, that number has increased in recent years following the COVID-19 pandemic.
The most prevalent challenge for payers and providers is the issue of waste in health care. In a 2019 JAMA article, authors estimated that as much as 30% of health care spending is wasteful. That adds up to more than $1.2 trillion in potential waste each year from:
In a comparison of health care costs, a significant part of the variation between the U.S. and other nations comes from administrative costs. For example, U.S. hospitals spend about 25% of their total budget on billing. Cutting these costs and streamlining operations could significantly reduce total cost of care in the U.S.
Harm and safety events, especially in hospitals, account for a high volume of unnecessary health care spending. An analysis of hospital-acquired infections (HAIs) found that these infections drive up costs because they require extra care and longer hospital stays for the patient. Many hospitals are addressing this issue and have reduced rates of HAIs, but there is still room for improvement.
Other harm and safety concerns include medication interactions that send patients to the emergency room or require hospital admission, opioid abuse, and misdiagnosis that leads to unnecessary care.
Doctors want to provide the best treatment for every patient. But many providers (and patients) mistakenly believe that more care always means better care. Unnecessary tests, treatments, or procedures drive up total health care costs.
Value-based care initiatives are pushing providers to identify appropriate treatment based on outcomes rather than volume, which is helping to address this issue.
The emergency room is supposed to be a last resort for care, but millions of Americans go to the ER for routine care or because they don’t have insurance and cannot afford to go to a doctor’s office. Many of these costly visits could be avoided with:
Prescription drug costs are rising at a rate much faster than overall health care costs. Providers and payers must evaluate whether new and expensive therapies provide enough benefit to their patients to justify the higher costs. For more established medications, substituting generic for brand-name medications can lower costs. Read our blog with more in-depth analysis of how prescription costs are affecting health care costs.
While fraud and abuse in health care are similar, the key difference between the two is whether there was specific intent to defraud payers. As noted above, there are several ways dishonest people can collect money by intentionally misleading payers.
Health care abuse is sometimes more difficult to identify because it’s unintentional. In some cases, the person committing the abuse may not even realize they’re breaking the law. Some examples of health care abuse include:
Highmark Inc. is always looking for ways to cut fraud, waste, and abuse in health care.
Data analytics and technology play a bigger role today than ever before in identifying and investigating these issues. Our team uses claims data and a wide variety of analytical tools developed in-house and with external partners to find potential instances of fraud, waste, and abuse in our system — such as an unusual spike in billing, or a high volume of certain claims from a single practice. Proprietary algorithms in these analytics tools help us review millions of claims quickly to find unusual patterns.
Employers can also play a role in reducing fraud, waste, and abuse. They can regularly review beneficiary reports from Highmark Inc. to ensure services are in line with normal patterns of health care usage. They can educate beneficiaries on how to spot potential problems and make it easy to report when something isn’t right.
When people get away with fraud, waste, and abuse, costs increase for everyone.
In addition to fraud, waste, and abuse, there are several other things that contribute to high health costs. We examine each one in detail in this series:
Overview: Why does health care cost so much?
Part 1: High utilization rates - coming soon
Part 2: Prescription drug costs - coming soon
Part 3: Chronic health conditions
Part 4: Health care economics and market forces
Talk to your client manager today and we’ll help you find the right health plan for your company.
Highmark is a registered mark of Highmark Inc.
© 2023 Highmark Inc., All Rights Reserved.
All references to “Highmark” in this document are references to the Highmark company that is providing the member’s health benefits or health benefit administration and/or to one or more of its affiliated Blue companies.
This website is operated by Highmark, Inc. and is not the Health Insurance Marketplace website. It also does not display all Qualified Health Plans available through the Health Insurance Marketplace website. To see all available Qualified Health Plan options, go to the Health Insurance Marketplace website at HealthCare.gov.
Highmark Blue Cross Blue Shield or Highmark Blue Shield are Medicare Advantage HMO, PPO, and/or Part D plans with a Medicare contract. Enrollment in these plans depends on contract renewal.
®Blue Cross, Blue Shield and the Cross and Shield symbols are registered service marks of the Blue Cross Blue Shield Association, an association of independent Blue Cross and Blue Shield plans. Benefits and/or benefit administration may be provided by or through the following entities, which are independent licensees of the Blue Cross Blue Shield Association: Western and Northeastern PA: Highmark Inc. d/b/a Highmark Blue Cross Blue Shield, Highmark Choice Company, Highmark Health Insurance Company, Highmark Coverage Advantage Inc., Highmark Benefits Group Inc., First Priority Health, First Priority Life or Highmark Senior Health Company. Central and Southeastern PA: Highmark Inc. d/b/a Highmark Blue Shield, Highmark Benefits Group Inc., Highmark Health Insurance Company, Highmark Choice Company or Highmark Senior Health Company.
PA: Your plan may not cover all your health care expenses. Read your plan materials carefully to determine which health care services are covered. For more information, call the number on the back of your member ID card or, if not a member, call 866-459-4418.
Delaware: Highmark BCBSD Inc. d/b/a Highmark Blue Cross Blue Shield.
West Virginia: Highmark West Virginia Inc. d/b/a Highmark Blue Cross Blue Shield, Highmark Health Insurance Company or Highmark Senior Solutions Company. Visit our website to view the Access Plan required by the Health Benefit Plan Network Access and Adequacy Act. You may also request a copy by contacting us at the number on the back of your ID card.
Western NY: Highmark Western and Northeastern New York Inc. d/b/a Highmark Blue Cross Blue Shield.
Northeastern NY: Highmark Western and Northeastern New York Inc. d/b/a Highmark Blue Shield.
Enter your ZIP code so we can show you personalized information.
This page is not available for this ZIP code. Please enter your ZIP code or return to highmark.com.