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How To Reduce Health Care Waste…And Lower Your Costs

The U.S. health care system wastes more than $750 billion a year on services that are unnecessary or ineffective.

Think about it — the costs of hospital mistakes, overtreatment, and unneeded tests quickly add up.

And all of this wasteful spending is passed on to you and your employees in the form of provider charges and increased premiums.

It may seem like reducing health care waste is out of your hands. Or that it’s a problem too big to tackle. But there are a few easy steps you can take to help prevent wasteful health care spending. And that can mean reduced costs for you and your employees.



Step 1: Partner with a health insurer with a plan to fight health care waste

Wasteful spending can be reduced when health insurers:

  • Use “pay for performance” models to reward doctors who focus on preventive health and whose patients see better outcomes. Ensuring patients get the right preventive care helps avoid costly trips to the ER or avoidable hospitalizations down the road.
  • Make sure that network providers use best treatment practices. This could mean ordering less expensive tests or prescribing generic medications proven to be as effective as higher-cost options.
  • Give members access to care cost estimates, so they can compare prices.
  • Investigate suspicious activities that may suggest wasteful spending — along with insurance fraud and abuse.


Step 2: Educate your employees

When your staff knows how their health plans work and how to use their benefits correctly, it helps cut down on wasteful spending. Make sure your employees know to:

  • Compare care costs. Many health insurers have cost estimates on their member website for the most common health services.
  • Choose generic drugs over brand names, when appropriate. Generics can be just as effective and will often have lower out-of-pocket costs.
  • Take advantage of preventive care services. Check-ups, screenings, and vaccines are often covered by health plans at little to no out-of-pocket cost for the member.
  • Keep an eye out for health care fraud and abuse. Report anything that seems suspicious to your health insurance company.


Step 3Identify and eliminate waste where you can

Clinical waste – Clinical waste can be reduced by encouraging your employees to get the right preventive care, better managed complex care, or transitional care after a hospital stay. Cutting down on clinical waste might also mean replacing high-cost tests with less costly alternatives. It can help reduce overtreatment, duplicate testing, and avoidable hospital readmissions.

Administrative waste – Health insurers, the government, and related agencies can cut administrative waste by using simpler standard forms and processes for billing, claims, etc.

Inflated prices – Price inflation occurs when doctors, hospitals, or suppliers charge more than similar providers for the same services and products. And more expensive care doesn’t necessarily mean higher quality care. Employees can help reduce price inflation by comparing costs using their health plan’s online comparison tools.

Fraud and Abuse – Look out for billing schemes that seek improper payment for health care services.

  • Fraud is seeking payment for items or services when there is no legal entitlement to that payment and the provider has knowingly and/or intentionally misrepresented facts to obtain payment.
  • Abuse refers to actions that may, directly or indirectly, result in unnecessary costs and improper payment. For example, a provider seeking payment for services that fail to meet professionally recognized standards or care that’s unnecessary could be considered abuse.
  • The cost of investigating suspected fraud and abuse also contributes to wasteful spending.

So work to identify and eliminate waste where you can. It can be the first step to controlling rising costs. And check with your insurer—they can provide further tips and tools to help prevent wasteful spending.