The US spends way more on healthcare than any other developed country:

And yet the residents of other developed countries live longer than Americans:

So what should our target be for cutting healthcare spending in the US? I’d say let’s get to Switzerland, which spends two-thirds as much per capita as the US but still manages to out-spend all other developed counties. And, as the above chart shows, the Swiss live way longer than Americans.

The US currently spends about $4 trillion on healthcare (splitting the difference between 2019 and 2020). To get to Switzerland, we’d need to get that down to under $3 trillion a year - a tall order. However, a JAMA study found that roughly $1 out of every $4 spent on health care in the U.S. annually is being wasted. Some examples:

  • Overuse of Medications (e.g., antibiotics)

  • Overuse of Screening Tests (e.g., colonoscopies)

  • Overuse of Diagnostic Tests (e.g., endoscopies)

  • Overuse of Therapeutic Procedures (e.g., cardiovascular, knee replacements)

  • Overuse of Aggressive Care for Dying Patients

  • Failures of Care Coordination

  • Administrative Complexity

  • Fee-for-Service Incentives

  • Defensive Medicine

  • Overuse of Specialists (insufficient gatekeeping)

  • Underuse of Primary Care Nurse Practitioners

That’s almost $1 trillion of unnecessary healthcare spending. Plus, an estimated 10% of Medicare/Medicaid is lost to fraud.

If we cut the waste and fraud, we’d be pretty close to Switzerland. Here are a few reforms that could get us there: 

  1. Stay with a multi-payer system, but with strict cost controls, like Japan and Germany.

  2. Develop fee schedules for diagnostic procedures, treatment, and medical equipment, set by federal or regional governments, like Japan and Canada. Public and private payers would use the same fees schedule, streamlining the medical billing process (i.e., reducing administrative complexity)

  3. Increase Medicare/Medicaid fraud prevention, detection, and prosecution.

  4. Greatly expand the number of nurse practitioners as independent primary care providers and gatekeepers to specialists, as is already happening in several European countries.

  5. Institute a no-fault medical malpractice system, like the one in Denmark.

  6. Develop federal guidelines for medical testing and treatment, much like the NICE system in Britain, which would reduce excessive testing and treatment, as well as malpractice claims. As in Britain, medical providers would still be allowed to depart from guidance per their independent judgment of what’s best for the patient.

So how does cutting US healthcare spending save lives? Partly by reducing out-of-pocket expenses, which lead many to avoid or delay medical care. Partly by reducing unnecessary but dangerous invasive procedures and surgeries. But mostly by freeing up funds for a universal healthcare system, which could cost less than $150 billion a year, per the Urban Institute. And that’s without factoring in savings from tackling waste and fraud. For more details, see The Bold Centrist, Part VII: How to Pay for Universal Health Care on a Budget.

This is doable. But it will require facing down some powerful interest groups, starting with the American Medical Association and Trial Lawyers of America.

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Recommended Reading: 

Berwick DM, Hackbarth AD. Eliminating waste in US health care. JAMA. 2012;307(14):1513–1516. https://doi.org/10.1001/jama.2012.362  

Blumberg, Linda J. et al “From Incremental to Comprehensive Health Reform: How Various Reform Options Compare on Coverage and Costs” The Urban Institute October 16, 2019   

Shrank WH, Rogstad TL, Parekh N. Waste in the US health care system: estimated costs and potential for savings. JAMA. 2019;322(15):1501–1509. https://doi.org/10.1001/jama.2019.13978  

Speer M, McCullough JM, Teutsch SM, Fielding JE. Excess medical care spending: the categories, magnitude, and opportunity costs of wasteful spending in the United States. Am J Public Health. 2020;110(12):1743–1748. https://doi.org/10.2105/AJPH.2020.305865