Davos WEF
Davos WEF

Shocking truth: 20% of health-care expenditures wasted in US and other nations

Nasos Koukakis, special to CNBC.com
RapidEye | Getty Images

A new OECD report released Jan. 10 reveals a shocking truth: About 20 cents of every dollar spent on health care in OECD countries is wasted in some fashion. That waste represents more than 20 percent of total health expenditure in the United States.

The findings of the report, entitled "Tackling Wasteful Spending on Health," will be discussed at a meeting for OECD Ministers of Health in Paris on Jan. 16–17.

According to the report's author, Agnès Couffinhal, a senior OECD health economist, it is alarming that around one-fifth of health expenditure makes no or minimal contribution to good health outcomes, especially at a time when public budgets are under pressure worldwide.

As she explains, "Governments could spend 20 percent less on health care and still improve patients' health." With as much as 9 percent of GDP spent on health-care systems across the OECD — 6.75 percent of which is by federal governments — this savings could mean a lot.

Surprising findings in the OECD report reveal:

  • A third of OECD citizens consider the health sector to be corrupt or even extremely corrupt.
  • 1 in 10 patients in OECD countries is unnecessarily harmed at the point of care.
  • More than 10 percent of hospital expenditures is spent on correcting preventable medical mistakes, or infections that people catch in hospitals.
  • 1 in 3 babies are delivered by Caesarean section, despite medical indications suggesting that C-section rates should be 15 percent at most.
  • The market penetration of generic pharmaceuticals — drugs with effects equivalent to those of branded products but typically sold at lower prices — ranges between 10 percent and 80 percent across OECD countries. (This is not a problem in the United States, where the generics market is very dynamic and the price of a generic drug is on average 8 percent to 80 percent lower than that of brand-name drugs.)
Sustainable progress toward better value from health care can only be achieved if health-care providers are on board and encourage local patient-safety initiatives.
Agnès Couffinhal
senior OECD health economist

"Efforts to increase the use of generics are now being hampered by regulatory obstacles," Couffinhal noted.

Corruption is another issue plaguing the health-care systems in many OECD countries, the report says. The health sector in OECD countries is ranked in the bottom third of corrupt institutions. The countries ranked with the most corrupt systems are Greece, Slovakia and Italy.

In the United States, ranked in ninth place, approximately 70 percent of health-care fraud is committed by medical providers, 10 percent by consumers and the balance by others, including insurers and their employees.

Norway is a country that is a good model for best practices, according to the report. There, pharmacists are obliged to inform patients about the possibility of cheaper generic alternatives. The country also imposes financial sanctions on local authorities and hospitals that delay discharging patients from hospitals. For older people in particular, longer stays in hospital can lead to worse health outcomes and can increase their long-term care needs.

In the United States the Choosing Wisely campaign, initiated by clinicians, aims to reduce low-value care by encouraging patient-provider conversations about whether certain treatments add value. "Sustainable progress toward better value from health care can only be achieved if health-care providers are on board and encourage local patient-safety initiatives," Couffinhal said.

All OECD countries are seeking to tackle this problem. Nearly half are actively promoting greater use of generic drugs. Some 19 countries, including France, Israel, Korea, Poland and Chile, are using a health technology assessment to help determine the value of new treatment options.

Although the United States spends more on health care than any other country, surprisingly, it does not have a nationally coordinated health technology assessment program.

— By Nasos Koukakis, special to CNBC.com