Most Healthcare Costs Can Be Attributed to Low-Cost, Low-Value Care

Contrary to popular belief, low-cost, low-value health services cost nearly double the amount of high-cost, low-value health services.
Published Online: October 12, 2017
Jaime Rosenberg
Low-cost, low-value health services contribute the most to unnecessary health spending in the United States and ultimately cost nearly twice as much as high-cost, low-value health service, according to a new study published in Health Affairs.

Low-value care has been characterized as health services that provide no net health benefit in specific clinical scenarios. While there has been previous research on the issue, spending on these health services still prevail.
 
“While many studies have focused on high-cost, low-value services, such as arthroscopic knee surgery for osteoarthritis, few have examined which low-value services contribute the most unnecessary costs,” wrote the authors.
 
The study analyzed data from the Virginia All Player Database in 2014, which included 5.5 beneficiaries of Medicare, Medicare Advantage, Medicaid, and private commercial insurers. The authors, which included co-Editor-in-Chief of The American Journal of Managed Care® A. Mark Fendrick, MD, assessed 44 services commonly deemed low-value. Each of the 44 services were categorized by cost into 4 groups: very low-cost, low-cost, high-cost, and very high-cost.
 
During that year, those 44 services were performed 5.4 million times. Using an algorithm that determined whether a service was high value or low value, the authors found that 1.7 million of the services performed were deemed low-value and 3.7 million were deemed high-value. Of the 1.7 million low-value services, 1.6 million were low- or very low-cost. Only 119,000 were high- or very high-cost.
 
The total cost of the low-cost and very-low cost, low-value services ($381 million) was almost double that of high-cost and very high-cost, low-value services ($205 million). With a total of $586 million, $9.90 was spent per beneficiary per month. This accounted for 2.1% of Virginia’s health care costs.
 
According to the authors, their findings should provide strong incentive for policy makers, healthcare systems, and clinicians to implement better ways to reduce unnecessary costs, without reducing the quality or access of care.
 
“Shared, nonpartisan health policy goals are to improve quality of care, enhance patient experience, and lower healthcare costs in the United States,” wrote the authors.
 
A seemingly easy answer to this issue is to identify, measure, and reduce the use of low-value care, but it has been harder to bring the answer to fruition, according to the authors. This is because the value of a specific health service fluctuates based upon who receives the service, who provides it, and where it is provided.
 
While changing a physician’s practice pattern has proven to be difficult in the past, even a small decrease in the performance of low- and very low-cost low-value services would make a difference.


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