As the costs of health care continue to rise, so does the financial stress for many Americans. Last year, the average U.S. household spent nearly $5,000 per person on health care — twice as much as they did in the 1980s. Today, 44 percent of Americans say they sometimes don’t go to their doctor because of costs — a troubling reality that presents real and serious impacts on our national health.
At Humana, we know that if we want to address costs, we must understand the underlying causes of high cost. That’s why our Chief Medical Officer, Dr. Will Shrank, helped conduct a study looking directly at health care waste. The results are startling.
Right now, the U.S. spends more on health care than any other country — but 1 out of every 4 dollars spent on health care is wasted. The result? Each year, we waste up to $935 billion on waste — an amount that is “comparable to government spending on Medicare and exceeds national military spending, as well as total primary and secondary education spending.”
Our study identified areas throughout the U.S. health care system primed for eliminating waste and cutting costs. The three greatest sources of wasteful spending come from 1) administrative inefficiencies in our current fee-for-service health care system; 2) lack of effective preventive care; and 3) overpriced prescription medication. If we tackle waste in these key areas, not only will we save patients and physicians costs — but also work to greatly improve people’s health.
As a health and well-being company, we have an important role to play in finding long-term solutions that will help deliver patients better care, at a lower cost.
That’s why Humana is focused on three key initiatives to rein in mounting waste in the health care system while also improving health outcomes.
First, we’re focused on transforming our fee-for-service system into a value-based approach. This is where doctors are paid to improve health outcomes, not just by the services provided. Shifting away from this traditional “fee-for-service” approach to a model that focuses on value, rewards providers for delivering quality care.
Value-based care is already making headway when it comes to reducing health care costs and improving value. And as a result — it is reducing wasteful spending.
Humana is partnering with health organizations across the country to bring value-based care to our members. In 2018, Humana found that members being cared for by doctors participating in value-based care arrangements spent 15.6 percent less on medical costs compared to individuals covered by traditional Medicare.
Second, we’re focused on providing preventive services. Our research found that failure to identify and prevent or treat chronic conditions leads to increased health care costs and wasteful spending. Left untreated, caring for common chronic conditions, like diabetes and colorectal cancer, is expensive and can lead to costly procedures and hospital stays. And with three in four people 65 and older are living with multiple chronic conditions, there is plenty of room to prevent wasteful spending.
As more individuals are diagnosed with chronic conditions, the costs of care will continue to increase. For example, by 2030, an estimated 55 million Americans are expected to be diagnosed with diabetes. This chronic condition requires constant management and monitoring, which can take a toll not only on an individual’s quality of life but their everyday expenses. For a Medicare beneficiary, low-severity diabetes costs $600 a month, whereas high-severity costs $4,500 a month.
That’s why we are using patient data to identify members who are at risk for health issues, including diabetes, and intervene with preventive care before the issue worsens. For example, our focus on preventive care helped us identify “Jimmy,” a Humana member who was battling obesity and other chronic diseases. We saw that Jimmy was at risk for developing diabetic foot ulcers, which can ultimately lead to an amputation. An amputation has a big impact on an individual’s long-term health and well-being, and research shows, over a five-year period, the mortality rate is 77 percent. However, by reaching out to Jimmy early, detecting this risk, and connecting him to a care manager he can trust, he was able to see a podiatrist, get regular testing on his long-term blood sugar level, and receive transportation services, so he could visit his doctor — all which helped him avoid an amputation.
Lastly, we recognize the need to reduce prescription drug costs. Today, 23 percent of older Americans say it’s difficult to afford their prescription medication, with 1 out of 10 saying it’s “very difficult.” Our research found that pricing inefficiency, in particular, lacks competition and transparency, driving the significant waste in this critical sector of the health care marketplace.
We are working to ensure members can afford the medications they need through our Humana Pharmacy service, helping to minimize inefficiencies and save costs. Members are able to fill a 90-day supply of their medication, where it is reviewed by Humana Pharmacy pharmacists for accuracy and quickly shipped right to their home.
Mail-delivery pharmacies like ours are up to 23 times more accurate compared to retail pharmacies, helping ensure members get the right medication when they need it. And mail-delivery pharmacies help save users 15 percent on 90-day prescriptions compared to prescriptions obtained at brick-and-mortar drugstores.
The solutions to lower the skyrocketing costs of our health care system are clear. Every day, billions of dollars are spent wastefully, and instead of making our health care system better — it’s making it worse. We can reduce waste and build a better system by expanding on what is actually helping patients and physicians: value-based care, preventive services, and lower drug costs. It’s working at Humana, and it can work throughout our health care system to help people live healthier lives at lower costs.