To make health care reasonably profitable for private payers and more affordable for patients, those who manage health care must focus on reducing cost, which is far easier than increasing the health benefit or medical loss ratio.

See: "How the U.S. Health-Care System Wastes $750 Billion Annually," by Brian Fung, pub. Atlantic Mobile, 9/7/12

As Dr. Berwick and Hackbarth point out, however, "programs to contain costs use cuts, such as reductions in payment levels, benefit structures, and eligibility. A less harmful strategy would reduce waste, not value-added care." The authors are adamant that the opportunity is huge and far greater than one could possibly achieve from "more direct and blunter cuts in care and coverage."

Reducing the cost of doing business is usually preferable to spending tons to generate new business or spending with reckless abandon--over testing, for instance, what some call 'shotgun medicine.'  Waste management, by definition improves efficiency and cost-effectiveness; once that is a core competency, it is easier to strategically invest scarce resources in making marginal if not major improvements in access and quality.

"In just 6 categories of waste—overtreatment, failures of care coordination, failures in execution of care processes, administrative complexity, pricing failures, and fraud and abuse—the sum of the lowest available estimates exceeds 20% of total health care expenditures."

Caveat: Cutting into waste can be disruptive as we are all too used to 'just do it' thinking in health care (that is, until it's your own dollars). Be careful: the consequent marketplace economic dislocations can be rather severe.

Berwick D, Hackbarth A. "Eliminating Waste in US Health Care" Published online in JAMA, March 14, 2012 [Free full text, available; just click on Abstract]