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.

Unfortunately, as Berwick and Hackbarth point out, "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: "The potential economic dislocations, however, are severe and require mitigation through careful transition strategies."

Donald Berwick, MD, MPP and Andrew Hackbarth, MPhil in "Eliminating Waste in US Health Care" Published online in JAMA, March 14, 2012 [Free full text, available]