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LOUISVILLE, Ky. (WDRB) – About a quarter of health care spending in the United States – up to $935 billion a year – is wasted on things like unnecessary treatment, high drug prices, hospital re-admissions and – most of all – “administrative complexity,” according to a new academic paper by researchers at Louisville-based Humana Inc.

Dr. William Shrank, Humana’s chief medical officer, was the lead author of the “special communication” published in the Journal of the American Medical Association on Monday.

The paper examines previous research to arrive at the conclusion that the U.S. wastes between $760 billion and $935 billion annually on health care, enough to extend insurance coverage to all Americans.

The country – which spends more on health care than any other nation -- could save up to $282 billion from various “interventions” to address the problem, according to the study.

Made with Flourish

Shrank and his co-authors point to administrative costs such as insurance-related billing as the single-biggest source of waste in the health care system -- an estimated $265.6 billion annually.

But the researchers don’t endorse a single-payer, government-run health system that would likely put insurers like Humana out of business, such as the plan advanced by Sen. Bernie Sanders, a leading Democratic presidential contender.  

“In the national debate about health reform, we do not need to start over,” Shrank said in a news release. “We can build on the strengths in today’s system to deliver higher quality care and reduce costs, while also producing the necessary savings to expand coverage to all Americans.”

Shrank was not available for an interview on Tuesday.

Humana offers commercial and military health insurance, but makes most of its money from Medicare Advantage, the privately managed version of Medicare.

Instead of calling for an overhaul of the healthcare system, the paper suggests that “administrative complexity” in health care could be tackled in part by changing how doctors and hospitals are paid.

Humana has long been a proponent of “value-based” payments, in which providers share financial risk with insurers and get rewarded for good patient outcomes. Healthcare professionals are traditionally paid for the services they perform – which, critics contend, leads to unnecessary and haphazard care.   

“As more clinicians transition into value-based payment arrangements with financial risk, administrative burden and oversight could be reduced for all health care constituencies, including payers, hospitals, and physician practices,” Shrank and his co-authors write in the paper.

But some of the potential savings mentioned in the paper do call for a bigger government role in health care.

For example, Shrank’s team estimates the country could save $20 billion a year by adopting the International Pricing Index, a proposal to tie Medicare drug prices to a benchmark set by the lower prices paid for drugs in other countries.

Another $31 billion could be saved by regulating hospital prices nationwide, as Maryland does with its “all payer” system, according to the paper.

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2019 WDRB Media. All rights reserved.