One fifth of health spending is wasted, says OECD official

10 Jan 17

Around a fifth of all health spending is probably ineffective or wasteful, an OECD deputy director has estimated at the launch of a report looking at inefficiencies in the world’s health systems.


Speaking at UK health think-tank the King’s Fund today, Mark Pearson, deputy director for employment, labour and social affairs at the OECD, said that number was a “guesstimate”, but “defendable figure”.

He highlighted huge geographic variation in the number of procedures carried out from country to country, which can’t be explained by differing need. Up to 50% of antibiotic prescriptions are unnecessary and 10% of health costs go towards treating conditions and problems caused during health treatment, Pearson said.

The OECD defines wasteful clinical care as care that is duplicated, unnecessary, doesn’t deliver benefits or causes harm. Its report highlighted three types of waste: clinical, operational and governance-related.

For example, there are fivefold variations between some countries in the rate of knee replacement surgeries, and threefold within countries, even after factors like population have been taken into account – numbers that cannot be medically justified and are a sure sign of waste, Pearson said.

Another speaker, Dr Catherine Calderwood, chief medical officer for Scotland, highlighted another example. She spoke to a patient who had wanted a handrail installed outside his home so he could talk to his neighbour on his doorstep. He was given knee surgery, but no handrail, and remains unable to talk to his neighbour – his sole request.

Operational waste occurs when care could be provided with fewer resources while maintaining the benefits. It includes medical products going unused, delays in discharging or purchasing branded drugs rather than generic alternatives.

Inappropriate visits to hospital also fall into this category. According to the report, between 12% and 56% of emergency department visits to OECD health systems are unnecessary.

Administrative costs – falling in to the governance-related category – are another area where there is huge variation between countries, by as much as seven times in some cases. The report stressed that many of the processes employed by health services add no value.

Another issue related to governance – funds lost to fraud and corruption – typically receives more attention. Studies estimate that between 5% and 10% of health spending is somehow affected, with that figure rising substantially in Latin America, especially in regards to procurement.

Taking all these factors into account, Pearson stressed that it is evident there is substantial waste in health spending globally.

“The message that we are trying to get across is that the first thing we need to do is acknowledge that the problem exists,” he said. “I think sweeping it under the table and saying our systems are so fantastic, there’s no waste in them so please give us money is just not a credible approach.”

He said in terms of tackling waste the report had three main recommendations: “inform, persuade and pay”.

This involves collecting data and generating indicators to show stakeholders just how much waste there is in the system. Pearson said it is “amazing how much of an impact” that can have.

People should also be persuaded to change their behaviour through campaigns, guidance and regulations, and financial incentives and nudges should also be used to encourage this.

Other potential approaches to reduce waste included: encouraging self-management of conditions where appropriate; bundled or population-based payments; promoting day surgery that does not require a hospital stay; shared decision making between doctors and patients; and investing in alternative services.

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