Medicare Wastes $3.6 Billion Annually on Low-Value Care, Study Finds

A recent study published in JAMA Health Forum reveals that Medicare annually spends approximately $3.6 billion on medical tests and procedures that provide minimal clinical benefit to older adults, with patients incurring an additional $800 million in out-of-pocket expenses.

The research, conducted by health economists from the University of Chicago and the University of Michigan, analyzed a representative sample of Medicare claims from 2018 to 2020 and identified 47 low-value services based on clinical guidelines and expert consensus. Notably, five preventive services rated as "D" by the U.S. Preventive Services Task Force (USPSTF) accounted for 59% of the total low-value spending, meaning these services have moderate to high certainty of no net benefit or potential harm. Under the Affordable Care Act, the Department of Health and Human Services (HHS) has the authority to withhold payment for services graded D or lower, a provision that could be leveraged to reduce unnecessary expenditures. Imaging services, including unnecessary scans for conditions such as plantar fasciitis and lower back pain, were among the most commonly used low-value services, with just 20 of the 47 services comprising 95% of all low-value spending. The study emphasizes a nuanced distinction between patients who may benefit from certain services and those who will not, advocating for targeted policy measures rather than broad spending cuts. Potential savings from eliminating the five D-rated services could reach $2.6 billion annually.

The study’s authors also note that the total cost of wasteful healthcare is likely underestimated, as downstream costs from follow-up procedures triggered by initial low-value services were not included. To curb this inefficiency, recommendations include enforcing existing ACA provisions, refining claims rules, and applying targeted prior authorizations to mitigate unnecessary care delivery. Despite challenges such as billing workarounds and service substitution, reducing payments for low-value services presents an opportunity to reallocate resources towards high-value care within Medicare, enhancing overall program sustainability.