Abstract
The National Health Expenditure Projections, 2018–27, cited by the 2019 JAMA paper by Shrank et al. provided a landmark synthesis of waste in the US healthcare system, estimating that 25%–30% of total health expenditure constitutes waste.1 Drawing on more than 70 estimates from peer-reviewed and grey literature, the study classified waste into six categories: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, administrative complexity, and fraud and abuse described by prior studies. These findings offer valuable insights into how inefficiencies impact both public and private spending in mature health systems.
However, the direct applicability of these benchmarks to emerging healthcare markets, particularly those dominated by indemnity-style health insurance, hospitalisation-based insurance reimbursement and limited outpatient care, requires careful interpretation. This paper aims to summarise the key findings of the Shrank et al. study and reflect on how these categories of waste may (or may not) align with the healthcare delivery and insurance realities in developing economies.
Introduction
Global health expenditure continues to rise, as seen from the estimated aggregate global spending at US$9.8 trillion in 2022 as compared to US$7.3 trillion in 2015.2,3 Yet universal concerns remain around inefficiency, sustainability and value. Whilst high-income countries like the United States face issues related to pricing excesses and administrative overload, emerging markets grapple with fragmented financing, limited access and underdeveloped primary care infrastructure. As health insurance expands in these settings, there is increasing interest in benchmarking against established systems. Yet without due care, such comparisons risk misclassifying structural inefficiencies as fraud, abuse or operational failure.
This white paper analyses the 2019 JAMA study,1 distils key insights on waste and fraud in the US context, and provides a practical interpretation of their relevance in developing insurance systems.
Overview of the JAMA 2019 study on waste in the US healthcare system
Shrank, Rogstad and Parekh's 2019 publication titled ‘Waste in the US Health Care System: Estimated Costs and Potential for Savings’ represents one of the most comprehensive reviews of systemic inefficiencies in healthcare.1 It draws upon the Institute of Medicine’s framework,4 identifying six major domains of waste:
| Domain of waste4 | Description1 |
|---|---|
| Failure of care delivery | ‘Waste that comes with poor execution or lack of widespread adoption of known best care processes, including, for example, patient safety systems and preventive care practices that have been shown to be effective. The results are patient injuries and worse clinical outcomes.’ |
| Failure of care coordination | ‘Waste that comes when patients fall through the slats in fragmented care. The results are complications, hospital readmissions, declines in functional status, and increased dependency, especially for the chronically ill, for whom care coordination is essential for health and function.’ |
| Overtreatment or low-value care | ‘Waste that comes from subjecting patients to care that, according to sound science and the patients’ own preferences, cannot possibly help them — care rooted in outmoded habits, supply-driven behaviors, and ignoring science. Examples include excessive use of antibiotics, use of surgery when watchful waiting is better, and unwanted intensive care at the end of life for patients who prefer hospice and home care.’ |
| Pricing failure | ‘Waste that comes as prices migrate far from those expected in well-functioning markets, that is, the actual costs of production plus a fair profit. For example, because of the absence of effective transparency and competitive markets, US prices for diagnostic procedures such as MRI and CT scans are several times more than identical procedures in other countries.’ |
| Administrative complexity | ‘Waste that comes when government, accreditation agencies, payers, and others create inefficient or misguided rules. For example, payers may fail to standardise forms, thereby consuming limited physician time in needlessly complex billing procedures.’ |
| Fraud and abuse | ‘Waste that comes as fraudsters issue fake bills and run scams, and also from blunt procedures of inspection and regulation that everyone faces.’ |
The total estimated waste ranged from US$760 billion to US$935 billion annually, equating to roughly 25% of total US healthcare spending.1 The potential savings from interventions were estimated between US$191 billion and US$286 billion, suggesting that even with systemic reforms, only around 25%–30% of waste is potentially recoverable.1 Figure 1 below shows the cost and potential savings estimates for the six domains.
Figure 1: Key cost estimates by domain1,5
| Domain | Estimated waste (US$bn) |
% of total ($3,82tn) |
% of total waste* (≈US$848bn) |
Potential savings (US$bn) |
% of total potential savings* (≈ US$238bn) |
|---|---|---|---|---|---|
| Failure of care delivery | 102,4–165,7 | 3,5% | 15,81% | 44,4–97,3 | 29,80% |
| Failure of care coordination | 27,2–78,2 | 1,4% | 6,22% | 29,6–38,2 | 14,20% |
| Overtreatment/low-value care | 75,7–101,2 | 2,3% | 10,44% | 12,8–28,6 | 8,70% |
| Pricing failure | 230,7–240,5 | 6,2% | 27,79% | 81,4–91,2 | 36,30% |
| Fraud and abuse | 58,5–83,9 | 1,9% | 8,40% | 22,8–30,8 | 11,30% |
| Administrative complexity | 265,6 | 7,0% | 31,33% | Not quantifiable | Not quantifiable |
*To benchmark across markets, we use mid-range estimates for each domain, acknowledging underlying uncertainty in original studies.
These estimates represent approximately 25% of total healthcare expenditures in the United States, which have been projected to be US$3,82 trillion for 2019.1
Notably, administrative complexity and pricing failure together account for over half of the total waste in the United States. Fraud and abuse represent about 6%–9% of total waste, a critical but often overstated component in popular discourse.
Limitations of applying these metrics to emerging markets
Health systems in many emerging economies differ fundamentally from those of the United States. Key differences include:
- Health insurance often covers hospitalisation only, with limited outpatient benefits.
- Primary care, referral networks, preventive care and care coordination are underdeveloped or not integrated within the health insurance system.
- Public and private healthcare providers often serve different population segments, with varying market shares across income groups and regions.
- Services offered through public provision or covered under insurance are not always comprehensive, leaving a significant share of healthcare costs to be paid out-of-pocket. Health insurance claims are adjudicated in the absence of structured data standards, clear submission guidelines and robust monitoring mechanisms, which limits accurate assessment and meaningful comparison.
- Health insurance pricing mechanisms may not accurately reflect the true cost of services and are often influenced by factors such as provider status and business volumes.
Limits of benchmark comparisons
While the idea of ‘25% to 30% waste’ is widely quoted, applying this figure uncritically to emerging markets can be misleading, especially from a health insurance payer perspective. For instance, the bulk of US waste arises from administrative overhead and pricing inefficiencies, neither of which may be measured the same way or even exist in comparable form in low- and middle-income countries.
Moreover, many of the systemic inefficiencies described in the US paper are products of a highly complex, multi-payer environment, which can be influenced by fee-for-service incentives and fragmented electronic health records, conditions often absent in emerging systems which are still developing their digital health infrastructure.
More importantly, any control over these inefficiencies is achieved through payment or health system reform, requiring a broader policy and regulation reform rather than through health insurance transaction processes.
Relevance of the JAMA findings to FWA in emerging markets
The JAMA paper uses a broad definition of waste, covering issues such as pricing inefficiencies, administrative overheads and missed opportunities for preventive care.1 However, in health insurance and claims management, the term ‘fraud, waste and abuse’ (FWA) is usually applied more narrowly, focusing on patterns which can be identified and measured within claims data, such as overtreatment, low-value care, billing errors and potential fraud. Therefore, what is classified as ‘waste’ in a systemwide study like JAMA’s may not fully align with how FWA is defined and monitored in insurance operations, especially in emerging markets where data systems and regulatory frameworks are still evolving.
The following interpretations can help policymakers in emerging markets make more appropriate comparisons.
Fraud and abuse (2,0% of US spend)
This domain includes improper billing, kickbacks, phantom claims and intentional misrepresentation. These are directly applicable to health insurance models globally and represent the core of what is typically considered FWA. However, in countries without strong legislation for fraud control, coding systems, central claims audits or pre-authorisation checks, this percentage could be substantially higher in practice.
FWA assessments in emerging markets must begin with investments in claims coding, audit systems and provider behaviour analytics. Active forensic investigations to confirm fraud and strengthening legislation to create strong disincentives for providers and physicians to engage in FWA become key requirements to curb fraudulent practices.
Overtreatment or low-value care (2,3% of total expenditures)
Defined as care that offers little or no clinical benefit, this includes unnecessary imaging, surgeries or overuse of branded drugs. In systems with weak clinical oversight or where providers are paid on volume rather than outcomes, this may be prevalent.
Whilst overtreatment may not always be fraudulent, legacy provider practices not updated to current practice and a lack of effective monitoring of overtreatment, unwarranted services, or low-value care, lead to claims leakage. Mature market payers and regulators actively develop medical review policies, standard treatment guidelines and peer comparison dashboards. Specific interventions to change clinician behaviour and prior authorisation/dynamic monitoring initiatives are options to discourage low-value care.
Administrative complexity (7,0% of total expenditures)
With no reported interventions targeting this waste category in the JAMA study, the burden of paperwork, authorisations and billing inefficiencies looms large in US healthcare. In low-resource settings, this form of waste may manifest differently through manual processing, lack of digitisation and inconsistent adjudication. Automation, digitised claims platforms and data exchange protocols are critical long-term investments to mitigate these inefficiencies.
Pricing failure (6,2% of total expenditures)
In the US context, pricing failure includes excessive charges for pharmaceuticals and procedures due to a lack of price regulation or market transparency. In underpenetrated markets, payers often don’t have much leverage over providers. Market-based reference prices are not based on cost or resources and may be market-driven. Fee-for-service models and balance billing (where any short payment from insurance is billed to the patient) limit any risk on the providers. In these emerging markets, the experience may be very different. Implication: Price benchmarking, generics promotion and alternate payment model-based contract design are more relevant than fraud detection tools in addressing this domain in emerging markets.
Key considerations for policymakers
When interpreting the findings of Shrank et al. for benchmarking purposes, policymakers in emerging markets should adopt a cautious and nuanced approach.
Avoiding overstatement of FWA risk
The JAMA study makes clear that only a part (5%–9%) of total health expenditure relates directly to fraud and abuse. Insurers and regulators should not conflate system inefficiencies with the intent of fraud and abuse and use of low-value care-related waste.
Figure 2: Potential savings estimates by waste domain1
| Domain | Estimated waste (US$bn) | % of total ($3,82tn) | % of total waste (≈US$848bn) | Potential savings (US$bn) |
|---|---|---|---|---|
| The usual focus of FWA is identifiable through claims data analysis, e.g., overtreatment, low-value care and potential coding/billing abuse: | ||||
| Fraud and abuse | 58,5–83,9 | 1,9% | 14,90% | 22,8–30,8 |
| Failure of care coordination | 27,2–78,2 | 1,4% | 11,03% | 29,6–38,2 |
| Overtreatment/low-value care | 75,7–101,2 | 2,3% | 18,51% | 12,8–28,6 |
| Broader system efficiency domains (not the primary focus of claims data analysis-based studies): | ||||
| Administrative complexity | 265,6 | 7,0% | 55,56% | Not quantifiable |
| Failure of care delivery | 102,4–165,7 | 3,5% | 28,04% | 44,4–97,3 |
| Pricing failure | 230,7–240,5 | 6,2% | 49,29% | 81,4–91,2 |
Building local definitions and frameworks
Waste categories should be tailored to local insurance practices, data availability and health system maturity. For example:
- In markets with fee-for-service hospital payments but no outpatient cover, overtreatment, unbundling, unwarranted services and admission abuse may be dominant concerns.
- In bundled payments, such as package rates or DRG/bundled payment programs, readmissions, upcoding severity, and under-delivery or low service quality can be of concern.
Investing in foundations
Data systems, coding infrastructure, claims review mechanisms and tariff transparency are essential for identifying, measuring and managing FWA in any form.
Distinguishing systemic reform from operational control
Some domains, such as administrative complexity or care coordination, require systemic redesign and are unlikely to be addressed solely through claims audits or penalties. Misclassifying them as FWA risks misdirecting resources and creating friction with providers.
Conclusion
The findings from the 2019 JAMA study provide a comprehensive and evidence-based picture of inefficiencies in the US healthcare system. Whilst the headline estimate of 25%–30% waste is striking, only a portion of this (notably fraud, abuse and overtreatment) is directly relevant to the type of FWA management practiced in health insurance systems.
These findings should be interpreted with nuance in emerging markets. Policymakers and payers could benchmark only those waste components which align with local realities, such as clinical misuse, overbilling or benefit abuse, and work towards broader health system strengthening to address others.
Ultimately, addressing fraud, waste and abuse in any healthcare system requires enforcement and adjudication, as well as governance, infrastructure and policy alignment. The path to greater efficiency in emerging health systems lies in combining operational vigilance with long-term structural reform.
References
1 Shrank, W.H., Rogstad, T.L., & Parekh, N. (October 2019). Waste in the US health care system: estimated costs and potential for savings. JAMA, 322, 15, 1501–1509. Available from https://jamanetwork.com/journals/jama/article-abstract/2752664.
2 World Health Organization. (9 December 2024). Global spending on health: emerging from the pandemic. Retrieved 13 February 2026 from https://iris.who.int/server/api/core/bitstreams/6a22149b-17d5-4afb-a89b-14a3e8c12442/content.
3 World Health Organization. (29 January 2018). New perspectives on global health spending for universal health coverage. Retrieved 13 February 2026 from https://iris.who.int/server/api/core/bitstreams/cab70b92-6065-4c65-b1a2-df1923deee01/content.
4 Committee on the Learning Health Care System in America; Institute of Medicine; Smith, M., Saunders, R., Stuckhardt, L., & McGinnis, J.M., editors. (10 May 2013). Best care at lower cost: the path to continuously learning health care in America. National Academies Press. Retrieved 13 February 2026 from https://pubmed.ncbi.nlm.nih.gov/24901184.
5 Berwick, D.M., & Hackbarth, A.D. (April 2012). Eliminating waste in US health care. JAMA, 307, 14, 1513–1516. Available from https://pubmed.ncbi.nlm.nih.gov/22419800.