Understanding and Avoiding Wasteful Health Care Spending: What You Need to Know

By Natalie BrooksLast Updated June 29, 2025

Introduction

Health care spending in the United States is among the highest in the world, yet a significant portion of these expenditures fails to improve patient outcomes. Wasteful health care spending is a critical issue, with estimates suggesting that hundreds of billions of dollars each year are spent on unnecessary or inefficient medical services, administrative complexity, and other avoidable costs. Understanding what constitutes wasteful health care spending is essential for patients, providers, and policymakers alike. This article explores key examples of wasteful spending, provides actionable guidance on how to identify and reduce such waste, and discusses the broader implications for individuals and the health care system.

What Is Wasteful Health Care Spending?

Wasteful health care spending refers to expenditures that do not lead to improved health outcomes or that could be avoided without negatively impacting patient care. According to research, waste can be classified into several main categories:

Overtreatment and Overuse : Providing medical services or treatments that offer no clinical benefit to the patient.
Administrative Complexity : Excessive costs related to billing, insurance processing, and other non-clinical activities.
Pricing Failures : Paying more for health care services than their actual value or market rate.
Fraud and Abuse : Intentional misuse of resources, such as fraudulent billing or unnecessary procedures.
Clinical Inefficiencies : Ineffective or redundant care delivery processes.
Missed Prevention Opportunities : Failing to provide timely preventive care, resulting in more expensive treatments later.

Estimates suggest that as much as 25% of total health care spending in the U.S.-amounting to between $760 and $935 billion annually-may be wasteful [2] [3] .

Common Examples of Wasteful Health Care Spending

Overtreatment and Overuse

One of the most common forms of waste is overtreatment: administering tests, procedures, or medications that are not medically necessary. For example, prescribing antibiotics for viral infections, performing advanced imaging for uncomplicated lower back pain, or hospitalizing patients who could be safely treated in outpatient settings. Research shows that overtreatment accounts for 2.0-8.4% of total health spending, with costs ranging from $76 billion to $226 billion annually [4] .

Real-world Example: A patient with mild high blood pressure is prescribed medication even though lifestyle changes may be sufficient. Not only does this expose the patient to unnecessary side effects, but it also results in avoidable spending [1] .

Actionable Guidance: If you’re a patient, always ask your provider about the necessity and expected benefits of recommended tests or treatments. For health care providers, implementing evidence-based guidelines and shared decision-making can reduce overtreatment.

Administrative Complexity

The United States leads the world in administrative costs related to health care. Excessive paperwork, complex billing systems, and redundant data entry drive up overhead without improving patient outcomes. Administrative costs account for more than 8% of U.S. health care spending, compared to 6% in other developed countries [1] [2] .

Real-world Example: Multiple insurers require different forms and coding for the same procedure, forcing hospitals to employ large billing departments.

Actionable Guidance: Patients can help by keeping accurate personal health records and confirming insurance coverage before procedures. Health care organizations can invest in integrated electronic health records and streamlined billing processes.

Pricing Failures and Lack of Price Transparency

Another major source of waste is paying higher-than-necessary prices for health care services and medications. Unlike most consumer transactions, patients and sometimes even providers have limited information about the cost of care before services are rendered. This lack of transparency leads to higher prices and unnecessary spending [1] .

Real-world Example: Two patients receive identical procedures at different hospitals, but one pays significantly more due to non-transparent pricing structures.

Actionable Guidance: Patients can request cost estimates from providers and consult their insurance plan’s pricing tools. Many health plans and providers offer online portals with estimated costs for common procedures. If you are unsure where to start, contact your insurance provider’s customer service for guidance on finding cost information.

Fraud and Abuse

Fraudulent billing, such as charging for services not provided or upcoding procedures, diverts health care dollars from legitimate patient care. While high-profile fraud cases make headlines, everyday abuse-like unnecessary diagnostic tests or duplicate billing-also contributes to waste [3] .

Real-world Example: A health care provider bills for a more expensive service than was actually performed, or submits multiple claims for the same service.

Actionable Guidance: Patients should regularly review their Explanation of Benefits (EOB) statements for errors or suspicious charges and contact their insurer or the provider’s billing office if discrepancies are found. If fraud is suspected, you can report it to the Office of Inspector General (OIG) at the U.S. Department of Health and Human Services by searching for “OIG fraud reporting” online.

Missed Prevention Opportunities

Failing to provide recommended preventive care, such as vaccinations, screenings, or counseling, can result in more expensive interventions later. Missed prevention is a form of waste because timely, cost-effective measures could avert costly complications [3] [5] .

Real-world Example: Patients who skip routine cancer screenings may require more intensive and costly treatments if cancer is discovered at a later stage.

Actionable Guidance: Patients should keep up to date with recommended preventive services. You can find these by searching for “USPSTF preventive care guidelines.” Providers can implement reminder systems and patient outreach programs to increase preventive care uptake.

How to Identify and Avoid Wasteful Health Care Spending

Reducing wasteful spending requires awareness, vigilance, and proactive engagement from all stakeholders. Here are practical steps individuals and organizations can take:

Ask Questions : Patients should ask providers about the necessity, risks, benefits, and costs of recommended tests and treatments.
Request Itemized Bills : After a procedure, request an itemized bill and review it for errors or unexpected charges. Dispute any questionable items with the provider or insurer.
Use In-Network Providers : Choose providers and facilities within your insurance network to avoid surprise bills and higher out-of-pocket costs.
Utilize Preventive Services : Take advantage of preventive care services covered by insurance. For information on covered services, consult your insurer’s official website or customer service department.
Report Suspected Fraud : If you suspect fraudulent billing or abuse, report it to your insurer or the relevant government agency. Search for the “Office of Inspector General fraud reporting” portal for official guidance.
Healthcare Professionals: Follow Evidence-Based Guidelines : Providers should adhere to established clinical guidelines and avoid unnecessary interventions.

Challenges and Solutions

Efforts to reduce wasteful spending face several challenges, including:

Defensive Medicine : Providers may order unnecessary tests out of fear of malpractice claims.
Patient Expectations : Patients may request unnecessary treatments, believing more care is always better.
Complex Billing Systems : Navigating insurance requirements can lead to redundant processes.

Potential Solutions: Increasing transparency, educating patients and providers, and streamlining administrative processes can help address these barriers. Policy initiatives at the federal and state level are also focusing on reducing waste through value-based care models and technology-driven solutions.

Alternative Approaches to Reducing Waste

There are multiple strategies for reducing wasteful health care spending, including:

Adopting value-based payment models that reward outcomes rather than volume.
Implementing electronic health records and interoperable data systems to reduce duplication.
Encouraging shared decision-making between patients and providers.
Investing in preventive care and chronic disease management programs.

Key Takeaways

Wasteful health care spending encompasses a range of activities and practices that do not contribute to improved health. By understanding the most common sources of waste-such as overtreatment, administrative complexity, pricing failures, fraud, and missed prevention opportunities-patients and providers can make more informed decisions and work together to ensure resources are used effectively. For additional guidance, consult official health insurance plan materials or contact your insurance provider directly for personalized assistance regarding coverage, pricing, and preventive services.