substantial contribution of each domain to excessive health care costs (see Table S-1).

Although these estimates have unknown overlap, the sum of the individual estimates—$765 billion—suggests the significant scale of waste in the system. Two other independent and differing analytic approaches—considering regional variation in costs and comparing costs across countries—produce similar estimates, with total excess costs approaching $750 billion in 2009 (Farrell et al., 2008; IOM, 2010; Wennberg et al., 2002).

TABLE S-1 Estimated Sources of Excess Costs in Health Care (2009)

Category Sources Estimate of Excess Costs
Unnecessary Services
  • Overuse—beyond evidence–established levels
  • Discretionary use beyond benchmarks
  • Unnecessary choice of higher-cost services
$210 billion
Inefficiently Delivered Services
  • Mistakes—errors, preventable complications
  • Care fragmentation
  • Unnecessary use of higher-cost providers
  • Operational inefficiencies at care delivery sites
$130 billion
Excess Administrative Costs
  • Insurance paperwork costs beyond benchmarks
  • Insurers’ administrative inefficiencies
  • Inefficiencies due to care documentation requirements
$190 billion
Prices That Are Too High
  • Service prices beyond competitive benchmarks
  • Product prices beyond competitive benchmarks
$105 billion
Missed Prevention Opportunities
  • Primary prevention
  • Secondary prevention
  • Tertiary prevention
$55 billion
  • All sources—payers, clinicians, patients
$75 billion

SOURCE: Adapted with permission from IOM, 2010.

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