Money will be lost in health care. This is true no matter how we describe it.

In health care, everyone wants the same two things: better outcomes and lower costs. Yet no matter
how we slice the numbers, tweak the incentives, or rename the latest reform, one stubborn truth
remains: money will be lost in health care. Some of it will be wasted on paperwork, some on
unnecessary tests, some on confusing pricing, and some on honest mistakes made in an incredibly
complex system.

That doesn’t mean the system is doomed or that every dollar is squandered. It means health care is
messy, high stakes, and full of uncertainty. When you mix human bodies, human behavior, technology,
politics, and giant financial incentives, a perfectly efficient system simply doesn’t exist. The real
question isn’t whether money will be lost. It’s where we’re willing to lose it and what
we’re getting in return.

Let’s unpack why waste is baked into health care, where the biggest leaks are, and how patients,
providers, and policymakers can at least make sure the money that is lost doesn’t take our
health and peace of mind with it.

Why some money will always be “lost” in health care

The United States spends more than any other high-income country on health care, over
four trillion dollars a year and roughly a fifth of the economy. A large chunk of that spending
doesn’t actually improve health. Analyses suggest that about one quarter of total health care
spending is “waste” dollars that could be cut without harming patients if we were more efficient.

That “waste” includes everything from excess administrative work and complicated billing to
unnecessary tests, hospital readmissions, and overpriced drugs. Even if we magically fixed
half of those problems, there would still be some loss built into the system. Why?

1. Health care is full of uncertainty

Your car either runs or it doesn’t. Your body, unfortunately, is not that simple. Doctors often have
to make decisions with incomplete information, under time pressure, and with patients who have
multiple conditions, other medications, and real-life constraints.

That means:

• Some tests will come back normal in hindsight.
• Some treatments will work beautifully in one person and barely at all in another.
• Some hospital stays will turn out to have been preventablebut only in retrospect.

From a spreadsheet perspective, those can look like “wasted” dollars. From a medical perspective,
they’re often the cost of trying to keep people alive and functioning in a world where we never
have perfect information.

2. Emergencies don’t shop around

Health economists love the idea of price comparison. Real patients, however, are not googling
“best cash price for emergency appendectomy” while doubled over in pain. In many situations,
people accept whatever hospital is close and whatever providers happen to be on call.

That lack of normal, everyday price shopping makes it easier for:

• Prices to vary wildly from one hospital to another.
• Specialists to bill out-of-network at higher rates.
• Surprise medical bills to show up months later.

In any market where people can’t realistically walk away, some money will be lost to inefficiency
and price games.

3. The system runs on rules, not just care

In theory, medicine is about diagnosis and treatment. In reality, it’s also about forms, codes,
prior authorizations, and quality metrics. Doctors don’t just treat patientsthey also feed data
into electronic health records, respond to insurance queries, and navigate shifting payment rules.

That bureaucracy isn’t free. It takes:

• Staff time to code, bill, and rebill claims.
• Software, consultants, and compliance teams to stay on top of regulations.
• Clinician time that could otherwise be spent actually seeing patients.

Not all of this is unnecessary. Some documentation protects patients and catches errors. But a big
portion is pure friction that turns into lost money.

Where the money leaks: major sources of waste in health care

If money will be lost no matter how we describe it, where exactly does it go? Think of the U.S.
health system as a giant, expensive bucket with several big cracks in it.

1. Administrative bloat and billing complexity

The U.S. spends an outsized share of its health dollars on administration. That includes:

• Multiple insurers, each with different rules and claim forms.
• Billing staff in hospitals and clinics devoted to coding and re-coding visits.
• Time doctors and nurses spend on electronic documentation instead of direct care.

Studies estimate that administrative costs soak up a significant slice of excess U.S. health
spending, especially when compared with other high-income countries. A huge amount of human
energy goes into simply getting bills paid rather than getting people healthier.

For patients, this shows up as:

• Confusing explanation-of-benefit forms.
• Endless phone calls to insurers about denied coverage.
• Surprise bills that appear because one specialist was out-of-network.

Every extra phone call and resubmitted claim is small on its ownbut scaled across millions of
visits, it adds up to billions of dollars lost.

2. Low-value and unnecessary care

Another big leak is what experts call “low-value care.” These are tests or treatments that:

• Offer minimal or no benefit to most patients.
• Duplicate other tests that already answered the question.
• Expose patients to risks (like radiation or side effects) without clear benefit.

Research on Medicare beneficiaries has found that about one in five services in certain categories
can be classified as low-value. That’s a lot of time, money, and effort for results that could be
achieved more safely and cheaply.

Why does this happen?

• Habit: “This is how we’ve always done it.”
• Defensive medicine: ordering more tests to avoid missing something (or a lawsuit).
• Fragmentation: specialists don’t always see what others have already done.
• Payment incentives: being paid per test or procedure encourages more of them.

Each individual test might seem reasonable. In the aggregate, they become a quiet leak of money
the system never gets back.

3. Hospital readmissions and poor transitions of care

Hospital readmissions within 30 days are a classic example of costly inefficiency. When someone
is discharged but ends up back in the hospital shortly after, the system pays twice. Average
readmissions can cost tens of thousands of dollars per patient, and the total national bill
runs into the tens of billions.

Not every readmission is avoidable. Some people simply get sicker. But many readmissions are
tied to:

• Poorly explained discharge instructions.
• Missed follow-up appointments.
• Medication confusion (or the patient not being able to afford prescriptions).
• Lack of coordination between hospitals and primary care.

Programs that improve care coordination and follow-up can reduce these costly rebounds, but they
also require up-front investment. Again, we trade one type of spending for another.

4. Opaque and inconsistent prices

In a normal market, you’d expect buyers to see prices and compare options. In health care, many
people find out the price only after they’ve already received careand sometimes long after.

This lack of price transparency creates several opportunities for money to go missing:

• Hospitals can charge very different prices for the same service, even within the same city.
• Patients can receive “surprise” bills from out-of-network providers they never chose.
• People may avoid needed care because they’re afraid of unknown costs, leading to more
  expensive problems later.

Recent rules require hospitals and health plans to post prices and make cost estimates available,
but compliance and usability are inconsistent. Even when data is available, it’s often not in a
patient-friendly format. The result: patients are still playing financial roulette.

5. High prices for drugs and technology

The United States also pays more for many prescription drugs and medical technologies than other
countries do. While innovation is valuableand sometimes life-savinghigh prices can strain both
patients and payers.

Some of this is due to:

• Patent protections and limited competition.
• Complex negotiations between drug companies, pharmacy benefit managers, and insurers.
• Lack of consistent policies on how much society is willing to pay for a given health benefit.

When a new drug dramatically improves survival for a rare cancer, higher spending may be worth
it. When prices rise for drugs that have been around for years without added benefit, money is
simply leaking out of the system.

6. Fraud, abuse, and gaming the rules

Most clinicians and hospitals are trying to do the right thing. But in any system this large,
some players will game the rules. That might mean:

• Billing for services that were never provided.
• Upcoding visits to higher-paying categories.
• Exploiting loopholes in payment rules or dispute processes.

Even if fraud represents a relatively small share of total spending, it still involves billions
of dollars that could otherwise support genuine care.

We’ll never get to zero wastebut we can choose better waste

If all of this sounds a bit depressing, here’s the hopeful part: while money will always be lost
in health care, we actually have some control over how it’s lost.

Imagine two systems:

• System A wastes money on redundant paperwork, confusing bills, and unnecessary tests.
• System B “wastes” money on preventive care, community health workers, and extra time for
  doctors to talk with patients.

Both systems may look inefficient on a simple cost chart. But System B is losing money in ways
that build trust, improve health, and prevent more expensive problems later. System A is losing
money in ways that create frustration and financial stress.

We will never design a system where every dollar is perfectly optimized. What we can do is shift
from bad wastebureaucracy, confusion, avoidable harmto better “waste”: redundancy that protects
patients, investments in prevention, and support that helps people manage chronic conditions.

How individuals can lose less money in a leaky system

Patients can’t fix the entire system, but they can protect themselves a bit better in a world
where money will be lost regardless. A few practical steps:

Ask “why this test or treatment?”

It’s completely reasonable to ask your clinician why a test is being ordered and how it might
change your treatment. Simple questions like:

• “What are we looking for?”
• “What happens if we skip this test?”
• “Is there a less expensive but still effective option?”

can sometimes reduce low-value care without compromising safety.

Use in-network providers when possible

Before non-emergency care, confirm that:

• The facility is in your insurance network.
• Key providers (like anesthesiologists or radiologists) are in-network, too, if you can find out.
• You have an estimate of your out-of-pocket costs.

This isn’t always easy, but even partial information can reduce surprise bills.

Stay on top of follow-up and medications

Many costly problemslike avoidable readmissionsstart with missed follow-up or medication issues.
You can lower your personal risk by:

• Scheduling follow-up visits before you leave the hospital.
• Bringing all your medications (or a list) to every appointment.
• Telling your clinician if you can’t afford a prescribed medicationthere may be alternatives.

These steps don’t eliminate waste in the system, but they can keep you from personally paying for
some of the most expensive leaks.

Experiences from inside the system: how this looks in real life

All of these statistics and policy debates can feel abstract until you’ve actually tried to
navigate the system. In real life, the idea that “money will be lost in health care” usually
shows up as frustration, surprise, or quiet resignation.

Picture a family dealing with a sudden hospitalization. One parent has chest pain, ends up in the
emergency room, and spends a couple of nights in the hospital for monitoring and tests. The
clinical care is solid: the team catches a heart rhythm problem early, adjusts medications, and
helps set up a follow-up plan. Everyone is relieved.

Then the bills arrive.

First comes the hospital statement with a five-figure totalwhich is alarming, but the family
assumes insurance will cover most of it. Next comes an explanation of benefits from the insurer
that might as well be written in ancient code. A few weeks later, separate bills start to
trickle in from:

• The cardiologist group.
• The hospital-owned imaging center.
• An out-of-network anesthesiologist they never realized was part of the case.

None of these providers did anything “wrong” clinically. They showed up, did the work, and billed
according to the rules. But for the family, it feels like being charged multiple times for the
same frightening episode. Their time is now being spent on phone calls, appeals, and payment plans.

On the other side of the exam table, clinicians are having their own version of the same story.
Many primary care doctors describe their days as a tug-of-war between actual care and paperwork.
They might see a full schedule of patients, then stay late to:

• Answer electronic messages.
• Fill out prior authorization forms.
• Document every box needed to get a visit paid.

They know that somewhere, buried in all that documentation, money will be losttime they can’t
bill for, claims that are underpaid or denied, hours of effort that don’t show up on their
productivity report. The system has trained them to accept a certain amount of loss as the price
of doing business.

Patients feel something similar when they delay care because they’re worried about cost. Maybe
they skip a recommended follow-up scan because the last one generated a bill they’re still paying.
Maybe they cut pills in half to make an expensive prescription last longer. On paper, these
choices might look like “savings.” In reality, they can lead to bigger problems that cost far
more down the linesevere complications, emergency surgeries, or hospital stays that might have
been preventable.

Even efforts to fix one leak can accidentally open another. Take price transparency rules:
hospitals and insurers are now expected to publish prices and offer cost tools. That’s a step
in the right direction for patients, but implementing these tools requires new software,
compliance checks, and staff training. Some organizations invest heavily and do it well. Others
struggle to keep up, adding more administrative work on top of the existing pile.

The result is a health system where everyonepatients, clinicians, insurers, employersis aware
that money is going missing, but no one feels fully in control of the leaks. People on all sides
quietly adjust their expectations. Patients expect confusing bills. Doctors expect after-hours
charting. Hospitals expect denied claims. Insurers expect appeals. It becomes normal to think,
“Of course some of this money will be wasted; that’s just how it works.”

The challenge, and the opportunity, is to stop treating that loss as invisible. When we name it
clearlywhether it’s low-value care, avoidable readmissions, administrative bloat, or unfair
pricingwe can at least decide which losses we’re willing to tolerate and which ones we’re not.
We might never build a system that runs without leaks, but we can build one where the losses are
smaller, smarter, and less likely to bankrupt the people it’s supposed to help.

Conclusion: Accept the leaks, fight the worst ones

“Money will be lost in health care” sounds cynical, but it can actually be a starting point for
honest reform. If we stop pretending that perfection is possible, we can focus on:

• Cutting the waste that adds no value and causes harmlike surprise bills and needless bureaucracy.
• Investing in the kinds of “waste” that actually helplike prevention, counseling, and coordination.
• Giving patients clearer information and real support so they can navigate the system without
  financial panic.

We won’tand can’teliminate every dollar of inefficiency in a system this complex. But we can be
clear-eyed about where the money is going, who’s paying the price, and what kind of health system
we want to build with the dollars we do control. In the end, the goal isn’t a perfectly efficient
spreadsheet. It’s a system where the money that is lost hurts less, and the money that is spent
does more good.