Medicare could save billions by cutting low-value care, study finds

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Medicare and its beneficiaries are spending billions each year on medical services that offer little or no clinical value — and in many cases, could cause harm. That’s the conclusion of a new study published August 1 in JAMA Health Forum, which analyzed a representative sample of Medicare claims and projected the national impact of 47 low-value services.

Led by David D. Kim, Ph.D., a health economist from the University of Chicago, and A. Mark Fendrick, M.D., of the University of Michigan, the study found that Medicare spent $3.6 billion annually on these services between 2018 and 2020. Patients shouldered another $800 million in out-of-pocket costs.

“Patients who can benefit from these services should absolutely receive them,” Kim said in a Michigan Medicine press release, “but we show that tremendous savings could be achieved by avoiding them in patients who won’t benefit or could be harmed.”

Five ‘D Grade’ services drive most costs

Of the 47 services that researchers looked at — deemed low-value by clinical guidelines and expert consensus, five preventive services stood out. They alone accounted for 59% of all spending identified in the study.

Each of the five holds a “D” rating from the U.S. Preventive Services Task Force (USPSTF), meaning there is moderate or high certainty that the services have no net benefit, or that the harms outweigh the benefits.

Section 4105 of the Affordable Care Act (ACA) grants authority to the secretary of the Department of Health and Human Services (HHS) — Robert F. Kennedy Jr. — to provide no payment for services graded lower than A, B, C, or I.

The five services that researchers highlighted are:

1. COPD screening in asymptomatic adults
2. Bacteriuria screening in asymptomatic patients
3. PSA testing for prostate cancer in men over 70 without risk factors
4. Screening in asymptomatic carotid artery stenosis
5. Electrocardiograms for asymptomatic heart rhythm issues

Kim and Fendrick estimated that eliminating these five services could save $2.6 billion annually.

Imaging the preoperative testing among most common

While the five “D grade” services carried the heaviest cost, the most frequently used low-value services were often imaging-related. Among the top 20 by prevalence were unnecessary scans for plantar fasciitis, headache, syncope and lower back pain.

In total, just 20 of the 47 services accounted for 95% of the total spending on low-value care.

Fendrick emphasized the study’s approach distinguishes between patients who might benefit from a service and those who clearly will not — a critical nuance often overlooked in broader policy conversations.

“This research is very policy relevant as it takes a clinically driven, patient-focused approach to quantifying unnecessary medical spending,” Fendrick said. “This is much more nuanced than ‘blunt’ policies that reduce government spending on health care but could harm patients.”

He also noted the study likely underestimates total waste.

It does not account for downstream costs from care cascades trigged by initial low-value services. In one example, PSA screening led to an estimated $6 in follow-up care for every $1 spent on the initial test.

Moving forward

The authors suggest several mechanisms to reduce waste, including using the ACA’s existing authority to stop paying for USPSTF grade D services, tightening claims-based rules and implementing targeted prior authorizations.

Still, they acknowledge that full savings may not be realized due to billing workarounds and substitution effects, where clinicians might shift to other unnecessary services. But even partial progress could free up significant resources.

“Reducing payments for low-value services could lead to substantial savings to create headroom to pay for high-value services while preserving the health of the Medicare population,” the authors concluded.