Waste and fraud in fee-for-service healthcare model

A recent study highlighted in McKnight’s Long-Term Care News reveals that Medicare spends approximately $4.4 billion each year on 47 different low-value medical services—procedures that provide little to no clinical benefit to patients. Imaging services, including unnecessary CT scans and X-rays, account for about 95% of this spending.

These findings align with broader research from the Medicare Payment Advisory Commission, which estimates that up to $5.8 billion was spent on similarly low-value services in 2022. Additionally, another analysis found that between 2018 and 2020, patients paid nearly $800 million out of pocket for these unnecessary procedures.

The overuse of such services is often driven by the fee-for-service healthcare model, which incentivizes volume over value. Many of these procedures, such as spinal fusions and vertebroplasties, not only lack medical necessity but may also pose significant health risks, especially for older adults. For instance, Medicare was found to have spent roughly $2 billion over three years on questionable back surgeries that were linked to higher rates of complications.

Experts suggest that substantial savings could be achieved by eliminating just five of the most unnecessary services, potentially reducing wasteful spending by
59% or about $2.6 billion annually. Campaigns like Choosing Wisely have emerged to combat this trend, encouraging physicians and patients to reconsider hundreds of commonly overused tests and procedures. Ultimately, reducing low value care is not only essential for preserving Medicare’s resources but also critical to protecting patients from avoidable harm and unnecessary costs.