Imagining 16% to 12%: A Vision for Cost Efficency, Improving Healthcare Quality, and Covering the Uninsured

Source: Bruce Pyenson, Kate Fitch, Sara Goldberg, Milliman Inc., Research Report, February 2009

If the United States reduced healthcare spending to only 12% of Gross Domestic product (GDP) instead of our current 16%, we would still spend far more that any other country. The 4% saved is less that many estimates of healthcare waste and is more than the annual expenditures on motor vehicles.

This paper presents projections of achievable healthcare cost savings. These savings could pay for health insurance for everyone in the United States and still reduce total healthcare spending from 16% to 12% of GDP. Furthermore, these savings could be achieved while also improving the quality of care. The projections presented in this paper are based on actuarial modeling and are grounded in observed best practices in healthcare management. Certainly other scenarios for reducing healthcare spending are possible; out theme is that the right care is better care and is less expensive. Our purpose in writing this paper is to stimulate debate about how we will achieve these significant savings.

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