Abstract

This review critically evaluates perspectives on waste in the US health care sector. The conventional discussion of waste is often imprecise and blames factors outside the purview of the health care system. Taking an economic perspective, we propose that productive inefficiency is a more tractable concept than waste. We then review the literature on the efficiency of health providers. We discuss the evidence on whether supply- and demand-side policies, such as value-based payment and cost sharing, can raise efficiency, finding that many of these policies have effects that are meaningful but small. We then turn to the literature on variations, where we argue that the body of evidence suggests there are large efficiency gaps, though these gaps are smaller than the initial eye-catching results that began this strand of research. Ultimately, these findings provide a potential roadmap for efficiency gains, a process in which a diverse array of policies compound, over time, to bring the US system closer to the efficiency frontier.