~25%
Of US health spending estimated to be waste (landmark JAMA analysis, 2019)
$760–935B
Estimated annual cost of that waste — larger than the entire US defense budget
6
Distinct domains the waste falls into — not one problem, but six

What "waste" means here

"Waste" is a precise term in health economics, not a rhetorical one. It refers to spending that could be eliminated without reducing the quality of care — money that buys no health. A widely cited 2019 analysis published in JAMA estimated that roughly a quarter of all US health spending fits this definition, and sorted it into six domains. Seeing them separately matters, because they have very different causes and very different fixes.

The six domains of waste

$266B
Administrative complexity — the single largest domain: billing, coding, and the paperwork of a fragmented system
$231–241B
Pricing failure — prices far above what a functioning market would set, for the same services
$102–166B
Failure of care delivery — poor execution, missed prevention, avoidable complications
$76–101B
Overtreatment & low-value care — tests and procedures that do not help, and sometimes harm
$59–84B
Fraud and abuse — the domain that draws the most attention but is far from the largest
$27–78B
Failure of care coordination — the gaps between providers where patients and information fall through

Administrative complexity: the biggest and the stickiest

The largest single domain is administrative complexity — the cost of a system so fragmented that an enormous amount of money goes simply to billing, coding, prior authorizations, and the friction between countless payers and providers. The United States spends roughly $1,000 per person per year on administration — about five times what a country like Germany spends. And it is the domain the JAMA authors found hardest to fix: their review turned up no proven interventions that meaningfully reduce it. It is baked into the structure.

This connects directly back to the spending breakdown. The roughly $540 billion the country spends administering the system, noted in an earlier primer, is not merely a cost of doing business — a large share of it is this administrative waste. It is what the machinery of insurance intermediation costs, and much of it buys no care at all.

Prices, not overuse

Note what is not the largest source. Fraud — the domain that dominates political conversation — is one of the smaller ones. And overtreatment, while real, is smaller than administrative complexity and pricing failure combined. The waste is not mainly Americans getting too much care or bad actors stealing. It is mostly a system that costs too much to run and charges too much for what it does.

The framework's reading

Here the waste taxonomy maps almost one-to-one onto the two halves of this framework — which is the strongest structural case on the whole site. Look at the six domains and ask which parts of the framework address them:

Administrative complexity — the biggest domain — is precisely what the cooperative model targets. By removing the insurance intermediary from the primary care relationship, a direct membership structure eliminates the billing, coding, and claims friction that generate this waste in the first place. You cannot pay a clean, direct membership fee and simultaneously generate the administrative overhead of insurance intermediation.

Failure of care delivery and failure of care coordination — two more domains — are exactly what the clinical model, the hub, and the arc of care are built to fix. Continuous, coordinated care that holds the whole arc is the direct answer to care that is poorly executed and poorly coordinated.

So three of the six domains of waste — including the single largest — are addressed head-on by the two halves of this framework: the cooperative attacks the administrative waste, and the clinical model attacks the delivery-and-coordination waste. This is not a coincidence of framing. It is what happens when you design a system around continuous delivery and direct relationship rather than episodic care and insurance intermediation. Better delivery is the cause; lower cost is the effect — and this is the mechanism by which a very large share of that $760 to $935 billion simply stops being spent.