Don Berwick and Andrew Hackbarth have identified the sources of cost-savings in the healthcare system and estimated the magnitude of savings available.  The original manuscript can be found at JAMA here. 

A quick summary of the $400 billion savings opportunities:

• Administrative Complexity: 
  Cause: “Inefficient or misguided” rules implemented by regulatory agencies or payors. 
  Solution: Simplification of rules and regulations, and user-friendly information management tools.
  Savings: Between $107 billion and $389 billion.

• Overtreatment: 
  Cause: Patient preference such as excessive use of antibiotics or surgery, when waiting might be better. 
  Solution:  Identifying procedures, tests, medications and other services that do not benefit patients.
  Savings: $158 billion to $226 billion.

• Fraud and Abuse: 
  Cause:  Fake claims and bills.
  Solution: Early detection, prediction and disincentives.
  Savings: Between $82 billion to $272 billion.
   
• Failures of Care Delivery:
  Cause:  Poor execution of care programs such as patient safety and prevention. 
  Solution: Better training, monitoring and learning models.
  Savings: Between $102 billion and $154 billion.

• Pricing Failures: 
  Cause:  Pricing fluctuations based on geographic location.
  Solution: Pricing transparency and consumer advocacy.
  Savings:  Between $84 billion and $178 billion.
   
• Failures of Care Coordination: 
  Cause: When patients fall through the cracks of fragmented care.
  Solution: Team orientation and information sharing across primary / specialty and in-patient / out-patient care settings when treating patients.
  Savings: $25 billion to $45 billion. 

The solution to the above savings opportunities will require a strong leadership agenda to develop a combination of applying policy levers, reimbursement models, training and management principles.