Paper Cuts: Reducing Health Care Administrative Costs
Administrative costs in the U.S. health care system consume an estimated $361 billion annually—14 percent of all health care expenditures in our nation. At least half of this spending is estimated to be wasteful. In an era of government budget deficits and rising health care costs, the case for reducing the administrative complexity of health care is compelling. Successful efforts can result in significant financial savings while simultaneously improving system performance indicators and the quality of patient care.
Indeed, stakeholders throughout the U.S. health care system—including health insurance companies, hospitals, physician organizations, labor unions, the pharmaceutical industry, and federal, state, and local governments—all recognize the importance of reducing administrative costs. In recent years, public and private groups have launched a variety of efforts to reduce administrative expenses, many of which, like the Health Insurance Portability and Accountability Act, laid critical groundwork for current initiatives passed under the Affordable Care Act and for future efforts. Yet more remains to be done to lower rising costs.
Administrative costs for private health insurance plans, for example, rose by 117 percent from 2001 to 2010. During this same period, total national health expenditures rose by 74 percent.
This paper outlines the nature of administrative costs affecting both health care payers and providers, and considers ways to contain these costs. Many such efforts are underway, including the ongoing implementation of the Health Insurance Portability and Accountability Act alongside several different elements of the Affordable Care Act. Continued progress in these areas is thus a central step to lower administrative spending.
Click on the link below to read the balance of this article on the Center for American Progress website: