80% of Billing, Health Insurance-Related Paperwork Costs Are Wasteful

The United States could save approximately $375 billion annually by simplifying the nation’s complex, multi-payer way of financing care, according to a study published in BMC Health Services Research.

According to the research, in 2012 physician practices spent $70 billion, hospitals spent $74 billion, and other institutions—such as nursing homes, home healthcare agencies and prescription drug and medical supply companies—spent $94 billion on bureaucratic paperwork.

"Most significant is our finding that were the US to adopt a simplified healthcare financing system—either along the lines of Canada's system or our Medicare program—80% of those itemized expenditures would disappear," lead author Aliya Jiwani, MPH, who is pursuing doctoral studies in public health at George Washington University, said in a statement. “That's how much administrative waste is embedded in our fragmented, dysfunctional system of paying for care."

Two of the authors, David U. Himmelstein, MD, and Steffie Woolhandler, MD, MPH, are co-founders of Physicians for a National Health Program, an organization of more than 19,000 doctors who support single-payer national health insurance.

Billing and insurance-related (BIR) paperwork cost the US approximately $471 billion in 2012, and researchers estimate that 80% is waste due to inefficiencies. BIR activities include functions related to interacting with payers, such as filing claims, obtaining prior authorizations, and managed care administration. Necessary tasks, such as patient scheduling and writing chart notes, were not considered BIR for the purposes of the study.

The savings from simplifying the system could cover all uninsured Americans and upgrade coverage for the tens of millions of Americans with inadequate policies—all without increasing national spending.

"The potential savings of adopting a single-payer system is striking: at least $375 billion annually," senior author James G. Kahn, MD, MPH, who teaches and conducts health economics research at the Philip R. Lee Institute for Health Policy Studies at the University of California, San Francisco, said. "Such a system would enjoy powerful economies of scale, sharply reduce the burdens of claims processing, and obviate the need for marketing, advertising and underwriting expenses. Our nation's patients, our physicians, and the US economy all stand to gain from such a shift."