Wednesday January 22, 2020

Over One Third of Healthcare Costs in the U.S. Goes to Bureaucracy: Study

U.S. insurers and providers spent more than $800 billion in 2017 on administration, or nearly $2,500 per person

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The reason why administrative costs in U.S.A are so high are because the insurance companies and healthcare providers are engaged in a tug of war. Pixabay

U.S. insurers and providers spent more than $800 billion in 2017 on administration, or nearly $2,500 per person — more than four times the per-capita administrative costs in Canada’s single-payer system, a new study finds.

Over one third of all healthcare costs in the U.S. were due to insurance company overhead and provider time spent on billing, versus about 17% spent on administration in Canada, researchers reported in Annals of Internal Medicine.

Cutting U.S. administrative costs to the $550 per capita (in 2017 U.S. dollars) level in Canada could save more than $600 billion, the researchers say.

“The average American is paying more than $2,000 a year for useless bureaucracy,” said lead author Dr. David Himmelstein, a distinguished professor of public health at the City University of New York at Hunter College in New York City and a lecturer at Harvard Medical School in Boston.

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Over one third of all healthcare costs in the U.S. were due to insurance company overhead and provider time spent on billing. Pixabay

“That money could be spent for care if we had a ‘Medicare for all program’,” Himmelstein said.

To calculate the difference in administrative costs between the U.S. and Canadian systems, Himmelstein and colleagues examined Medicare filings made by hospitals and nursing homes.

For physicians, the researchers used information from surveys and census data on employment and wages to estimate costs. The Canadian data came from the Canadian Institute for Health Information and an insurance trade association.

United States vs. Canada

When the researchers broke down the 2017 per-capita health administration costs in both countries, they found that insurer overhead accounted for $844 in the U.S. versus $146 in Canada; hospital administration was $933 versus $196; nursing home, home care and hospice administration was $255 versus $123; and physicians’ insurance-related costs were $465 versus $87 They also found there had been a 3.2% increase in U.S. administrative costs since 1999, most of which was ascribed to the expansion of Medicare and Medicaid managed-care plans.

Overhead of private Medicare Advantage plans, which now cover about a third of Medicare enrollees, is six-fold higher than traditional Medicare (12.3% versus 2%), they report. That 2% is comparable to the overhead in the Canadian system.

Why are administrative costs so high in the U.S.?

It’s because the insurance companies and health care providers are engaged in a tug of war, each trying in its own way to game the system, Himmelstein said. How a patient’s treatment is coded can make a huge difference in the amount insurance companies pay. For example, Hammerstein said, if a patient comes in because of heart failure and the visit is coded as an acute exacerbation of the condition, the payment is significantly higher than if the visit is simply coded as heart failure.

More and more paperwork required

“It’s clear that healthcare costs in the U.S. have soared,” said Dr. Albert Wu, an internist and professor of health policy and management. VOA

This upcoding of patient visits has led insurance companies to require more and more paperwork backing up each diagnosis, Himmelstein said. The result is more hours that healthcare providers need to put in to deal with billing.

“(One study) looked at how many characters were included in an average physician’s note in the U.S. and in other countries,” Himmelstein pointed out. “Notes from U.S. physicians were four times longer to meet the bureaucratic requirements of the payment system.”

The new study is “the first analysis of administrative costs in the U.S. and Canada in almost 20 years,” said Dr. Albert Wu, an internist and professor of health policy and management at the Johns Hopkins School of Public Health in Baltimore. “It’s an important paper.”

‘Inefficient and wasteful’  system

“It’s clear that health costs in the U.S. have soared,” Wu said. “We’re paying for an inefficient and wasteful fee-for-services system.”

Also Read- We Got Trump Elected, Shouldn’t Stop Him in 2020; Says Facebook Executive

“Some folks estimate that the U.S. would save $628 billion if administrative costs were as low as they are in Canada,” said Jamie Daw, an assistant professor of health policy and management at Columbia University’s Mailman School of Public Health in New York City.

“That’s a staggering amount,” Daw said in an email. “It’s more than enough to pay for all of Medicaid spending or nearly enough to cover all out-of-pocket and prescription drug spending by Americans.” (VOA)

Next Story

Apple CEO Tim Cook Bullish on Preventative Healthcare Technology, AR

I view AR like I view the silicon here in my iPhone, it's not a product per se, it's a core technology," he said

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Tim Cook
Apple CEO Time Cook. Wikimedia Commons

Calling Augmented Reality (AR) the next big thing in technology, Apple CEO Tim Cook has reiterated his commitment towards building more preventive healthcare tools in devices like Apple Watch.

In a conversation with IDA Ireland CEO Martin Shanahan here on Monday, Cook said the company is investigating technology that could help identify health risks at an early stage, reports Silicon Republic.

“I think you can take that simple idea of having preventive things and find many more areas where technology intersects healthcare, and I think all of our lives would probably be better off for it,” Cook said.

The cost of healthcare can “fundamentally be taken down, probably in a dramatic way” by integrating healthcare technologies in consumer devices like Apple Watch, he added.

The medical fraternity has welcomed the ECG app and irregular rhythm notification feature on Apple Watch (Series 4 and 5) that can help identify atrial fibrillation, or AFib which is the most common form of arrhythmia.

The sound-monitoring Noise app and menstrual cycle tracking Cycle app have also been released with watchOS 6.

“Most of the money in healthcare goes to the cases that weren’t identified early enough. It will take some time but things that we are doing now — that I’m not going to talk about today — those give me a lot of cause for hope,” Cook told Shanahan.

Tim Cook
New iPhones worth the cost: Tim Cook. IANS

There have been numerous cases where Apple Watch has saved lives globally.

IDA also presented Cook with the inaugural ‘Special Recognition Award’ for Apple’s 40 years of investment in Ireland.

Calling AR the “next big thing” in tech, Cook said he thinks it’s something that doesn’t isolate people.

“We can use it to enhance our discussion, not substitute it for human connection, which I’ve always deeply worried about in some of the other technologies,” said the Apple CEO.

Also Read: Instagram Removes IGTV Shortcut Button Due to Lack of Use

Cook always compared AR with the ubiquitous smartphones.

“I regard it as a big idea like the smartphone. The smartphone is for everyone, we don’t have to think the iPhone is about a certain demographic, or country or vertical market: it’s for everyone. I think AR is that big, it’s huge,” Cook told The Independent newspaper.

I view AR like I view the silicon here in my iPhone, it’s not a product per se, it’s a core technology,” he said. (IANS)