Administrative expenses account for 34% of private health care spending in California according to a report authored by University of California-Santa Barbara researchers and noted in California HealthLine. The 34% is comprised of insurance paperwork (21%) and medical records (13%).
Billing expenses amounted to 8% of private health insurance premiums; 11-14% of hospital spending and 14% of physician office expense went to billing as well.
Total private insurer administrative expenses totaled 9.9%; Medicare came in at 4.5%.
The full study, published in Health Affairs, noted :
“Including health plan profits, we estimated that 19.7-21.8 percent of spending on physician and hospital services in California that are paid for through privately insured arrangements is used for billing and insurance-related functions.
This is not “new news”; administrative expenses in the US consume a significant portion of health care expense. However, the study notes that these dollars, which are often labeled as “waste”, are not. Here is a quote from the full study:
“some administrative effort is required and desirable in a well-functioning system. Hospitals are complex organizations, and administrative effort is needed to use inputs efficiently and produce good outcomes. As physician practice moves toward larger medical groups, administrative effort is required to assure that the groups function efficiently. Administrative activities here include the work of the office manager, the receptionist, the billing staff, the information technology experts, and other personnel not directly contributing to the hands-on care of patients.”
Thus, the definition of “administrative expense” is quite broad, encompassing both payer and provider functions. This may be lost in some of the other publicity surrounding reporting of this study.
What does this mean for you?
Lots of opportunity to reduce administrative expense.
Nov
11
