Healthcare administration, including medical coding and billing, makes up a huge part of America’s healthcare bill, according to a paper by the Center for American Progress (CAP).

Administration Complexity

The complexity of all administrative activities include everything from duplicative forms, transferring records, managing claims, and other activities, but CAP estimates payers and providers spend $496 billion on billing and insurance-related costs. The think tank argues that “as  healthcare costs continue to rise, a logical starting point for potential savings is addressing waste,”  which it estimates is $248 billion a year.  A more recent paper by Woolhandler and Himmelstein, based on 2017 spending levels, put the figure at $1.1 billion.

The National Academy of Medicine published a report in 2010 related to billing and insurance in 2010 concluding that accounted for 14.4% of healthcare spending. billing and insurance related costs account for 13% of physician care spending and 8.5% of facility spending.

CAP cites the claims denial process as a separate industry, “with private firms squeezing dollars out of Medicaid Programs”.  They also mention upcoding as a major contributor, especially in the Medicare Advantage program.

Patients bear the real impact of the problem, according to CAP, as they decipher bills, shuttle records, and try to understand their insurance plans. CAP cites Accenture, which maintains insurers and employers spend an estimated $4.8 billion to assist consumers with low insurance literacy.

According to Woolhandler and Himmelstein, $504 billion of their $1.1 trillion is excess. Assuming that the less-expensive Canadian healthcare system were provided in the United States, the two researchers argue the costs would multiply by more than three times per person.

Medicare vs. Commercial Insurance

One assertion CAP makes is that billing and insurance for Medicare is 2 to 5% while it soars to 17% for commercial insurance.

The most expensive business and insurance-related costs per patient encounter, according to a paper in the Journal of the American Medical Association, are for inpatient surgery, followed by outpatient surgery, a general inpatient stay, an emergency department visit, and primary care visit.