Paying a Premium for Pencil Pushers

12 Sep

Let’s start with something most of us know: Health care is expensive in this country. I think pretty much everyone agrees on that. In fact, it’s not only expensive, it’s the most expensive care in the world. Again, data make it hard to argue this point. The disagreement begins, I think, when we start to contemplate value. That is, some of us think that we are getting what we pay for, while others of us think that we are paying too much for what we get. Of course, the reality is some mix of the two.

We know, for example, that private insurers spend more of their budgets on administrative costs than Medicare and Medicaid do. The reason is simple: Medicare and Medicaid don’t need to advertise like private insurers do. Some of that administrative cost undoubtedly gets built into your monthly premium. Bureaucracy, as it turns out, is also expensive. My friends who favor limited government just shouted “Amen!” Actually, however, I’m talking about the private bureaucracy created by the interaction of private physician offices with multiple private insurers.When a doctor’s office has to keep track of the benefits offered by several different plans, spend time seeking preauthorizations, and juggle a variety of different forms and claim submittal processes, administrative costs increase at the point of care. The question is how much?

In the August issue of Health Affairs, Dante Morra and colleagues quantify the excess costs for us by comparing the multi-payer U.S. system to the single-payer Canadian system. We know that per capita spending on health care is $7,290 in the U.S. and $3,895 in Canada. That difference can likely be explained in one of three ways: Canadians are healthier than Americans, so spend less on health care, Canadians are less healthy than Americans, because they spend less on health care, or the Canadian system is more efficient than the American system. Door number three seems to hold at least part of the explanation.

In Canada, the single-payer system makes things simpler and that saves time and money. Physicians in Ontario reported spending 2.2 hours per week interacting with the insurer and their staff reported spending 2.5 hours per week. That’s 4.7 hours in all. By contrast, in the convoluted American system, physicians reported spending 3.4 hours per week interacting with various insurers, while their staff reported spending 20.6 hours per week doing the same. That’s 24 hours altogether, or roughly 3 full working days.

The cost associated with this is non-trivial. In Canada, the cost was $20,410 per year per physician. In the U.S., it was $82,975. A move to a single-payer system could reduce administrative costs in the U.S. by more than 75%. That’s real money that could go towards other things–or back in the patients’ pockets.

Now, please note, Morra and colleagues’ study in no way assesses the quality of care received in the respective countries. While I can certainly appreciate people’s concerns that a single-payer system would mean that the government would start denying a wide variety of services, I do not share those concerns. Nor do I think that the actual quality of care provided would be affected by simplifying how we pay for health care. In fact, if anything, this study suggests that physicians and other staff would spend less time on administrative tasks, which would free them up to spend more time on actually delivering care. It might even make it so that a practice could see more patients each day. If so, a change to single-payer has the potential to improve access to high quality care, while helping to control costs. The effects may be modest–it’s impossible to tell–but that doesn’t mean we shouldn’t consider it.

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Posted by on September 12, 2011 in Uncategorized


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