One of the great myths of healthcare is that there is an actual “system” in the United States. If such a system exists, I have yet to become familiarized with it. What we have are mountains of paper that slavishly tie the patient, doctor, hospital and insurance carrier alike to a system of coding interpreted by individuals with no sense of what the codes mean or the labor and risk involved in their accomplishment. This inertia is inclusive of purposeless and an infinity of idiotic government regulations that create more dead forest. For the patient, this system is akin to entering The Twilight Zone; actually, it is The Twilight Zone.
As a result, the consumer doesn’t know what they are paying for and the doctor and the hospital spend endless hours trying to explain exactly what was done to an insurance company employee who is not a medical professional. This is akin to the proverbial mouse asking the snake for safe passage across a river.
Administrative costs as a percentage of healthcare expenditure in America comprise anywhere between 18-31 cents out of every healthcare dollar. This figure varies because so many different things can be considered “administrative,” because there are differences in small and large health insurance plans, and because there are differences in excessive spending between private and public sectors. Generally speaking, Medicare/Medicaid administrative costs are between 5-6 cents out of every healthcare dollar percent. According to a CBO report, administrative costs account for approximately 12 cents out of every dollar spent, depending upon the size of the plan.
The McKinsey Global Institute published a study in December 2008 accounting for the costs of U.S. healthcare. They estimated that excessive spending for “health administration and insurance” accounted for as much as 21 percent of excess spending. Translated into current dollars, that’s $525,000,000,000.00. This report suggested that 85 percent of this spending was attached to the “system” described above (that amounts to almost $450 Billion in a $2.5 Trillion spending spree). The remaining 15 percent is attributed to public plans.
Last, consider this well publicized study that included the administrative costs of all parties feeding at the healthcare troth, but not the productive time wasted by patients in receiving care. In 2003, Woolhander and Campbell published a study in The New England Journal of Medicine in which they concluded that when comparing purchasing parity dollars, in 1999 the United States spent $1,059 per capita on administrative costs while the Canadians spent only $307. Imagine the cost today? Imagine the waste that could be reinvested in delivering real healthcare?
So what is the conclusion we can draw from all of this? It is not that we need a single payer. What we need is a single payment system applicable to all that receive healthcare in the United States by whatever means. It means only one system of paperwork and system process, one system reproducible throughout. This true “system” would be online and easily accessible. Furthermore, if we take all these complex codes and bundle them to be inclusive of many things for the more predictable and common surgical and medical procedures and their attendant CPT codes, the estimated savings per year could be substantial. If we can reduce our administrative costs by say, one third, that would translate to $150 Billion in the private sector or a 6 percent savings. If we can cut the administrative costs in half by shamelessly stealing from the Canadians, we would save what amounts to approximately $262 Billion. Soon we will be talking about real dollars.
We don’t need a single payer to control our healthcare freedom; what we really need is a single payment system, a true system, and the freedom to choose our own healthcare.
Mitchell Brooks is an orthopedic surgeon and the host of Health of the Nation on Talk Radio 570 KLIF in Dallas, Texas. He blogs at Health of the Nation.
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