Billing is 21% of California Health Costs
Straight from the “I almost forgot to blog this really important study” files comes this zinger (and an SF Chronicle summary): billing and insurance-related (BIR) functions represent 20–22 percent of privately insured spending in California acute care settings. That means 20 cents of each dollar spent on health care by insurers, doctors’ offices, or hospitals goes toward expenses so that people or organizations can be billed. None of us can really comprehend the number that this actually represents–$26 BILLION, but it’s obviously substantial.
Many advocates of health care reform note that an incredible amount of money is spent on administration, and much of this money is wasted. What is significant about this study, then, is that it specifically attempts to divy up the money spent on administration into “possibly-useful administrative spending,” and “possibly useless spending” (billing and insurance-related functions). From The Chronicle:
Researchers used data collected from 73 insurers between 1996 and 2001, survey responses from physicians and hospital administrative costs reported to the state. They then estimated how much of each health care dollar went to administer health insurance in California.
The study concluded that 21 percent was spent on insurance administration and an additional 13 percent was used to cover other administrative tasks, such as maintaining medical records. “What you’re left with is that 66 cents (out of every dollar) is spent on health care,” Kahn [study author] said.
Overall, private insurers’ spent the least on BIR, hospitals were 2nd, and private physicians’ came in last (this makes sense; the smaller the organization, the harder it is to streamline everything).
Look, even if you’re a libertarian strictly against government regulation, can’t you agree that that $26 BILLION could be better spent on patient care?
I’m glad you touched on this; hopefully many docs, docs-to-be, and healthcare groupies/junkies will start taking this one to heart. Ask your local PMD how much effort, and how many people are employed, for the sole purpose of extracting money owed to the practicioner by the insurance companies. Then go visit the Medical Abstraction office in your big academic medical center. Where I’m from, its a room of 30 people, at least, working on 100′s of charts a piece, for the sole purpose of dancing the dance to get the green needed to keep hospitals alive.
The truth is that this is another example of regulatory one-sidedness; if any other industry was as negligent with payments as the health insurance industry is, they’d be taken to task on Capitol Hill, there’d be reforms out the wazoo, and the companies would become insolvent under the weight of lawsuits. Somehow, health insurance is immune, and because of this 20 cents of each of the trillion dollars going into the system is wasted on this nonsense.
And while I’m ranting, one last thing… health insurance companies, in their publically-touted quest to keep health care affordable in this country, also bleed off ~10-20% of each dollar coming in to the company in “overhead” (=rent on the big shiny buildings, multi-hundred-million dollar salaries, layers of middle management…). By placing themselves between the consumer and practicioner, they are able to make the practice of medicine nearly untenable and get rich in the process. I’m a capitalist, I love this country, but something here, folks, has to give.
-Darren
MS4
Sorry. I ranted first, then saw your Single Payer pages and animation. Strong work. I’m going to link this out as far as I can…
It’s even worse than that. Back in the dark ages (1960′s) my own physician charged $8.00 for an office visit, and $25.00 for a (can you believe?) house call. Then came Medicare, HMO’s, and all that jazz. During the halcyon days, his wife kept track of the paperwork part time. After the bureaucrats got their teeth into it and the ugly spectacle of pointless malpractice suits reared its head, and self-protection insurance became the vogue, (literally) dozens of different kinds of forms became a paperwork storm, and the poor beleagured physician had to staff, equip, and fund his own lab., hire a bookkeeper and an accountant, get a tax lawyer – the upshot was that his overhead ballooned to the point that within five years he had to charge $35.00 for an Office call, and no longer could make ANY house calls (except to my Grandmother, who was a medical anomaly he was studying). And the worst of it was that he was, at the end, making less take-home money than he was making before the revolution! A direct quote from him (and I kid you not!) “Insurance has nothing to do with patient care. It’s a money-making business – for the Insurance Companies! We’d all be better off if Uncle Sam did the whole thing – and I was against “Socialized Medicine!” before the Insurance hawks got their bloody talons into the med. biz.” Who knows? If enough physicians get the same attitude, single-payer may even come about in our lifetimes.