Health administrator, heal thyself

Helen Palmer Mar 20, 2007

KAI RYSSDAL: Americans have the most expensive health care in the world. We pay twice as much as a Swiss or a German citizen. And a report released today looks at where some of that spending is going. If you’ve ever had to decode a pile of your own hospital bills or insurance statements, you might have a clue already. Helen Palmer has the details from the Marketplace Health Desk at WGBH.

HELEN PALMER: This report surveyed 200 hospital and insurance industry executives. They say administration is both costly and wasteful.

PAULA FRYLAND: Thirty cents of every health care dollar is going to administration, which includes billing and collection.

That’s Paula Fryland, of PNC financial service’s health care group. PNC paid for the independent report.

The hospital executives surveyed said 96 percent of claims need to be filed more than once. And insurance leaders complained that half the time they have to ask hospitals twice to get the right information.

Fryland thinks confusion and frustration over bills hurts patients’ pocketbooks too.

FRYLAND: One in five consumers indicated they had actually paid a bill for which they felt should have been paid by their insurance company.

The survey also reported that electronic billing made claims more efficient and saved cash.

Here’s Mohit Ghosh of America’s Health Insurance Plans.

MOHIT GHOSH: Insurance companies are able to process an electronic claim within 85 cents, whereas it costs about $1.58 to process the similar paper claim.

But Ghosh says administration eats up nothing like 30 cents of every dollar. Their report by Price Waterhouse Coopers pegged admin costs at 14 percent. So who do you believe? Glenn Melnick, who teaches health policy at University of Southern California, says every industry spends cash on administration.

GLENN MELNICK: Development of new products and choice costs money — and consumers in every other part of our economy are willing to pay for that. The question is, what’s the optimal balance in health care between choice and costs?

Squeezing out the wasteful admin’s the tricky part, says Melnick. He says one major expense is insurance companies screening out the sick. We could start there.

In Boston, I’m Helen Palmer for Marketplace.

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