The Great Waste In America’s Health Care

In light of the global pandemic, one thing we all can agree on is that health is paramount. We were told to remain indoors, wear face masks, and maintain social distancing to curtail the spread of the virus.

As we transition towards a world free from the deadly virus, health comes to the forefront.

These days, we see employees clamoring for more employer paid-benefits as they show up at work. A 2015 study, suggests that 60% of people put benefit packages into consideration when deciding to accept a job offer. With the pandemic greatly shifting our lives in many ways we now see employees want more employer-paid benefits.

One of the most prominent benefits is healthcare.

Then again, we can not help but notice that in America’s healthcare system, a great waste persists. Americans spends more on medical care than citizens of any other developed country in the world. This makes for 18% of the gross domestic product (GDP) and places every American spending over $10,000 yearly for healthcare.

More surprising is the fact that about 30% of money spent on healthcare can be categorized as waste. From a comprehensive report, the biggest source of waste is administrative costs generating $266 billion yearly. It is mind-blowing when you think about it.

In this article, we will explore what it means and while the waste continues to exist.

What are these Healthcare Administrative Costs?

The major components of these administrative costs include billing and insurance-related (BIR) costs, physician practice, and hospital administration costs.

BIR costs are typically added to recipients’ insurance premiums and reimbursements for providers. These can also include overhead costs for the health insurance provider for claim submission, payment processing, and claims reconciliation.

Hospital management and medical record-keeping are also part of the administrative cost to improve healthcare quality and lower fraud and abuse.

Where the Great Waste Lies for Employers

From the looks of things, you would say these costs are not bad. Some of these costs go into creating an improved medical process for everyone, hiring and managing doctors and qualified staff, and fostering information systems.

A lot of problems arise as a result of this.

A study reveals that generating bills and collecting payments is a major problem for American doctors. Doctors spend about 3 hours per week handling billing-related tasks. More surprising is the fact that for each doctor, a medical support worker spends on average an additional 19 hours weekly.

For employees in the commercial and corporate industry, it is a different ballgame.

There are a lot of intricacies and complexities involved in healthcare coverage in the US. This often translates to spending too much time with insurance administrators, sorting out insurance bills, transferring medical records between providers, and filling several intake forms. These complexities are a reason why the US spends a lot of money on healthcare.

Employees Share the Great Waste Burden

Research from Stanford University reveals that employees spend more time asking questions and sorting out issues with their insurance administrators often translates to a loss of money for employers. The cost of time spent with these insurance providers is approximately $21.5 billion yearly. More dazzling is the fact that this “wasted time” is actually more than half (53% in fact) of the time spent doing their jobs.

The quote “time is money” holds true for employers and heavy players in the commercial world. When workers spend more time tackling BIR issues to access benefits, this can often result in spillovers from their work and affect their behaviors in the long run.

Unsatisfied employees are more likely to perform worse at their jobs. If issues with their health insurer persist for hours without positive resolution, they will be less active at their current jobs. This could lead to higher levels of stress, which might force them to miss work for a couple of days.

When you consider the fact that the approximated cost of absence from work is around $26.4 billion, you would easily see that employers are losing a lot of money at the hands of insurance providers.

This issue has remained for several years. Without changes we can expect this significant level of waste to run trillions of dollars. A seamless operation from hospital management, record-keeping, billing, and insurance, will reduce the unnecessary time used to sort out payments, claims, and other issues will be drastically reduced.

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Marc Freedman

To help you achieve your company's financial growth goals, Marc serves as our Chief Cost Advisor, providing advice to client management teams. He is highly regarded as an expert in his field, and he frequently collaborates with and contributes to other spend consultants to develop and implement cutting-edge strategies for their respective clients.

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