AMA Says $210 Billion Wasted on Admin

That's right, $210 billion dollars annually are wasted in administrative costs related to insurance claims processing. Don't trust me on this, trust the American Medical Association (AMA) who documents the amount in their newly released report. If you wish to take a look at the findings and statement of methodology, you can download a PDF of the report as well as other related info at the AMA website here.

The opening paragraph of the report is succinct in presenting the situation as it stands now:

Physicians are spending as much as 14 percent of their total collections to obtain accurate payment for their services. When physicians submit correctly coded health care claims, health insurers and other third-party payers may still inappropriately delay, deny or significantly reduce payments. The significant savings that could be realized from more efficient claims processing could be better spent on increasing the quality of patient care and reducing the burden of high premium costs to consumers.

Fourteen percent? Doesn't sound all that huge unless it is your money, and as cost of care spirals out of control in order (among other things) to cover these costs, it is your money. Every medical need that involves paperwork or billing -- i.e., all of them -- is more expensive because of the cost of processing and filing.

Seven insurers were graded, along with the government-run Medicare: Aetna, Anthem Blue Cross and Blue Shield,CIGNA Corp., Coventry Health Care, Health Net Inc., Humana Inc., and United Health care. The results are disquieting (via The Chicago Tribune):

But business leaders and health policy makers are interested in cutting an estimated annual $210 billion in wasted administrative claims processing costs, AMA leaders said.

$210 billion? In some parallel universe that might be acceptable, but here in the real world where Joe America is suffering the skyrocketing cost of food and gas along with the cost and access issues of modern health care, that number is frightening. As a matter of fact, the price of doing business with insurance companies and the erratic claims process has driven some doctors to cease dealing with them completely.

Dr. Marcy Zwelling, a physician interview for the Tribune article, got fed up with the expense and time wasted in attempting to process insurance claims for her practice that she ceased dealing with insurance companies completely. That was four years ago. She now runs a boutique practice in which her patients simply pay an annual fee.

"The best thing is, I get to be a doctor" instead of a claims processor, said Zwelling, of Los Alamitos, Calif. She says she doesn't make any more money than she did when she accepted insurance, but she has more time with patients.

Of course, like everyone else, I immediately took a look at my own health insurance to see how it rates:

UnitedHealthcare had the lowest rate of contract compliance, according to the AMA report. About 62 percent of medical services billed were paid by UnitedHealthcare at the contracted rate, compared with 71 percent for Aetna and 98 percent for Medicare.

Lovely. Sixty two percent of the contracted rate. Barely over half of the claims are fulfilled according to contract. That's a wonderful wake up call. In what other business can you get away with that?

SOURCE: "AMA: National Health Insurer Report Card" 06/17/08
SOURCE: "AMA issues first report card on health insurers" 06/16/08
photo courtesy of Jon-A-Ross, used under its Creative Commons license