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

LD4: Privacy vs. Policy in Health Care Data Mining

Tarren Bragdon, director of health reform initiatives at the Maine Heritage Policy Center, is in the spotlight today as he shares his opinions of Maine's recently passed law known simply as LD4. What, you may ask, is LD 4? I will allow Mr. Bragdon to explain in his own words (taken from the Bangor Daily News -- typos and all) :

Earlier this year, the Maine Legislature hastily passed LD 4, a law that will go into effect on Jan. 1, 2008. The law restricts access to prescriber-identifiable data, information about which doctors are prescribing what drugs in what amounts. Supporters of this law argue that restricting this prescriber-level data will block pharmaceutical sales representatives from using this data to persuade doctors and others to prescribing more expensive drugs.

However, the reality is that by knowing which physicians are prescribing particular medications is an efficient and confidential means in which to target those doctors treating certain types of individuals. By being able to identify physicians, those with patients who would benefit can be quickly contacted about new medications, the latest treatment research and innovation drug trials. Physicians benefit from such a system because they are provided quick access to the latest technologies and treatment approaches, while patients receive notice of every treatment option available, all in an environment that protects patient confidentiality.

Under LD 4, physicians can no longer be targeted to receive potentially life-saving information.

As with all discussions about data transparency there are a variety of pros and cons to consider, especially in this age of target marketing and identity theft. Mr. Bragdon addresses this by providing an alternative example that has been in place for over a year now, one that allows medical info to be shared among health care professionals, not sales reps.

The Maine law is based on a nearly identical law passed in New Hampshire, which was ruled unconstitutional in April by a U.S. District Court judge. The minor difference in the Maine law is the "opt-out" provision allowing physicians the choice to opt-out of allowing their prescribing data to be accessed.

If physicians want a choice in sharing their prescribing information, a better option is the Physician Data Restriction Program, or PDRP. Sponsored by the American Medical Association since 2006, PDRP offers physicians the option to "opt-out" of having their prescribing data shared with sales reps. Unlike LD 4, the data could still be accessed for the other valuable purposes mentioned previously.

The New England Journal of Medicine recently published a study conducted by the Seattle Children's Hospital Research Institute and the RAND Corp. This study showed that children receive less than half the advised care for conditions covering twelve clinical areas, information that Bragdon uses to shore up his assertion that restriction of information leads to variability of care. Variable care quality has a negative impact on both health care and health care costs.

Bragdon is far from alone. IMS Health Inc., Verispan LLC and Source Healthcare Analytics, sent lawyers to the U.S. District Court in Bangor seeking an injunction blocking LD 4 from taking effect on January 1, 2008. All three companies deal in the collection and analysis of prescriber level data such as that affected by this legislation.

To make things interesting he is answered in another Op-Ed in the same publication. This one by Maine State Senator Lisa Marrache, D-Waterville, a physician who is board certified in family medicine and a member of the Health and Human Services Committee, who refutes Bragdon's points in no uncertain terms.

Bragdon mischaracterizes LD 4 and misunderstands the way safety information is conveyed to prescribers. The Food and Drug Administration already requires drug companies to notify prescribers of untoward side effects, new study precautions and "black box" warnings. To suggest this would not occur if LD 4 goes into effect is preposterous. The law was narrowly crafted to specifically preserve access to prescribing information for safety and health uses. Also, each board of licensure knows who is prescribing, and the federal government has access to the largest database of physicians and other prescribers. Targeting prescribers based solely on what types of medications they prescribe does absolutely nothing to further patient safety.

What about the "opt out," option? Data confidentiality? Enforcement? Sen. Marrache responds:

One reason the Legislature passed LD 4 is that alternatives do not exist. The private, voluntary "opt out" program run by the American Medical Association and touted by Bragdon is close to useless. In the federal courtroom in Bangor last month data mining company executives admitted that even after physicians enroll in the AMA program; their information continues to be sent to the data mining and pharmaceutical companies. Only the drug sales rep and her immediate supervisor don't have access to the data -- but marketing executives may still use the information to create individual prescribe profiles to develop marketing strategies or reward sales reps.

The voluntary program doesn't address the concerns of nonphysician prescribers, including physician's assistants, nurse practitioners or pharmacists. There is no enforcement of violations, and until urged by the New England doctors in a formal resolution, the AMA's own Web site actively discouraged participation by suggesting that physicians opting for confidentiality wouldn't receive free drug samples, often given to patients lacking health insurance. The AMA received 16 percent of its 2005 revenue, $44.5 million, from the sale of its physician Masterfile, which is used by the data mining companies in the creation of their lucrative databases. It is not reasonable to expect the AMA to voluntarily establish and maintain an effective prescriber opt-out system if it makes their Masterfile a less useful tool for pharmaceutical marketing purposes.

One law, two viewpoints, and the uncertain variable of public opinion. This piece of news bears watching as it may well set a precedent for future legislation on the subject of electronic medical records!


SOURCE: "A Bad Pill for Health Care Reform in Maine" 11/30/07
SOURCE: "LD 4, A Step in the Right Direction " 12/04/07
photo courtesy of Night Star Romanus remixed and used under this Creative Commons license