One of the things we notice in our line of work is that it takes a lot of administrative effort to keep a hospital running smoothly. We see outside lab results that come in different formats, sent through a variety of methods, that have to be entered manually into an EMR. We also see information that’s being reported to a registry or other outside group redacted by hand. It’s no secret that administrative costs are a burden in healthcare, and a recent study from the Annals of Internal Medicine showed that these costs now comprise 34.2% of healthcare costs in the U.S., totaling $812B in 2017.
While presidential candidates and political pundits spar over the cost of a program like Medicare for All, co-author of the study, Dr. David Himmelstein, said that if the U.S. was able to match Canada’s per capita spending on administrative costs, we could cover everyone who isn’t insured, eliminate deductibles and copays, and still have money left over. Per capita administration costs were $2,479 per person in the U.S. compared to only $551 per person in Canada.
Extract focuses on workflow optimization and expedited data ingestion primarily for healthcare providers, but it seems that private insurance companies have been the largest contributors to clerical burden growth. Overhead from insurance companies made up $275.4 billion of U.S. healthcare costs, $45 billion of which comes from government programs. This was not only the largest category, but the one with the largest increase in expenses as well.
One of the reasons why private insurance administration costs have risen is their management of certain Medicare and Medicaid plans. A third of Medicare users’ and the majority of Medicare’s plans are managed by private insurers. Between 1999 and 2017 administrative costs rose 3.2%, and these plans are largely the reason why. Three quarters of that cost increase can be attributed to private insurance’s expansion into these government programs.
Subcontracting these public programs to private insurance is vastly more expensive than administering them by the government. Government run Medicare has an overhead of 2% while the privately run Medicare Advantage plans have an overhead of 12%, a gap of $1155 per person every year.
These numbers lead the authors to believe that some of the public option plans being presented by presidential candidates could increase costs in the future. They believe that the best choice would be a single payer plan like Medicare for All, which would bring bureaucracy costs more in line with those in Canada, insuring all citizens and eliminating deductibles and copays.
Some administrative costs are going to be unavoidable, which is why Extract makes software to reduce them while delivering more accurate data to healthcare systems faster. If you’d like to learn more about how we can automatically OCR, extract, and deliver data from unstructured documents to your organization, please reach out today.
About the Author: Chris Mack
Chris is a Marketing Manager at Extract with experience in product development, data analysis, and both traditional and digital marketing. Chris received his bachelor’s degree in English from Bucknell University and has an MBA from the University of Notre Dame. A passionate marketer, Chris strives to make complex ideas more accessible to those around him in a compelling way.