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Metroland: A Healthy Simplification

By Ali Hibbs, February 12

Eighty percent of medical costs associated with billing and insurance practices in the United States—approximately $375 billion—is squandered annually due to systemic inefficiency, according to a study released last month by a group of physicians and health policy researchers connected with Harvard Medical School, the University of California-San Francisco and the City University of New York School of Public Health, who attribute the staggering waste to the nation’s complex, multi-payer way of financing care.

The four-member research team reported its findings in the peer-reviewed journal BMC Health Services Research, where they noted that a simplified, single-payer system of financing health care similar to Canada’s, or the U.S. Medicare program, could result in savings of more than $1 trillion over three years.

Those savings, they said, could be used to cover everyone who is currently uninsured and to upgrade coverage for the tens of millions of Americans who now have inadequate policies with no increase in national health spending.

“Most significant,” said Aliya Jiwani, the article’s lead author, “is our finding that were the U.S. to adopt a simplified health care financing system—either along the lines of Canada’s system or our Medicare program—80 percent of those itemized expenditures would disappear. That’s how much administrative waste is embedded in our fragmented, dysfunctional system of paying for care.”

Senior author Dr. James G. Kahn said that the study is the first scientific article to provide a comprehensive portrayal of billing- and insurance-related costs (BIR) in the U.S. health care system.

“Synthesizing costing data on BIR costs from existing studies, using a uniform yardstick for defining BIR, and comparing those results with costs in simplified insurance systems in other countries, we see the true magnitude of administrative bloat in U.S. health care,” he said. “Money spent on such unnecessary bureaucratic tasks is money that could and should be spent on patient care.

“The potential savings of adopting a single-payer system is striking,” Kahn continued. “Such a system would enjoy powerful economies of scale, sharply reduce the burdens of claims processing, and obviate the need for marketing, advertising and underwriting expenses. Our nation’s patients, our physicians, and the U.S. economy all stand to gain from such a shift.”

The study was released just prior to the last of a series of hearings that were held around the state where lawmakers, medical professionals and healthcare advocates spoke in favor of a law known as NY Health, which has been introduced in both houses of the Legislature proposing a single-payer system here in New York.

“The Affordable Care Act has made some important improvements in how we organize and pay for health care in this country but it still leaves us and our health care, and our wallets, in the hands of insurance companies—with their premiums, and their administrative costs, and deductibles, and co-pays, and limited network, and denials of payment for the care we need,” said Richard Gottfried, longtime chairman of the state Assembly committee on health care. “We can do better and New York can do better.”