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UnitedHealth Proposes Administrative Cost Savings

By July 8, 2009November 2nd, 2009Commentary

UnitedHealth Group released a second report relating to health reform issues last week.  (UHG Report) This report focuses on administrative cost savings and identifies about $332 billion that could be saved over ten years.  About 50% of these savings would accrue to providers and 50% to payers, including the government.  Supposedly, some of these savings might be passed on in the form of lower provider prices or lower health plan premiums or lower taxes.   The savings are all administrative costs, but the report says that making some of the changes could also create substantial medical cost savings, as much as several hundred billion dollars over the same period.

Some of the primary categories of savings include using automated cards for eligibility and benefit determinations at the point of service; eliminating paper payments and remittance advices; complete use of EDI for claims-related activities; predictive modeling to prescore claims for COB, fraud, abuse and medical management, creation of a national payment accuracy clearinghouse to settle under and over-payments and creation of a single credentialing entity and process.  Foundational to all of these ideas is having a mandatory single national standard for data and transactions.

All of these look like very good and workable ideas, although some will take time to implement, especially where provider systems need to be updated or expanded.  Most would seem unobjectionable.  Government assistance is needed to implement them in a comprehensive manner, however, especially in regard to standard setting and creation of utility-like entities to facilitate universal use of the recommended approaches to handling administrative issues.  While the formula for identifying the savings attached to these proposals is not spelled out, the amounts don’t seem unrealistic.  UnitedHealth should be commended for putting forward some concrete ideas to create savings and make the health system work more efficiently and effectively.

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